Witan more than doubles last year’s dividend thanks to revenue reserves – Witan (WTAN) has posted its final results for the year to 31 December 2021. During the period, the trust’s NAV increased by 15.8% while its share price total return was 11.9%. NAV uplift from share buybacks offset the majority of the company’s ongoing charges during the year.
A fourth interim dividend of 1.52 pence was declared in February 2022, payable on 18 March 2022. As a result, the dividend for the year increased by 2.8% to 5.60 pence per share, ahead of the 2.6% average rate of UK consumer price inflation during the year. The dividend was partly funded using £14.6m from revenue reserves and represents more than double that paid in 2011 and an unbroken run of increases since 1974.
The Board expects portfolio dividends to recover further in coming years and it is the company’s intention to continue to make use of retained earnings to increase the dividend to shareholders annually while cover is rebuilt. If necessary, realised capital reserves could also be used, as part of a defined path towards dividends once again being fully funded by revenue earnings.
Statement from the chair:
Although this is the Annual Report for 2021, the outlook at the time of writing is dominated by the consequences flowing from the Russian invasion of Ukraine. Apart from the immediate suffering imposed on the Ukrainian people, the longer-term effects on international relations and economies are hard to predict. In investment terms, this calls for steady judgement and a long-term perspective.
Looking back, 2021 was a year of considerable progress for markets and it is pleasing to be able to report a 15.8% advance in your Company’s NAV total return. However, progress was not smooth, with changing investor reactions to COVID-19 outbreaks, vaccination programmes, struggling global supply chains and rising interest rates causing erratic swings in market leadership.
The relative fortunes of ‘COVID winners’ and ‘COVID losers’ in the market tracked the fluctuations in news about the pandemic. The seasonal rise in cases in the Northern hemisphere and the rapid spread of the new Omicron variant meant that the year ended with renewed restrictions and a reversal in the share prices of companies linked to the reopening of economies.
These events were reflected in Witan’s performance, which showed a strong absolute trend and was ahead of our global benchmark until the final furlong. Unfortunately, the last two months saw market leadership move away from the economically sensitive stocks which had served our managers well and a further dramatic shrinkage in the breadth of performance in the US market. Of the 500 companies in the index, in both 2020 and 2021 a disproportionate share of the US market’s return (over 50% in 2020, over 30% in 2021) was generated by five technology-related stocks. This late correction meant Witan’s NAV return was below the 19.9% return from our benchmark at the year-end.
We believe our managers were right to be positioned for a broadening of economic recovery as, following the technology leaders’ strong performance in 2021, the 2022 earnings prospects for a wider range of companies looked set to improve. In the early weeks of 2022, there was a correction in the highly rated technology sector and better performance from sectors seen as beneficiaries from economic recovery, such as natural resources and financials. However, the Russian invasion of Ukraine shifted the focus from hopes of a recovery from COVID-19 to the uncertainties created by an outbreak of war in Europe. This has made the outlook much less predictable, with much depending upon the duration, scale and outcome of the Russian aggression. Andrew Bell’s CEO report covers these points as well as the macroeconomic backdrop in more detail.
The other aspect that impacted returns during the year was the widening of the discount. After a number of years during which the shares traded close to asset value, Witan is suffering from a sector-wide phenomenon of widening discounts despite the continuation of our share buyback programme. Your Board remains committed to this because we believe it offers heightened market liquidity and NAV enhancement for long-term holders.
Taking a longer-term perspective, since Witan adopted a multi-manager approach in 2004, we have beaten the returns on our benchmark and raised the dividend well ahead of the rate of inflation. Over the ten years to the end of 2021, Witan achieved a NAV total return of 233% and a share price total return of 255%, both of which exceeded the benchmark’s 210% return.
WTAN : Witan more than doubles last year’s dividend thanks to revenue reserves