Mercantile dips into revenue reserves to increase dividend – Mercantile (MRC) has posted its final results for the year ended 31 January 2022. During the period under review, the trust’s net asset total return, based on debt being valued at fair was 15.3%. With the debt valued at par, the return was 13.2%. Over the year, the discount of the share price to net asset value (with debt being valued at fair) widened, from 3.8% to 9.7%, resulting in a total return to shareholders for the year of 8.3%. This compares with a benchmark total return of 13.4%.
As with many other companies, the board of MRC said this 12 month performance represents a very strong absolute return and a significant recovery from its performance during the previous financial year to 31st January 2021.
Revenue per share increased by 59% from 4.10p to 6.50p, in 2022. For a second year in a row, MRC will be utilising a small proportion of its revenue reserves to increase the dividend this year, although to a lesser extent than last year. The company has paid three interim dividends of 1.35p per ordinary share in respect of the year to 31st January 2022 and the board has declared a fourth quarterly interim dividend of 2.85p per share, giving a total dividend of 6.9p per share for the year, an increase of 3.0% over last year.
Chairman’s outlook:
When writing an outlook statement amid profoundly unsettled markets, there are times when you have to put pen to paper at the latest possible time ahead of release of the results, as the text can become stale very quickly. This year is perhaps the ultimate exemplar of such a time with daily newsflow from both the UK and globally creating significant volatility in markets. Into our new financial year, the NAV and share price have not escaped the considerable market volatility, and falls, brought about by global events and the re-emergence of inflation. I am afraid I have no crystal ball as to what will happen in the immediate future but I do know that we are at an advantage over others and there are substantial benefits of investing in The Mercantile, which remain valid today and in the future.
Identifying tomorrow’s UK market leaders remains at our core. The companies we invest in have consistently and significantly outperformed the wider market over the medium and longer term, and the absolute returns have been excellent. The good news now is that the breadth and number of opportunities within the Company’s investment universe remains compelling, many more so as a result of share price falls this year.
The diversification of risk is a notable feature of the Company’s investment universe and is particularly relevant during a period of market weakness. Our excellent Investment Manager’ active fund management style, and our ability to gear, enables us to adjust positions to take advantage of opportunities as they arise.
As an investment trust we can use revenue reserves to enhance the dividend you receive during difficult times and meet our objective of long-term dividend growth.
The key is to identify companies which have sound financial credentials and good long term growth prospects, together with an attractive dividend yield. I believe that your Company holds just such investments and this will in the future result in excellent returns for shareholders.
Regular investing in The Mercantile involves buying into the market at different times and as a result this can average out the cost over the longer term. Pound-cost averaging can smooth returns in volatile investment markets. The clear lesson from history is that investors who hold equities must keep faith with them when times look bleak and I remain convinced that equities, and your Company in particular will once again be great generators of wealth for long-term investors.
MRC : Mercantile dips into revenue reserves to increase dividend