The Scottish American Investment Company (SAINTS) has released its annual results for its financial year ending 31 December 2022.
- SAINTS aims to grow its dividend ahead of inflation over the long term. Over the past ten years SAINTS has increased its dividend at an annualised rate of 3.5%, which compares with UK CPI of 2.7%. For its recent financial year SAINTS declared a final dividend of 3.67p per share, bringing its full year dividend to 13.82p per share, a 9% increase on the prior year’s. SAINTS dividend was fully covered by its revenues for the year, which were 13.82p per share.
- SAINTS generated a NAV total return of -3.7% and a share price total return of -3.5%, ahead of the -7.3% of global equities.
- The largest contributor to SAINTS’ performance was Novo Nordisk, which is also its largest holding. SAINTS’ consumer staples investments also performed well, e.g. Pepsico. Other notable contributors included SAINT’ financial sector investments, which include banks and insurance.
- Three new equity investments were made: Intuit, L’Oréal and Cognex. Corresponding to this were four disposals: Kimberly-Clark de México, Hiscox, Haleon and CH Robinson.
- SAINTS’ non-global equity investments had mixed performance. While its infrastructure investments and bond portfolio had a good year, being the best performing asset classes in the portfolio, its direct property investments had a more challenging time, and were a net detractor.
- SAINTS refinanced a large part of its debt over the year. SAINTS’ overall cost of borrowing on its £94.7m debt (£65.5m at fair value) fell to just below 3%.
- SAINTS generated £5.9m from new share issuances over the year. SAINTS currently trades on a 3.3% discount.
- SAINTS’ previous chairman Peter Moon retired from the board at the last AGM. He has been replaced as chairman by Lord Macpherson.
SAINTS’s investment manager, James Dow, commented:
” Although 2022 felt rather like sailing through a storm, with waves crashing left and right and visibility poor, SAINTS’ portfolio proved pleasingly robust and charted a relatively steady course. The strong companies that constitute the backbone of the portfolio delivered, for the most part, admirably solid compounding in their revenues and profits. The portfolio also generated dividend growth that broadly kept pace with inflation, ensuring shareholders’ real income was largely maintained.
“The company’s property, infrastructure and fixed income investments also held up relatively well. SAINTS has been able to refinance its borrowings, and the Company’s overall borrowing cost has now fallen to 3%, having previously been 8%, which will be a substantial saving going forward.
“Credit for this steady performance should perhaps go more to the seaworthiness of the ship than the skill of its captains: the quality of the holdings shone through rather than any change of course by its managers, given that we made only three new equity investments during the year. But the bottom line is that SAINTS’ shareholders own a portfolio that proved its mettle in 2022 and appears well set for the future. The outlook for the global economy is showing tentative signs of improvement, and as managers we remain optimistic about delivering steady growth in earnings and dividends in 2023 and beyond.
“We would much rather invest shareholders’ capital in companies with good long-term growth prospects, and wait for these storms to pass, than invest in the likes of oil & gas companies where, to the best of our judgement, the long-term outlook for growth in their earnings and dividends is very poor. In the medium-term we expect interest rates and equity valuations to stabilise, while the portfolio’s earnings should continue to compound higher. Ultimately this should drive growth in SAINTS NAV and dividends in the years to come.
“There are no certainties in investing. There can be no guarantee that SAINTS’ capital value and dividends will continue to compound higher in the decade to come as they have in the decade past. But we do believe that, whatever winds may blow, and as far as we are able to ensure as managers, the odds remain skewed strongly in favour of long-term capital appreciation and dividend growth in the years ahead for SAINTS shareholders.”