Manchester and London (MNL), the £303m technology forced to suspend share buybacks last month in a bid to protect its investment trust status, has announced a dramatic hike in its dividends to shore up shareholder returns.
Chair Dan Wright said the company would pay at least 40p in annual dividends for the next five years having listened to shareholders’ complaint that the pause in buybacks meant a reduction in their total capital return.
The proposed 40p distribution represents a 30% increase on the 28p per share the company returned in ordinary and special dividends in its last financial year.
The shares jumped 3.4% to 824.75p.
“We have listened,” said Wright, who said the increased dividend would lift MNL’s yield to 5% from 3.5% currently.
He said the higher dividend would be paid “even if a mechanism is found and executed that allowed share buybacks to continue”.
Buybacks and share purchases by insiders were halted to prevent the free float in the company falling below 35% due to the 62% stake held by fund manager Mark Sheppard and his family. Sheppard subsquently indicated he could be open to a “friendly” merger with other investment companies to expand MNL and reduce his stake.
MNL has warned that crossing the threshold could mean the loss of its investment trust status with HMRC, exposing the company to a potentially huge tax bill on the investment gains it has made over the years.
The company has recently been re-categorised as a technology trust by the Association of Investment Companies. Previously it led the Global sector on account of its large stakes in AI stocks Nvidia and Microsoft which had boosted its 10-year returns to 366%. Following its move to the Technology sector it now ranks third behind Allianz Technology (ATT) on 771% and Polar Capital Technology Trust (PCT) on 657%.
Our view
James Carthew, head of investment company research, said: “Investment companies are wonderful things. Where else would you find an investment in AI that pays a hefty dividend yield? Manchester & London has been reclassified by the AIC as a technology trust, and it stacks up well against its new peer group – topping the performance tables over three years. It’s obviously a much more concentrated bet on a handful of AI names than alternatives such as Polar Capital Technology, but even after today’s share price move on the back of this announcement, the discount looks too wide at about 25%.”
