Bruce Stout sounds note of caution about the dividend recovery

In its half-year results, Murray International cautioned that it is likely to dip into its reserves again this year.  

Murray International (LSE:MYI), the emerging market investment trust, says it plans to at least match the amount of dividends it paid last year, according to the trust’s half-year results.

In the update to investors, the trust, which is a member of interactive investor’s Super 60 list, said that it would pay two interim dividends of 12p per share for the first half of the year. This is the same as in 2020. However, the trust says it “intends to maintain a progressive dividend policy”. Therefore, it expects dividend payments in 2021 to at least match the payout of 54.5p per share seen in 2020.

To do this, the trust will likely have to dip into its dividend reserves. The trust notes: “It is expected that this will again entail some use of the significant revenue reserves built up over prior years for occasions such as the current pandemic.”

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The results showed that in the first six months of the year, the trust underperformed the global index. The trust’s net asset value (NAV) total return stood at 8.7%. Over the same period, its share price total return was lower, at 7.3%. This was a result of the discount widening. In comparison, the FTSE All-World Index saw a total return of 11.4%. Murray International notes that this index is not its “benchmark”, but instead its “reference index”.

According to the trust’s manager Bruce Stout (pictured above), the performance is reflective of a slow recovery for dividends. While acknowledging markets saw higher share prices on the back of improving global economic growth and company profitability, Stout noted that “numerous companies remained very cautious when it came to returning improving cash flows to shareholders”.

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He added: “Opting to reset dividends below pre-pandemic levels or to keep dividends unchanged until greater transparency emerges was commonplace against a backdrop of viral mutations and constantly changing directives from governments.”

As a result, Stout argues: “The path to income recovery may take much longer for certain economic sectors and businesses this time around.”