Within the universe of UK equity income investment trusts, Shires Income (SHRS) stands out from the herd. It sets out to offer investors a meaningfully higher dividend yield than UK equity markets and aims to make this sustainable by diversifying the fund’s sources of income. SHRS also makes use of the flexibility afforded by its closed-end structure to increase its income by using borrowings in a pragmatic fashion
High level of income with potential for growth
SHRS aims to provide its shareholders with a high level of income, together with the potential for growth of both income and capital from a portfolio substantially invested in large cap UK equities. The portfolio may be further diversified with exposure to smaller UK companies and overseas equities. SHRS augments its income with a portfolio of irredeemable preference shares and convertibles (and, when the manager believes appropriate, fixed income securities), financed, in part, by lower cost gearing.
Globally, investors have been unnerved by the growing threat of a trade war. In addition, Brexit-worries have meant that the UK economy and its stock market have lagged those of other developed countries. The manager sees the possibility of further volatility. This may create opportunities for him to acquire high quality stocks at attractive valuations, with the aim of building on SHRS’ record of long-term outperformance of its benchmark.
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