PCFT to maintain dividend despite mounting pressure on financials
Uses £9m reserves
The board of the Polar Capital Global Financials trust (PCFT) has opted to maintain dividends due to its shareholders this August and in February 2021 despite widespread dividend cuts across its investable universe.
In a statement this morning, the board confirmed that despite "exceptional market conditions arising from the Covid-19 pandemic", which has forced severe dividend cuts across financial services firms, PCFT has built up sufficient distributable reserves to maintain its next scheduled pay outs.
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The £155m trust has 1.7 years of dividend cover with reserves of around £9m according to AIC data. It has posted five year dividend growth of 7.3% per annum for a dividend yield of 4.5%
PCFT's board said: "The company has an income and growth mandate and the board is aware of the importance of income to shareholders, especially at a time when many listed companies, including some in the financials sector, are cutting or suspending their dividends.
"The company has built up distributable reserves over past years which may be utilised to support dividend payments to shareholders at times when the underlying portfolio delivers lower than expected income returns."
The board explained that the trust's capacity to maintain the dividend for the current financial year at an equivalent level to last year "will give the fund manager time to assess the structure and longer-term income capability of the portfolio in a post covid environment and to determine the appropriate longer-term distribution level".
It added: "The board will declare dividends in due course, with the first such declaration expected to be in July for the August payment."
PCTF has posted a NAV total return loss of 22% and 14.9% over one and three years respectively, and a positive return of 8% over five years. The Financials AIC sector's average NAV total return is down 12.2% over one year and 1.6% over three, while the AIC does not yet have data over five years.
It is currently trading on a discount to NAV of 8.9%.
PCTF's top two holdings, JPMorgan Chase & Co and Bank of America Corp, account for more than 10% of the portfolio. Banks have been under particular pressure from regulators across the world to suspend dividends.
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Head of investment company research at QuotedData James Carthew explained that PCFT's managers, Nick Brind and John Yakas (pictured), are confident that the banking sector "is much better placed to rise out of this crisis than it was in 2008".
He added: "Balance sheets have been rebuilt and banks have, in general, left the loan market to fund the world's growing debt mountain.
"Not every bank will emerge unscathed, but it is the job of the people behind an actively managed fund to identify the winners."
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