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LONDON - Schroder Income Growth Fund PLC (LSE:SCF) reported mixed half-year results for the period ending February 28, 2025, with a net asset value (NAV) total return of 2.9% and a share price total return of 1.8%. These figures contrast with the FTSE All-Share Index’s return of 5.2%. The fund’s stock selection in the financial sector was a highlight, with Standard Chartered (LON:STAN), 3i (LON:III) Group, and Lloyds Banking Group (LON:LLOY) among the top performers. However, choices in consumer discretionary, industrials, and consumer staples sectors did not fare as well.
Earnings for the fund decreased by 3.9% over the same period, a trend attributed to a shift in capital allocation by companies, with a preference for share buybacks over dividend payouts, especially special dividends. Despite the earnings decline, the board decided to increase the first and second interim dividends to 3.25p per share, up from 2.50p. This move aims to distribute income more evenly throughout the year, with the expectation that the total dividend will be spread more across the first three interim payments, and the fourth will likely be lower.
In a bid to manage volatility and maintain the discount within a single-digit range under normal market conditions, the board is taking a more active stance on discount management. Furthermore, Schroder Income Growth Fund announced fee reductions to benefit shareholders. Starting September 1, 2025, management fees will drop from 0.45% to 0.40% and will be calculated on the lower of market capitalization or NAV. Additionally, the fee for secretarial and administration services will be eliminated. The board estimates savings of over $300,000 for shareholders, or approximately 0.4p per share, assuming a 10% discount to NAV.
Matt Bennison’s appointment as co-manager during this period strengthens the management team but does not alter the fund’s management approach.
Despite the challenges of the first half of FY2025, including geopolitical tensions and domestic uncertainties, Schroder Income Growth Fund’s emphasis on small- and mid-cap stocks, which have historically supported long-term outperformance, positions it for potential upside if market sentiment improves. With mid-cap valuations at attractive levels and a yield premium over the FTSE 100, the fund’s diversified portfolio could appeal to long-term investors seeking income with growth potential. These prospects are further supported by the board’s cost reduction efforts and proactive discount management.
This report is based on a press release statement from Schroder Income Growth Fund PLC.
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