Aberdeen Equity Income Trust Delivers Strong NAV Return Following Shires Merger

Aberdeen Equity Income Trust has put out a solid half-year update, and the headline is straightforward: the trust delivered a strong underlying return, grew income, and got a lot bigger after merging with Shires Income PLC. For retail investors, that is the core story.

The numbers are good. Net asset value, or NAV – the value of the portfolio after liabilities – delivered a total return of 9.9% over the six months to 31 March 2026. That beat the FTSE All-Share Index total return of 8.9%.

But there is a wrinkle. The share price total return was only 4.7%, because the shares moved from trading around asset value to a 4.6% discount to NAV. So the portfolio did better than the market, but shareholders did not get the full benefit in the share price during the period.

Aberdeen Equity Income Trust half-year results: the key numbers that matter

Metric	31 March 2026 / Period	Comparison
NAV total return per share	9.9%	FTSE All-Share total return 8.9%
Share price total return	4.7%	Year ended 30 September 2025: 25.7%
NAV per share	403.75p	377.84p at 30 September 2025
Share price	385.0p	378.0p at 30 September 2025
Discount to NAV	4.6%	0.0% at 30 September 2025
Revenue return per share	11.23p	10.17p a year earlier
Dividend per share for the half year	11.40p	11.40p a year earlier
Total assets	£352.7 million	£206.8 million at 30 September 2025
Equity shareholders’ funds	£320.4 million	£184.3 million at 30 September 2025
Net gearing	9.6%	11.2% at 30 September 2025

Why the Shires Income merger is the biggest piece of this RNS

The merger with Shires is the standout event here. It completed on 17 March 2026 and added £115.0 million of net assets, taking total net assets to more than £320 million. That is a material step up in scale.

Why does scale matter for an investment trust? Usually because it can improve liquidity, spread fixed costs over a larger base, and make the shares easier to trade. That seems to be happening already. Average daily trading volume rose from just over 100,000 shares per day before the announcement to over 174,000 shares per day after completion.

That is a genuine positive. Bigger trusts with better liquidity tend to be more attractive to wealth managers and private investors alike, and that can help support the rating over time.

There is also a cost angle. The ongoing charges ratio is forecast at 0.45% for the year ending 30 September 2026, but that includes a management fee waiver linked to the merger. Excluding the waiver, the ratio would be 0.81%, compared with 0.84% last year. So the eye-catching 0.45% is not the clean underlying number, but costs do still look to be trending in the right direction.

Aberdeen Equity Income Trust performance: strong portfolio returns, weaker share price reality

The trust outperformed its benchmark at the NAV level, which is what you want from an actively managed trust. The managers said this was especially encouraging because large-cap stocks outperformed smaller companies during the period, and this portfolio is deliberately index-agnostic – meaning it is not built to hug the benchmark.

Energy was the biggest contributor, helped by holdings such as Ithaca Energy, BP, Harbour Energy and Diversified Energy. Financials also did well, with CMC Markets, Conduit and Ashmore called out as strong performers. Basic materials helped too, particularly Rio Tinto.

On the weaker side, pharmaceuticals hurt because the trust was underweight names such as AstraZeneca and GSK. Consumer discretionary holdings including easyJet and Barratt Redrow struggled, and some real estate positions were hit by rising bond yields.

My take is that the underlying stock-picking looks good. Beating the index while not being built around its biggest constituents is a decent achievement. The frustration is that the market rating moved the wrong way at the same time.

Why the discount widened and why investors should care

The shares ended the period at a 4.6% discount to NAV, having generally traded at a premium earlier in the half. The board points to the Iran conflict, wider investment trust sector weakness, and end-of-tax-year selling as key reasons.

This matters because discounts can swamp good portfolio performance in the short term. That is exactly what happened here: NAV total return was 9.9%, but share price total return was 4.7%.

There is at least some improvement since the period end. The discount had narrowed to 2.0% at close on 26 May 2026. If that continues, shareholders could recover some of the gap.

Dividend income and payout outlook: good progress, but one number needs watching

Income was encouraging. Revenue income rose 14.6% to £6.2 million, and net revenue earnings increased 19.7% to £5.8 million. Revenue return per share climbed to 11.23p from 10.17p.

That said, the dividend declared for the half year was 11.40p, so first-half earnings did not fully cover first-half dividends. That is not automatically a problem for an equity income trust, because income is often second-half weighted. The managers explicitly said the first half usually generates around 40% of full-year dividend income, and they remain confident about covering the dividend target for the full year.

The current plan is unchanged: three interim dividends of 5.70p per share, with the fourth interim expected to be at least 6.00p. That implies a total annual dividend of at least 23.1p per share.

For income investors, that consistency matters. The board and managers are also talking up the prospect of a 26th consecutive year of dividend per share growth when full-year results are reported. That is not yet guaranteed, but it is clearly the aim.

Portfolio positioning after the merger: more diversified, but still clearly tilted

The portfolio remains heavily tilted towards financials at 36.6%, with energy at 16.2% and industrials at 9.8%. The top ten investments made up 30.2% of the portfolio, led by Rio Tinto, HSBC, BP, Chesnara and M&G.

This is not a bland, benchmark-like income fund. More than 57.6% of the portfolio sits outside the FTSE 100, and the trust now also has a bit more flexibility after the Shires merger, including preference shares, fixed income and some overseas exposure.

That broader toolkit should help income resilience. The trust now holds £16.8 million in preference shares and fixed interest investments, which management says adds another stable income source.

Balance sheet, gearing and costs: sensible, not reckless

Net gearing was 9.6% at 31 March 2026, down from 11.2% at the year end. Gearing means borrowing to invest, which can enhance returns when markets rise but can hurt when they fall.

The trust had borrowed £32.5 million from facilities of £40 million at the period end, including a £10 million fixed-term loan at 3.903% expiring in May 2027. Since the period end, it has drawn another £3.5 million, taking net gearing to 10.3%.

That level looks moderate rather than aggressive. Still, with energy prices, inflation and geopolitics all in the mix, borrowing is something investors should keep an eye on.

What this half-year report means for Aberdeen Equity Income Trust shareholders

Overall, this is a positive update. The trust beat its benchmark, grew income, completed a meaningful merger and increased its scale. Those are all real positives, not accounting tricks.

The negatives are more about market perception than portfolio quality. The discount widening held back the share price, and the ultra-low 0.45% ongoing charges ratio comes with the important caveat of a merger-related fee waiver.

Still, the bigger picture looks healthier than it did six months ago. Aberdeen Equity Income Trust is now larger, more liquid and more diversified, while still offering a forecast yield based on 23.1p of 6.0% at the period-end share price.

If the managers keep delivering NAV outperformance and the discount continues to narrow, shareholders could start to see the benefits come through more clearly in the share price. That is the bit to watch from here.