The Dividend Keeps Climbing: Brunner Navigates Choppy Waters
Against a backdrop of geopolitical tension and shifting market leadership, Brunner Investment Trust (BUT) has delivered something shareholders truly value: a dependable dividend hike. Today’s half-year report reveals a 5.9% increase in the interim dividend to 12.5p per share, continuing its remarkable 53-year streak of annual dividend growth. This isn’t just symbolism – it’s cold, hard cash returning to investors’ pockets when many are still feeling the pinch from inflation.
Performance: Weathering the Storm
Let’s not sugarcoat it – absolute returns were negative over the six months to May 2025. The trust’s Net Asset Value (NAV) total return dipped 1.5%, slightly trailing its benchmark (-0.1%). Meanwhile, the share price total return fell 3.9%, reflecting a modest discount widening. Key figures tell the story:
- NAV per share (debt at fair value): Down 2.4% to 1,425.2p
- Share Price: Down 4.8% to 1,390.0p
- Earnings per Share: Up 1.2% to 17.3p
The primary drag? US healthcare stocks. UnitedHealth became such an anchor that managers Julian Bishop and Christian Schneider fully exited the position, frankly admitting they held on too long as government policy squeezed profitability. Other healthcare names like Thermo Fisher and Align also wobbled.
Where the Portfolio Worked
It wasn’t all doom. European banks shone brightly – DNB (Norway) and Bank of Ireland delivered robust returns thanks to favourable rates and capital returns. Other standout performers included:
- Aena (Spanish airports operator)
- GE Aerospace (jet engines)
- Visa (payments network)
- Admiral (UK insurer)
- Brambles (Australian logistics)
These winners highlight Brunner’s core strategy: seeking quality businesses with sustainable growth, but crucially, only when the price is right.
The Dividend Engine: Built to Last
This is where Brunner flexes its investment trust muscles. Despite negative capital returns, revenue earnings grew (EPS up 1.2% to 17.3p). More importantly, those hefty revenue reserves – a key structural advantage of trusts – provide ample coverage. The board confidently declares:
- Second Interim Dividend: 6.25p per share (payable 19 Sept 2025)
- Forecast Full-Year Dividend: 25.0p per share (a 5.3% year-on-year increase)
Chair Carolan Dobson explicitly states: “We have no current plans to pay dividends out of capital and foresee no need to do so in the foreseeable future.” That’s the sound of a dependable income stream locking into place.
Portfolio Surgery: New Blood In, Underperformers Out
Brunner wasn’t passive. Three significant new holdings entered the fray:
- Tesco: Positioned as a resilient “cash cow”. Scale advantages in UK grocery, strong cash flow, generous shareholder returns via dividends/buybacks. A low-risk income generator.
- Kia: A deep-value contrarian play. Trades at a staggering ~2x trailing profit *excluding* its $13bn net cash pile! High EV/hybrid sales mix mitigates some auto sector risks, though US tariffs remain a watchpoint.
- Amazon: Seen as offering a better balance of quality, growth, and *relative* value than often appreciated. Long-term focus and concealed profitability potential are key attractions.
Significant sales included Nestlé (stagnant growth, high multiple), AbbVie (patent cliff fears), and the aforementioned UnitedHealth exit.
Navigating the Macro Maelstrom: Tariffs, Truss Moments & Kings
The managers don’t shy from the elephant in the room: Trump-era tariffs and expansive US fiscal policy. Their report is laced with historical parallels (even referencing 11th-century King Harthacnut!) and economic analysis:
- Tariffs = Taxes: Highlighting the economic consensus that tariffs ultimately harm wealth creation, despite political appeal to “globalisation’s discontents”.
- Fiscal Fears: The US deficit (>6% of GDP) is flagged as unsustainable in benign times, risking a “Liz Truss moment” if bond markets rebel.
- Market Elasticity: The US market’s sharp reversal (S&P 500 down 7% in GBP terms) is seen partly as a valuation “snap back” after excessive enthusiasm.
Their conclusion? “Even kings can’t control the tide,” but Brunner’s balanced, valuation-aware global approach is built for such volatility.
Looking Ahead: Steady as She Grows (the Dividend)
Uncertainty remains Brunner’s constant companion – geopolitics, policy shifts, and inflation risks loom. Yet, the trust plays its core strengths:
- Income Resilience: Revenue reserves and diversified global income sources underpin that 54th consecutive annual dividend hike target.
- Active Stock Picking: Willingness to cut losers (eventually!) and hunt for value globally (like Kia).
- Discount Management: While the discount widened modestly, the board notes steady underlying demand and continues share issuance (£4.2m raised).
Brunner isn’t promising smooth sailing, but it is delivering what income investors crave most: a reliable, growing dividend stream navigated through stormy markets by experienced hands focused on the long-term horizon. That 53-year track record isn’t maintained by accident.
