Lowland Investment Company Reports Strong Annual Results, Outperforms Benchmark and Grows Dividend

Lowland’s 2025 scorecard: NAV up 20.8%, share price up 24.4%, dividend raised

Lowland Investment Company delivered a third strong year on the trot. For the 12 months to 30 September 2025, net asset value (NAV) total return was 20.8%, ahead of the FTSE All-Share’s 16.2% and well ahead of the AIC UK Equity Income peer group on 13.3%. The share price total return was even better at 24.4% as the discount narrowed.

Importantly for income seekers, the board is proposing a final dividend of 1.70p, taking the full-year dividend to 6.625p, up 3.1% year on year and covered by earnings of 6.73p.

Metric (year end 30 Sep 2025)	2025	2024
NAV total return	20.8%	16.3%
FTSE All-Share total return	16.2%	13.4%
Share price total return	24.4%	-
NAV per share (debt at fair value)	168.6p	146.1p
Share price	150.5p	127.0p
Discount to NAV	10.7%	13.1%
Dividend per share	6.625p	6.425p
Dividend yield (at year end)	4.4%	5.1%
Gearing (borrowed money used to invest)	11.5%	11.0%
Ongoing charge	0.71%	0.66%
Market capitalisation	£331m	£343m

What powered the outperformance: big banks, takeovers and sensible gearing

NAV total return is the fund’s performance including dividends. Lowland’s outperformance versus the benchmark came mainly from strong stock selection in FTSE 100 names, especially the banks, and from a pick-up in takeover activity across the UK market. Gearing – using some debt to invest – also added to returns.

• Top contributors included HSBC (+65.6% share price total return), Barclays (+73.6%), Standard Chartered (+85.6%), Babcock (+183.8%) and Aviva (+51.6%).
• Takeovers helped: H&T was acquired by US lender FirstCash; Renold and International Personal Finance also received approaches.
• Drags came from more cyclical, domestic names such as STV (-51.8%), Marshalls (-44.2%) and Headlam (-59.9%).

By size, Lowland owns a mix but had a higher proportion in smaller companies than the index. All small-cap indices rose in absolute terms but lagged the FTSE 100, so this “size tilt” was a modest headwind to relative performance.

Dividend growth, coverage and the buybacks trend

The proposed total dividend of 6.625p is up 3.1% and is fully covered by earnings per share of 6.73p. The trust aims for a progressive dividend – keeping each quarterly payment at least flat year on year.

Across the market, many companies keep favouring share buybacks over special dividends. Lowland’s managers note specials were just 4% of investment income this year (2015: 14%). They are relaxed about it when buybacks are funded from surplus capital and undertaken on undervalued shares. Revenue grew 7% and the board still has revenue reserves of £9.7 million to smooth payouts if needed.

Discount narrowed, and Lowland bought back 50.2 million shares

The discount – the gap between the share price and the NAV per share – closed from 13.1% to 10.7% over the year, but it remains wider than the AIC UK Equity Income sector average of 3.0% at year end. Lowland repurchased 50.2 million shares into treasury for £67.2 million, which the managers estimate added just over 1% to NAV per share and should support earnings per share over a full year.

Buybacks are useful tools, but the board is candid that they are not a long-term solution. The real prize is sustained investment performance and better marketing to attract new holders and help normalise the discount.

Portfolio shape and valuation: financials and energy to the fore

Lowland invests across large, mid and small UK companies. At year end, 47.6% of the portfolio sat in FTSE 100 names, with the rest mainly in FTSE 250, SmallCap and AIM. The top 20 holdings feature a strong line-up of financials (HSBC, Barclays, M&G, Aviva, Phoenix, Standard Chartered), energy majors (Shell, BP), defensives (GSK, National Grid) and cyclicals (Rio Tinto, Serica Energy, Senior, IMI).

On valuation, the portfolio traded on a 12.1x 12‑month historic P/E versus 13.8x for the FTSE All-Share. That discount, alongside a healthy dividend stream, is the nub of the Lowland thesis: own sound UK businesses at undemanding prices, get paid to wait, and let mean reversion and corporate activity do some heavy lifting.

Balance sheet and costs: conservative gearing, fixed-rate debt

Gearing ended the year at 11.5%, largely in the low-to-mid teens throughout 2025. The trust has a £30 million fixed term note at 3.15% due 2037 and a £40 million revolving credit facility, which was renewed post year end to October 2026. The ability to gear is a structural advantage of investment trusts and has helped returns in this period.

Ongoing charges rose to 0.71% from 0.66%, mainly due to higher marketing spend. That feels sensible if it helps broaden the shareholder base and shrink the discount over time.

Why this update matters for investors

• Clear outperformance: NAV total return of 20.8% beat the FTSE All-Share by 4.6 percentage points. Three- and five-year numbers now also outpace the index.
• Income progression: dividend up 3.1% and covered by earnings; forward yield was 4.4% at year end.
• Valuation support: the portfolio and the shares both trade at discounts – a double layer of value if UK equities continue to re-rate or takeovers persist.
• Long record: over 25 years, NAV and share price total returns of 721.8% and 855.7% respectively, versus 298.2% for the FTSE All-Share.

On the flip side, the UK market’s continued neglect of mid and small caps is frustrating and can prolong recovery in some holdings. The discount at 10.7% remains wide for a trust with this track record, and cyclical names exposed to fragile domestic demand still carry earnings risk.

Outlook signals from the managers

Consensus points to around 9% earnings growth from underlying holdings, which the managers think should translate into similar dividend growth. They expect a fall in UK interest rates and gilt yields to help rate-sensitive names such as British Land and Shaftesbury, and they have been adding to property and building materials companies that could benefit from any upturn in construction and infrastructure spending.

The board’s tone is realistic: inflation, taxes and geopolitics remain headwinds. But the UK market is still cheap relative to global peers, and Lowland’s portfolio is cheaper again than the UK market. That combination, plus a covered and growing dividend, underpins the investment case.

Key dates and practicalities

• Proposed final dividend: 1.70p per share.
• Ex-dividend date: 29 December 2025; record date: 30 December 2025; payment date: 30 January 2026 (subject to AGM approval).
• AGM: Wednesday, 28 January 2026, 12.30pm at 201 Bishopsgate, London EC2M 3AE.

Josh’s take

This is a strong set of results. Outperformance came from exactly where you’d want in a value-tilted UK trust: big, cash-generative banks and insurers, plus a helpful breeze from M&A. The dividend kept moving up, it is covered by earnings, and buybacks nudged NAV per share higher while tackling the discount.

Risks remain around UK cyclicals and the domestic economy, but valuation is firmly on Lowland’s side. If the UK continues to close the gap to global markets – or if takeovers keep spotlighting the value – a 10.7% discount and a 4.4% yield look like a decent starting point.