Lowland Investment Co delivers 7.1% NAV return in volatile half-year, hikes dividend

Lowland Investment Co half-year results: good gains, but the benchmark still got away

Lowland Investment Co has put in a solid first half for the six months to 31 March 2026. Net asset value, or NAV – the value of the portfolio after liabilities – delivered a total return of 7.1%, while the share price total return was 6.8%.

That is the good news. The less good bit is that the FTSE All-Share Index returned 8.9%, so Lowland made money but still underperformed its main yardstick.

My read is fairly straightforward: this is a respectable update, not a knockout one. Shareholders got growth in assets, a higher dividend and decent income coverage, but the trust’s bias towards smaller companies held it back in a market led by the very biggest UK stocks.

Lowland Investment Co H1 2026 key numbers retail investors should know

Metric	H1 2026	H1 2025
NAV total return	7.1%	-2.1%
FTSE All-Share total return	8.9%	4.1%
Share price total return	6.8%	2.9%
NAV per share	174.2p	137.2p
Share price	159.0p	129.0p
Dividend for the period	3.425p	3.275p
Ongoing charge	0.70%	0.71%
Dividend yield	4.3%	5.0%
Gearing	13.5%	13.8%
Discount to NAV	10.2%	7.8%

Assets also moved higher, with net assets rising to £383.267 million from £364.635 million at 30 September 2025. Market capitalisation reached £350 million.

Why Lowland Investment Co underperformed despite a positive return

The trust’s managers were pretty clear on the main reason. Lowland owns more medium-sized and smaller companies than the benchmark, and those parts of the market had a tougher time.

At 31 March 2026, only 48.8% of the portfolio was in FTSE 100 companies, versus 88.8% for the benchmark. Meanwhile, 24.7% sat in the FTSE 250, 9.6% in FTSE SmallCap and 10.2% in AIM stocks. That positioning can work brilliantly over time, but in this half it was a headwind.

The Deutsche Numis Smaller Companies Plus AIM Index fell 5.1% over the same period. So when the chair says the underperformance was modest, that is fair enough – Lowland was swimming against the tide.

There is a positive spin too. The managers said stock selection was positive, and takeover activity helped offset some of the damage. Two more approaches for portfolio companies arrived in the half, continuing a theme UK investors have seen for a while: cheaper smaller companies attracting buyers.

Dividend growth looks encouraging, but there is one caveat

Income investors will probably like this bit most. Lowland declared a second interim dividend of 1.725p per share, up 4.5% from 1.65p a year earlier.

That takes the dividend in respect of the half year to 3.425p, compared with 3.275p last year. The company said it expects to maintain its quarterly progressive dividend policy, meaning the final two payments for the current year should be at least at this rate.

On the trust’s own figures, the 12-month historic run rate gives a dividend of 6.775p per share, equal to a 4.3% yield. That is attractive, although not spectacular in UK equity income terms.

One thing worth noting: earnings per share rose to 2.64p from 2.06p, but the chair said the size of the increase was mainly due to the timing of dividend payments from holdings. In plain English, income has improved, but not all of that jump should be treated as a clean underlying trend just yet.

Discount and gearing at Lowland Investment Co: what they mean and why they matter

Two bits of investment trust jargon matter here: discount and gearing.

The discount is the gap between the share price and the NAV. Lowland ended the period on a 10.2% discount, compared with 10.7% at the last year end. That means investors can still buy the portfolio for less than the stated asset value, which can be attractive if sentiment improves.

The catch is that the discount remains wider than the AIC UK Equity Income sector average of 6.0%. So the market is still marking Lowland down more heavily than many peers. That can create opportunity, but it also tells you demand for the shares is not especially strong right now.

Gearing means borrowing to invest. It can amplify gains and losses. Lowland’s gearing rose to 13.5% from 11.5% at 30 September 2025, and the board said it was modestly beneficial in the first half.

I think this is sensible rather than reckless. The trust’s policy allows gearing up to 20% at drawdown, so 13.5% is meaningful but not extreme. Still, if markets wobble again, gearing can make the ride bumpier.

Best and worst holdings in the Lowland portfolio

The winners were led by big UK names and energy exposure. BP contributed 1.0% to return, HSBC 0.8%, Shell 0.8%, GSK 0.8%, Serica Energy 0.7% and Rio Tinto 0.7%.

That list tells a story. Energy, banks, pharma and miners did the heavy lifting, helped by rising oil prices and a more defensive market mood.

On the downside, smaller and more UK-exposed names struggled. Eleco was the biggest detractor at -0.3%, while Ibstock, Ilika, Aviva, Dunelm, Card Factory, Alumasc and FRP Advisory each chipped away at returns.

The managers also highlighted worries about artificial intelligence hitting sentiment in some businesses, even where trading has not yet been affected. That is an important distinction. Share prices can move well ahead of the actual numbers, for better or worse.

Portfolio changes show the managers are buying into weakness

Management used the weaker market to add to a wide range of companies. New or added positions mentioned included Alumasc, Cohort, RELX, Segro, Hammerson, Young & Co’s Brewery and Mears.

That suggests the team is sticking to its long-running style: buy unloved companies with what they see as low valuations and capable management teams. This approach can be rewarding, but it does require patience. It is not built for chasing whatever is hottest this quarter.

Lowland Investment Co outlook: better since period end, but risks are obvious

Since the half year end, performance has actually improved sharply. Between 31 March and 11 May 2026, NAV rose another 6.3% and the share price climbed 7.4%, ahead of the FTSE All-Share’s 2.1% gain.

That is a strong start to the second half. But the backdrop is hardly calm. The company points to the war in the Middle East, higher oil prices, rising inflation pressure and changing interest rate expectations as major uncertainties.

There is also a clear domestic issue. Some of the weaker holdings were hit by subdued UK economic activity, especially around the November Budget and its impact on consumer-facing businesses.

The bullish argument is that Lowland looks diversified, valuations are described as extremely low, and long-term performance remains impressive. Over 10 years, NAV total return is 102.7%. Over 25 years, it is 668.1%.

The bearish argument is simpler: the trust still sits on a wide discount, still leans into smaller companies, and those areas can stay out of favour for longer than investors would like.

What this Lowland half-year update means for shareholders

This was a decent half-year report, with real positives for income investors. Dividend growth, a low ongoing charge of 0.70%, and improving NAV all strengthen the case.

But it was not flawless. Lowland lagged the FTSE All-Share, and that underlines the reality of the strategy – you are buying an actively managed trust with a genuine tilt away from the index, especially into smaller companies.

For existing holders, this update probably reinforces the investment case rather than changes it. For new investors, the 10.2% discount and progressive dividend policy are the eye-catching features, but you need to be comfortable with a bit more volatility than the benchmark.

In short, Lowland is doing what it says on the tin: backing a broad spread of UK companies for capital and income growth. This half proves that can still work in rough markets, even if it does not always win the short-term league table.