Schroder Income Growth Fund has put out a pretty solid half-year update for the six months to 28 February 2026. The headline is simple enough: shareholders got a strong absolute return, dividend progress continued, and earnings improved sharply. The small catch is that the trust’s net asset value, or NAV – the value of its portfolio minus liabilities – still lagged the FTSE All-Share Index.
That makes this a good rather than flawless set of numbers. For income-focused investors, though, there is plenty here to like, especially the 30th consecutive annual dividend increase and a noticeable lift in revenue earnings per share.
Schroder Income Growth Fund half-year results: NAV up 17.4% but still behind the FTSE All-Share
For the six months to 28 February 2026, the trust delivered a NAV total return of 17.4%. That is a strong gain in its own right, but it was below the FTSE All-Share Index return of 18.9%.
The better news for shareholders is that the share price total return was 18.9%, exactly matching the benchmark. That happened because the discount to NAV – where the share price trades below the underlying asset value – narrowed from 8.2% to 7.2% during the period.
| Key metric | Six months to 28 February 2026 | Comparator |
|---|---|---|
| NAV total return | 17.4% | FTSE All-Share Index: 18.9% |
| Share price total return | 18.9% | FTSE All-Share Index: 18.9% |
| Revenue earnings per share | 3.97p | 2.84p |
| NAV per share | 398.71p | 347.32p at 31 August 2025 |
| Discount to NAV | 7.2% | 8.2% at start of period |
| Average gearing | 8.4% | Positive contribution |
In context, that benchmark lag looks fairly understandable. The manager says market returns were heavily driven by a small number of stocks, and that sort of concentration can make relative performance awkward even when the broader portfolio is doing well.
There is also a useful bit of perspective here. The trust says long-term returns remain ahead of the FTSE All-Share since Sue Noffke took over the portfolio in July 2011. It also beat its AIC UK Equity Income peer group average return of 15.0%, ranking in the second quartile.
Dividend growth, revenue earnings and reserves: why income investors will focus on this section
This is where the update gets more interesting for retail investors who own the trust for income. The company paid first and second interim dividends of 3.25p per share for the year ending 31 August 2026, unchanged versus the equivalent payments last year.
More importantly, the board says it has now delivered an increased dividend for 30 consecutive years and still wants to retain AIC “Dividend Hero” status. That is the kind of consistency income investors tend to prize.
Revenue earnings per share rose to 3.97p from 2.84p. That is a jump of about 40%, and the report gives three reasons: higher income from investments, lower costs, and fewer shares in issue after buybacks.
Income from investments rose 17.5% to £3.383 million. Some of that came from a special dividend from Lancashire Holdings, with no equivalent last year, but even stripping that out, ordinary dividend income was up 7%.
The fee reduction also helped. Management says the lower investment management fee contributed about 0.17p per share in the first half. That may not sound huge, but in an income trust every fraction of a penny matters because it supports dividend cover.
After paying the first interim dividend, revenue reserves stood at 7.1p per share, equal to 48% of the dividends paid last year. In plain English, that gives the board a decent buffer if portfolio income turns choppy.
Share buybacks, discount control and gearing: sensible capital management in action
One of the stronger operational points in this half-year report is discount management. The board is actively using share buybacks to stop the discount widening too far, aiming to keep it within single digits in normal market conditions.
During the six months, the company bought back 803,214 shares, equal to 1.2% of issued share capital excluding treasury shares, for £2.8 million. The average price paid was £3.43 per share, and the company says this added about 0.1% to NAV.
That is modest, but definitely positive. Buybacks only really help when they are done at a worthwhile discount, and that appears to be the case here.
After the period end and up to 7 May 2026, the company bought back another 1,035,000 shares for £3.6 million. By that date, the discount had tightened further to 6.1%.
Gearing – borrowing to invest more into the portfolio – also helped. The trust had average gearing of 8.4% and a £30 million revolving credit facility, with £26.0 million drawn at the period end. In a rising market, that extra exposure boosted returns. Of course, the flip side is that gearing can hurt when markets fall.
Portfolio winners and losers: mining, infrastructure and banks beat luxury and specialist finance
The report gives a fairly clear read on what worked. Rio Tinto, SSE, Balfour Beatty and Standard Chartered were among the positive contributors.
That tells you a lot about the style of the portfolio right now. It is leaning into internationally exposed, cash-generative UK-listed companies, especially where valuations still look sensible.
On the downside, ICG, TP ICAP, Burberry and Whitbread detracted. In a market where a handful of areas ran very hard and investor sentiment shifted quickly, that mix of winners and losers is not especially surprising.
The manager also points to one helpful factor on relative performance: not holding several expensive index names that de-rated as investors questioned how artificial intelligence might disrupt parts of software and data businesses. Names mentioned included Experian, London Stock Exchange, Sage and Compass.
That said, even with that tailwind, the trust still fell short of the benchmark on NAV terms. So the portfolio did some things right, but not enough to overcome the concentrated strength elsewhere in the index.
Schroder Income Growth Fund outlook: UK valuations attractive, but risks have not gone away
The outlook section is balanced rather than bullish for the sake of it. The board and manager both say UK valuations remain attractive and the market still offers a broad range of opportunities.
That feels fair. UK equities have had a better run, but the report suggests plenty of shares – especially among small and mid-caps – still trade at meaningful discounts to larger peers and to their own history.
The obvious risk is geopolitics. The board flags uncertainty around the conflict in Iran and the knock-on effects for inflation, interest rates and market volatility. Since 28 February 2026, the trust’s NAV total return was down 5.2% to 7 May 2026, versus down 5.0% for the FTSE All-Share, while the share price total return was down 3.7%.
So this is not a straight-line story. Strong first-half numbers have already been followed by a wobblier market backdrop.
Board changes and the Nuveen-Schroders deal: not urgent, but worth watching
There are two corporate side-notes investors should keep in mind. First, chairman Ewen Cameron Watt will step down at the 2026 AGM after nine years on the board, with Victoria Muir set to succeed him.
Second, Schroders plc has agreed terms of a recommended cash acquisition by Nuveen, with completion not expected until Q4 2026. The board says it has been told Nuveen intends to maintain continuity across Schroders’ investment and client-facing functions.
That is reassuring, but it is still something to monitor. When the parent of your investment manager is being acquired, investors are right to keep an eye on staff retention, culture and process stability.
What this Schroder Income Growth Fund RNS means for investors
My take is that this is a credible and broadly positive half-year report. The trust did not beat its benchmark on NAV, and that matters, but it still produced a strong return, matched the index on share price total return, improved earnings, narrowed its discount and kept the dividend story intact.
For income investors, the biggest positives are the 30-year dividend growth record, 3.97p of revenue earnings per share, and the 7.1p per share revenue reserve. For total return investors, the key question is whether the portfolio can turn attractive UK valuations into better benchmark-relative performance from here.
Overall, this looks like an investment trust doing most things sensibly. It is not shooting the lights out, but it is managing capital well, protecting its income proposition and giving shareholders a fairly robust way to back UK equities.
The half-year report was not audited or reviewed by the company’s auditor.
