Scottish Mortgage Trust Reports 11.2% NAV Growth and 42nd Consecutive Dividend Hike

Scottish Mortgage Delivers Double Digits in Turbulent Times

Let’s cut straight to the chase: Scottish Mortgage Investment Trust (SMT) just posted an 11.2% net asset value (NAV) total return for the year ending March 2025. That’s comfortably ahead of both the FTSE All-World Index (5.5%) and its global sector peers. More impressively, this marks the trust’s 42nd consecutive annual dividend hike – a feat that cements its status as an AIC Dividend Hero.

But here’s the kicker: these numbers only tell half the story. Let’s unpack what’s really happening under the bonnet.

Performance: The Long Game Pays Off

Yes, the one-year figures are respectable. But as Chair Justin Dowley rightly notes, Scottish Mortgage plays the “decades, not quarters” game. Consider this:

• 10-year NAV return: 320% vs 182% for the FTSE All-World
• £1.9 billion spent on buybacks (15.2% of share capital)
• Ongoing charges remain ultra-competitive at 0.31%

The trust’s willingness to stomach volatility – its shares swung from a 4.5% premium to a 9% discount during the year – reflects its growth-focused DNA. As Dowley puts it: “Investing in companies at the forefront of structural change means share price peaks and troughs are inevitable.”

The Dividend Tightrope Walk

That 3.3% dividend increase to 4.38p per share is no small feat given:

• A 40% drop in revenue earnings per share (thanks to the Northvolt write-off)
• Just 0.31% portfolio yield (growth companies reinvest earnings)

This balancing act – maintaining dividend hero status while prioritising growth – speaks volumes about management’s capital allocation discipline. The message? Income isn’t the priority here, but reliability matters.

Portfolio Surgery: Selling Winners, Betting on AI’s Next Act

Manager Tom Slater’s team made bold moves:

• Trimmed NVIDIA significantly despite its AI leadership (“at $70k chips and 60% margins, the risk/reward looked balanced”)
• Added TSMC as the “picks and shovels” play for AI infrastructure
• Doubled down on Meta and Spotify as AI adoption plays

The private portfolio saw fireworks too:

• SpaceX now has 5M+ Starlink subscribers
• Joby Aviation nearing FAA certification for flying taxis
• Zipline drones delivering Walmart orders in 30 minutes

China Chessboard: Cautious Re-engagement

After years of regulatory winter, SMT sees green shoots:

• New position in BYD (now a $100B revenue EV giant)
• PDD’s Temu going global with localised logistics
• 14% portfolio exposure – down from peak, but still conviction-led

As Slater notes: “China remains home to an enormous, educated, and entrepreneurial population.” But tariff risks loom large.

Risks: The Elephant in the Rocket Ship

Not all glittered:

• Northvolt bankruptcy – a £900M+ write-off
• Moderna slump on vaccine fatigue
• Geopolitical tensions triggering April 2025’s “dramatic drop” post-year-end

These stumbles validate SMT’s “asymmetric returns” philosophy – most bets fail, but the winners more than compensate.

Looking Ahead: Resilience as Strategy

The investment case boils down to three pillars:

1. Operational leverage: Portfolio companies grew margins despite macro chaos
2. Balance sheet optionality: 13% gearing at average 3.1% interest cost
3. Multi-decade themes: AI, space, biotech, and yes, luxury handbags

As incoming Chair Christopher Samuel takes the reins, the question isn’t “can Scottish Mortgage repeat past success?” It’s “does the market still have patience for 10-year compounders?”

For investors who can stomach the ride, the trust remains a unique vehicle for accessing global growth outliers. Just pack your seatbelt – and maybe a sick bag.