In 1974, the Ford Cortina was the UK’s most popular car and Leeds United topped the First Division. It was also the year in which the directors of the Murray Income Trust decided to increase the full-year dividend from just under to just over half a penny.
This year Murray Income celebrated its 100th anniversary and its 50th consecutive annual dividend increase, paying a total dividend of 37.5p to its shareholders (representing a healthy compound annual growth rate throughout the period of 9.15%).
The longevity of Murray Income’s dividend record can be explained by three factors.
MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
- The structure of investment trusts, with revenue reserves, has helped to smooth income
- The strength of overseas currencies have helped with a dividend paid in sterling.
- But to my mind the overarching reason for the payout’s heroic performance has been the portfolio’s focus on high-quality businesses able to grow their earnings and hence their dividends over the long term, through good times and bad.
In light of the above I’ve chosen four high-quality companies with exposure to three enduring trends – digital transformation, the energy transition, and ageing populations – that can hopefully deliver similar levels of long-term earnings growth, long-term dividend growth and capital appreciation.
1. Sage (LSE: SGE)
Sage (LSE: SGE), a company I last mentioned in this column in March 2012, is a leading supplier of accounting and business management software to smaller companies that have underinvested in digital tools.
Sage has a competitive product portfolio, aided by the success of the acquisition of Intacct a number of years ago, to provide help. There is scope to grow geographically and through further product innovation, while margins should benefit from operating leverage. The firm’s products are typically embedded in their customers’ workflow and provide a large benefit for a relatively limited cost.
2. Rotork (LSE: ROR)
The next company is Rotork (LSE: ROR), a leading manufacturer of actuators. The company has an attractive part to play in the energy transition helping to remove methane emissions in oil and gas wells while also enabling the development of hydrogen and carbon capture, utilisation and storage (CCUS).
Rotork has strong quality characteristics with attractive margins, a high return on capital employed, robust brand resonance and a net cash balance sheet.
3. Oxford Instruments (LSE: OXIG)
Oxford Instruments (LSE: OXIG) is exposed to several structural growth markets as a leading provider of advanced instrumentation equipment used for scientific research, chemical analysis, semiconductor processing and diagnostic imaging.
It benefits from technological leadership, a strong brand and good commercial nous. The company should deliver attractive revenue growth with improving margins. The net cash balance sheet provides additional avenues for expansion.
4. Convatec (LSE: CTEC)
The final stock is Convatec (LSE: CTEC), which is in the midst of a turnaround under a management team we rate highly. Convatec has operations in the areas of infusion care, ostomy care, advanced wound care and continence care. These areas provide exposure to chronic care with recurring revenues and high customer dependency in growing markets driven by population ageing. Convatec has a clear plan to enhance revenue growth and greatly improve operating margins. The firm trades at an unjustifiably large discount to its nearest rival.
This article was first published in MoneyWeek's magazine and all information was correct at the time of writing. Enjoy exclusive early access to news, opinion and analysis from our team of financial experts with a MoneyWeek subscription.
-
Families suffer £20,000 lost income growth – are you feeling the pinch?Average incomes for working age families have increased by just 7% in the past two decades, research suggests
-
How to achieve a secure retirement, as more retirees admit to struggling with debtTwenty-six percent of retirees now have unsecured debt – a sharp rise compared to two years ago – with many underestimating how much a typical retirement costs
-
Small UK industrial stocks are hidden gemsOpinion Ed Wielechowski of the Odyssean Investment Trust highlights three of his favourite British small-cap industrial stocks
-
Aurora Innovation is running on empty – is it overvalued?Aurora Innovation, a maker of self-driving trucks, may have promised far more than it can deliver
-
'Ride the recovery in emerging markets': Gustavo Medeiros of Ashmore Group tells MoneyWeekInterview What's the outlook for emerging markets? Gustavo Medeiros, head of research at Ashmore Group, gives his analysis and reviews progress in developing economies
-
What is the Enterprise Investment Scheme and should you have one?The Enterprise Investment Scheme is tax-efficient and potentially lucrative. Taking a chance on the scheme could trim your family’s IHT bill, says David Prosser
-
The alcohol industry is suffering as consumers sober up – is it still worth investing in the sector?Changing consumer tastes are rocking the alcohol industry, but the best players are adapting their strategies. Buy them while their shares are still cheap
-
A strange calm in creditCorporate bond markets remain remarkably relaxed, with yields that offer little compensation for risks
-
'The City's big bet on green finance fails to pay out'Opinion Insurers and banks are backing away from “green finance”, and there is not much sign of the green boom we were promised. That’s a problem for the City
-
Six top investment trusts for smaller stocksLiquidity constraints mean investment trusts are best placed to seize the juiciest opportunities
