Positive results for SCF mark its 31st consecutive year of dividend growth.

Josef Licsaue

Updated 12 Nov 2026

Disclaimer

This is a non-independent marketing communication commissioned by Schroder Investment Management. The report has not been prepared in accordance with legal requirements designed to promote the independence of investment research and is not subject to any prohibition on the dealing ahead of the dissemination of investment research.

• Schroder Income Growth (SCF) has reported an NAV total return of 19.0% for the year to 31/08/2026, against the FTSE All-Share’s 21.3%. The share price total return was stronger at 23.0%. Over the longer term, SCF has delivered an annualised NAV total return of 8.7%, ahead of 8.1% for the FTSE All-Share since Sue Noffke took the reins in July 2011.
• Over the year, Computacenter was among the strongest contributors, benefitting from AI-related capital expenditure in its US business, alongside Standard Chartered, which was supported by the interest rate environment and strong growth in Asian wealth management.
• The shortfall against the index came largely from the overweight to consumer discretionary. Burberry was hit by weaker sentiment towards luxury goods and Whitbread by higher costs following the UK Budget. Elsewhere, Telecom Plus detracted after warning that renewed competition in the energy market would weigh on 2027 earnings.
• The higher share price return reflected the discount narrowing from 8.2% to 5.3%, aided by strong buyback activity. The board repurchased c. 4.4% of the issued share capital for £10.7m, adding around 0.3% to NAV, and a further 1.1% has been bought back since the year end, as at 09/11/2026.
• It has been another positive year for shareholders’ income. Dividends per share rose 4.1% to 15.30p, and dividend growth has now exceeded inflation over one, three and ten years, delivering real rather than merely nominal income growth. Importantly, this marks SCF’s 31st consecutive year of growth, further cementing its AIC Dividend Hero status.
• Revenue earnings per share rose 8.5% to 13.62p, despite broadly flat dividend income of £10.3m. By our calculations, lower revenue costs and finance charges, including a one-off VAT recovery, added around 0.7p per share, whilst a smaller share count following buybacks added around 0.4p. Sue attributes the flat income to three factors: portfolio repositioning, companies’ growing preference for buybacks, and dividend cuts at Diageo, Taylor Wimpey, Pets at Home and Telecom Plus.
• That said, the dividend over the year was 0.89× covered by earnings, with the shortfall drawn from revenue reserves. Following payment of the fourth interim dividend, the revenue reserve stood at £3.3m, equivalent to 5.07p per share, or c. four months of the annual dividend. Whilst this may seem modest, SCF also benefits from distributable, realised capital reserves of 225.16p per share, which can be used to support distributions and equate to nearly 15 times the annual dividend.
• Ongoing charges fell to 0.57% from 0.78%, reflecting the management fee cut to 0.40% from 0.45%, now charged on the lower of market capitalisation or NAV, along with the removal of the separate secretarial fee and lower service provider costs.
• Portfolio activity was elevated, with ten new holdings and twelve exits. Sue’s changes ranged from increasing mining exposure through new positions in Glencore and Anglo American and building up recovery situations via Reckitt Benckiser, Croda and Diageo, to using the AI-related de-rating of data businesses to buy LSEG and add to RELX.
• Chairman Ewen Cameron Watt will step down at the December AGM after nine years on the board, making this his final statement, and Victoria Muir will succeed him. Looking ahead, he struck a constructive tone on the UK, citing attractive valuations, resilient earnings, strong balance sheets and increasing corporate investment, despite geopolitical tensions, inflation and higher bond yields. He also noted that whilst total dividends paid by UK companies remain below 2019 levels, SCF’s dividend has risen 23% over the same period.

Kepler View

In our view, these are good results for income investors. Schroder Income Growth (SCF) raised its dividend by 4.1%, not only extending its growth record to a 31st consecutive year but once again staying ahead of inflation. Since 1996, dividends have compounded at an annualised 4.1% against inflation of 2.5%, providing real growth over multiple market cycles. Sue has overseen half of that period, and her process has been central to sustaining it, steering the portfolio through very different markets without anchoring to a single style or reaching for unsustainable yields, which gives us confidence in the durability of SCF’s income.

Over the year, Sue took profits in higher-yielding winners such as Lloyds and TP ICAP, recycling the capital into businesses like RELX and LSEG, which yield less but are highly cash-generative and could support stronger income growth in future. There were challenges, though. Diageo and Taylor Wimpey were among the holdings to cut their dividends, and with cover at 0.89×, the revenue reserve has thinned to 5.07p per share. However, we think it’s important to remember that SCF has access to substantial realised capital reserves, which give the board ample support. Moreover, Sue notes that the shift towards buybacks has left ordinary dividends across the market better covered.

Regarding changes to the portfolio over the year, we think RELX and LSEG highlight Sue’s willingness to lean against the market. Both sold off sharply earlier in the year on fears that AI would erode their businesses, with RELX falling by double digits in a single day after Anthropic launched an AI legal tool in February, and Sue used that weakness to add to RELX and open a position in LSEG. These changes make sense, in our view, as AI is only as good as its data. Both businesses own proprietary, constantly refreshed datasets for customers, from lawyers to traders, who need answers that are accurate and auditable. Rather than being bypassed, they are building AI into their own products or, in LSEG’s case, supplying the data third-party tools rely on. We think their rally since July suggests the market is coming round to that view.

More broadly, the UK backdrop looks supportive for SCF’s approach. Over the year, 26 of SCF’s 46 holdings announced buybacks, and as Sue anticipated, the trend is spreading to mid-caps, including existing holdings like Hollywood Bowl, Fevertree and QinetiQ. M&A involving UK companies also doubled to £65bn in the first eight months of 2026, reinforcing Sue’s long-term view that UK equities offer value the market has been slow to recognise. And with around three-quarters of portfolio revenues generated outside the UK, SCF offers far broader exposure than its domestic label implies.

There are, of course, risks to weigh. The consumer discretionary overweight held back relative returns this year, recovery positions such as Diageo may take time to come good, and higher bond yields or renewed geopolitical tension could test sentiment towards equity income, as they did in 2023. Even so, we think the balance looks favourable. Sue sees the clearest value among small and mid-sized companies, where SCF has meaningful exposure, and investors can access that opportunity at a 6.8% discount, at the time of writing, wider than its five-year average, with costs now lower at an OCF of 0.57%. With a current yield of 4.2% and a 31-year record of dividend growth behind it, we think SCF is potentially well placed to turn the cash UK companies are returning to shareholders into a rising income for its own.

One for your watch, to buy if the price falls and the yield rises.

Regional REIT (RGL) made further progress in Q326 with its ongoing portfolio repositioning strategy, reducing borrowings through additional disposals and enhancing overall portfolio quality. Leasing conditions remain challenging, with occupier decisions taking longer, although rents achieved on completed transactions continue to demonstrate demand for good-quality office space. The company continues to target a fully covered FY26 dividend of 8.0p per share, and we make no changes to our forecasts.

Written by

Martyn King

Edison

Director, Financials. Property and Insurance

Year end	EPRA earnings (£m)	EPRA EPS (p)	NAV/share (£)	DPS (p)	Yield (%)	P/NAV (x)
12/25e	19.1	11.8	1.94	10.00	11.4	0.45
12/26e	14.9	9.2	1.90	8.00	9.1	0.46
12/27e	15.0	9.2	1.94	8.20	9.4	0.45
12/28e	15.2	9.4	1.99	8.40	9.6	0.44

Improving portfolio quality and reducing debt

RGL completed £8.9m (before costs) of property disposals during Q3, with a further £1.7m since the period end, taking year-to-date disposals to £32.2m. The company has not updated previous guidance of at least £55m for the year, which is reflected in our forecasts and implies a further c £23m by year-end. For the nine months, disposals were at an average 11.0% discount to pre-sale valuations (H126: 5.7%).

Leasing activity continues to demonstrate occupier demand for good-quality space, although the conversion of interest into completed lettings remains slow. In our recent executive interview, CEO Stephen Inglis commented that lettings now typically take nine to 15 months from initial viewing, versus six to nine months before the COVID-19 pandemic. In the first nine months, 26 new lettings generated £2.0m of annualised rent, with little change during Q3. The company also completed 41 lease renewals, securing £2.4m of annualised rent at 5.6% above estimated rental value (ERV), with tenant retention of 71.8%. Portfolio quality continues to improve, with 61.9% now rated EPC B or better (including exempt properties), compared with 61.2% at H126 and 60.0% at end-FY25. Annualised rent roll declined by £1.2m during Q3 to £47.2m, reflecting disposals and leasing movements. Nevertheless, the company estimates that completed disposals will enhance annual earnings by c £1.4m, reflecting savings in non-recoverable property costs and finance expenses. EPRA occupancy was broadly stable at 74.1% versus 74.3% at end-June.

Gross borrowings reduced by £11m during Q3 to £233m, taking the year-to-date reduction to £33m. Adjusted for £34m of cash, net loan-to-value (LTV) was 38.5% (H126: 38.5%). The average cost of borrowing increased to 4.1% from 3.4% at H126, reflecting the August replacement of low-cost interest rate hedges at higher market rates, with 97.1% of borrowings fixed or hedged. Discussions to refinance the £104m facility maturing in December 2027 are progressing, with completion targeted well ahead of maturity.

We leave our forecasts unchanged, including FY26e EPRA EPS of 9.2p and DPS of 8.0p. At 87.5p, the shares offer a prospective dividend yield of 9.1% and trade at a c 54% discount to H126 EPRA NTA. Progress in capturing the significant embedded net rental income potential remains the key driver of longer-term upside.

Octopus Renewables Infrastructure (ORIT) is a renewable energy infrastructure specialist, diversified by geography, technology and stage, and investing in projects from development stage to operational. Although predominantly invested in operational assets, ORIT owns equity stakes in developers, giving it access to projects at an early stage, with the potential to generate higher returns. ORIT’s Manager, OEGEN, is one of the largest, most experienced and well-resourced managers of renewables assets in Europe, with assets under management of £8.8bn.

In the first half of ORIT’s current financial year, to 30/06/2026, net assets declined from £495m to £455m, or approximately 8%. The main factor in this was a reduction in the value of ORIT’s onshore wind assets following a review of the long-term energy yield assumptions. In simple terms, the onshore wind assets, which are relatively new, were previously valued using technical assumptions and forecasts which, now that a meaningful set of actual operational data has been collected, have been updated to reflect that. Clearly this is a disappointing outcome, but it means that the vast majority of ORIT’s assets are now valued against operational data.

Despite this, ORIT remains on track to increase its annual dividend once again, with dividend cover in the first half slightly higher than for the same period last year at 1.38x. If ORIT meets its full-year target, that will represent a 4.3% annualised dividend growth rate since 2021. With ORIT currently trading at a near-30% discount, the dividend yield is 10%, which is a significant premium to government bond yields, although the gap has narrowed more recently as government bond yields in the UK and Europe have risen.

ORIT’s weighted average discount rate is now 8.3%, an increase from 7.8% at the beginning of 2026, but one that the team believes is rooted in growing transaction evidence in private markets, where it sees a stronger pickup in investor interest than in public markets. Factor in ORIT’s holdings in developers and the figure rises to 8.9%, which means that ORIT is well on track to reposition the portfolio to achieve the revised return targets it set in 2025 of 9-11%.

Analyst’s View

In our view one of the conundrums of 2026 is that, on the one hand, energy prices have risen, but on the other hand discounts on renewable energy infrastructure trusts have remained stubbornly wide. It’s true that the sector, and ORIT, have faced strong headwinds, but ultimately they are selling a product, electricity, where demand appears to be entering a secular growth trend. The factors that have contributed to ORIT’s wide discount such as higher interest rates, power price forecasts, the changes to the RoC regime’s inflation linkages and gearing, as well as the well-documented investment trust sector issues like cost disclosures and wealth manager consolidation, are all very well-rehearsed. And yes, a trust like ORIT, with fixed prices across much of the portfolio, cannot immediately capture a short-term spike in prices. Pile on political risk, which we take a brief look at in the Portfolio section, and the discount might seem explicable. Our view though is that all of those are well-known factors that have been running for a while and we come back to the conundrum: fund managers across regions and asset classes are very focused on the ‘electrification’ of the global economy and yet the investment trusts that pump the electrons into that trend remain overlooked. That’s starting to change though, with ORIT’s discount starting 2026 close to 40% and now trading at just under 30%.

In response to changing market conditions and a changing opportunity set in renewables, ORIT has set out a clear plan to boost its target returns by gradually increasing its allocation to construction assets to 20%, while retaining a target 5% allocation to developers. It will fund this from a mixture of excess cashflows (dividend cover was 1.38x at the half year), temporary use of debt and through gradual disposals of more mature assets. As the team notes, the revised portfolio discount rate is based on an increasing number of actual transactions in the private markets, and a number of disposals are at various stages of negotiation, with progress expected in the coming months. A successful implementation of ORIT’s plan could make the current discount seem excessively wide in time.

Bull

• A near-30% discount and 10% yield on a diversified portfolio of renewable energy generation assets
• A clear strategy to increase returns and grow the company
• Jurisdictions ORIT operates in remain supportive of renewable energy generators

Bear

• ORIT’s gearing is relatively high, and will amplify losses as well as gains
• M&A activity in the renewables sector has been slow to take off. ORIT will need to execute an M&A transaction to achieve its 2030 goal of £1bn of net assets
• A more negative political environment for renewables is emerging more broadly

Kepler

Preferred Payouts from 5.7% to 10.6%… Which is Safest ?

Brett Owens, Chief Investment Strategist
Updated: November 11, 2026

Alas, no actual threat this afternoon. Bizzi’s bark tone was the tell. As it often is on Wall Street, too.

As I write to you from my office chair, the stock jock suits are howling at AI borrowers, louder than Bizzi, “Your loans are in danger!” Trading on “default insurance”—the risk of nonpayment—for the 10 largest AI spenders and chipmakers popped more than eightfold this year, to $176 billion. That’s a chunk of insurance changing hands!

That means investors are buying protection against AI companies defaulting on their debt payments. This fear has spread to other income investments, including preferreds.

Okay, I get it. The credit market is nervous, and when this happens, it punishes the rest of Income Land. Investors are dumping perfectly good payers, such as preferred stock funds, which fell all fall.

The decline kicked off in September when rates rose. This punished long bond prices and bond proxies including preferreds. Fine. We know bonds move inverse to rates. Then credit jitters spread like the cold and flu in October. Now we have fears of an AI winter in November.

But here’s where you and I should get up off our proverbial investing couches. There are perfectly good income funds caught up in this Wall Street worry ritual.

Let’s say we own a preferred stock fund. Should we heed the warning barks? Or “ignore them” and buy low and collect the monthly payouts?

The preferred stock asset class is a promise plus a payout. Preferred shares put us ahead of regular “common” stockholders for dividends—we are paid first. But we sit behind bondholders when the you-know-what hits the fan. So, yes, we receive preference but only over the regular common stock holders.

So far, so good. The tradeoff? Preferreds offer less upside than common shares. That’s okay. We are focused on income, not buying and hoping that our portfolio goes up, so this is a trade we are just fine making because preferreds tend to pay more (often a multiple more) than common shares.

Sounds compelling, yes, but how exactly do we make this trade as individual investors? How do we buy preferreds?

Preferred stock selection is not for beginners. Got a complex database with specific terms, interest rates, and credit quality? How about analysis based on various credit scenarios?

No thanks! We’re trying to retire—not perspire—on dividends here! And as we maximize our leisure time and passive income we “outsource” this research to expert preferred stock managers like Flaherty & Crumrine and Nuveen. Why spin cycles in the minutiae of individual preferred selection when we can simply buy the funds (which trade just like stocks)?

Let’s consider the four biggest positions for First Trust Preferred Securities and Income ETF (FPE), a popular preferred ETF. One click and we have this portfolio which is made up firstly of banks (the classic issuers of preferred stock): Bank of America (BAC), Barclays (BCS), Wells Fargo (WFC) and Citigroup (C). Further down the list we have two utilities, NextEra Energy (NEE) and Xcel Energy (XEL).

You know what FPE’s top 10 holdings don’t include? AI or data center related debt!

For every $100 in FPE’s portfolio, $45 sits in bank securities. The next $13 sits in utilities and $12 in insurers. That’s $70 out of $100 in traditional, “boring” (boring is good!) preferred payers.

Let’s say AI play Broadcom (AVGO) takes on more debt tomorrow. This doesn’t affect the terms of the Wells Fargo preferred whatsoever.

Now, could trouble with an AI borrower reach a bank? Sure. Banks lend to data center projects, and if many of these loans sour, the bank’s capital can take a hit. Which is why we want funds that invest in banks that have adequate capital and a diversified loan portfolio.

The bigger risk for preferreds? Interest rates. Preferred stocks typically have no maturity date, so like long-duration bonds, they lose value when long-term rates rise.

Let’s say a preferred stock pays 6%. That looks attractive when long rates are at 3%, and far less so when they rise to 6%. Why lend money to a company that has to make money and fight off competitors when you can give it to Uncle Sam for the same amount?

Now, FPE as an ETF trades for about the value of what it owns—its net asset value (NAV). So there’s no discount here, but you can snag one by considering preferred closed-end funds (CEFs) instead.

CEFs work differently from ETFs in that they don’t create and redeem shares every day. They are, well, closed! So their prices can drift above and below NAV. When below, that is the discount we contrarians love.

Most preferred CEFs also borrow to buy more preferreds. Generally this boosts income because they are borrowing for less than they earn. But borrowing also magnifies losses when prices drop.

But we need to make sure each fund earns its payout—and this is different from promising a dividend! Let’s look at two leading preferred ETFs and five top preferred CEFs. You’ll notice:

1. The CEFs offer a better deal from a discount-to-NAV standpoint.
2. Three of the CEFs have poor income coverage!

Flaherty & Crumrine Dynamic Preferred and Income Fund (DFP) and sister fund Flaherty & Crumrine Preferred and Income Securities Fund (FFC) are the best with 98% and 97% dividend coverage. From here it turns dicey with Nuveen Preferred & Income Opportunities Fund (JPC) rounding out the list with only two-thirds dividend coverage.

Translation: DFP and FFC roughly earn enough to fund their dividends from income. JPC is paying (for now) but covering the gap from elsewhere.

Whichever fund you buy, use a limit order. Some of these trade thinly.

I’ve sold the PCT shares in the SNOWBALL for a loss of £50 after all dealing costs.

I’ve added to BRAI 340 shares for 1k. The two shares are similar but BRAI pays a dividend where PCT doesn’t.

Dividend

Four interim dividends were paid in respect of the year ended 31 August 2026, totalling 25.10p per share and delivering a yield of 9.5%. This continues the Company’s track record of returning a progressive dividend for 19 consecutive years.

I am pleased to report that the dividend has been fully funded from revenue, and we have added a modest amount to reserves this year.

Thursday 12 November

BlackRock American Income Trust PLC ex-dividend date
Fidelity Emerging Markets Ltd ex-dividend date
Greencoat UK Wind PLC ex-dividend date
ICG Enterprise Trust PLC ex-dividend date
International Public Partnerships Ltd ex-dividend date
Majedie Investments PLC ex-dividend date
NextEnergy Solar Fund Ltd ex-dividend date
Octopus Renewables Infrastructure Trust PLC ex-dividend date
Pershing Square Holdings Ltd ex-dividend date
Schroder BSC Social Impact Trust PLC ex-dividend date
Scottish American Investment Co PLC ex-dividend date
Target Healthcare REIT PLC ex-dividend date

I’ve bought for the SNOWBALL 341 shares in BRAI ahead of their xd date this week. I fully expect to lose some capital in the short term but if/when the price falls, I will be able to buy more shares from the re-invested dividends.

If the price falls the actual dividend payment will also fall as currently the dividend is paid at 6% of NAV.