Tip Sheet

This is Money says Alliance is doing little wrong, while The Telegraph tips HICL Infrastructure to build itself back up.

ByFrank Buhagiar

This is Money ALLIANCE TRUST: The ‘dividend hero’ that’s poised to maintain its amazing record

What makes a record amazing? How about 58 consecutive years of dividend growth. For that’s the number of years in a row Alliance (ATST) looks set to raise its payout to shareholders after the global investor unveiled a 6.62p quarterly dividend, its first for the year. Crucially, 6.62p is higher than last year’s 6.18p paid.

But ATST is not just a dividend growth story, “As for share-price gains, Alliance is also doing little wrong. These have been 13 and 18 per cent over the past six months and year, respectively.” A thumbs up for the fund’s differentiated approach – rather than hand over the funds to one investment manager, ATST uses Willis Towers Watson (WTW) to identify the best managers around. WTW then gives these best-in-class managers a portion of the fund’s assets to invest and manage as they see fit – typically each manager invests in around 20 different stocks. Currently, the £3.4 billion fund employs 10 managers who run 11 different segments of the fund’s assets.

The article concludes by highlighting the tagline on Alliance’s website “The trust has its own website (alliancetrust.co.uk) and has taken to the airwaves to promote its suitability as a long-term investment – tagline: ‘Find your comfort zone’. It is a sign, some say, of the confidence that the trust’s board has in WTW.” And speaking of airwaves, you can have a listen of the fund’s latest doceo video update here.

Questor: This infrastructure fund is building itself back up

The infrastructure fund in question? HICL Infrastructure (HICL), first tipped by The Telegraph tipster back in 2014. Different world since then of course. Look no further than interest rates – Bank Rate was 0.5% back in 2014; today its 5.25% with most of the increase taking place over the last couple of years. Trouble is, infrastructure funds, which are viewed as bond proxies due to the government-backed revenue streams they receive from long-term contracts, are “sensitive to rises in the yields on government bonds which increase when interest rates go up.” Cue a steep fall in HICL’s share price from 176p back in early September 2022, at which point the shares traded at an 8% premium to net assets, to 121.8p today, a 22% discount to NAV.

But there could be light at the end of the tunnel. For as Questor points out, with both the Canadian and European Central Banks both cutting rates earlier this month, “it is probably only a matter of time before the Bank of England follows suit and lowers the Bank Rate from 5.25pc”.

The £3.2 billion fund hasn’t been sitting on its hands waiting for rates to be cut though. During the last financial year, HICL raised £500m by selling nine infrastructure projects. Crucially, the sales were at prices either at or above their previous valuation, thereby validating the internal valuation process. What’s more the proceeds raised have enabled the extensive credit facilities to be repaid and a £50m share buyback programme to be launched. And thanks to savings made, a pick-up in inflation-linked revenues and its investment in Channel Tunnel HS1 rail link resuming distributions to its shareholders, the fund has raised next year’s dividend target.

Questor goes on to note that broker Stifel rates HICL, along with other infrastructure funds, a “buy”, highlighting how dividend yields across the sector offer “an attractive margin over gilts, especially with their shares on wide discounts.” Questor concludes “That’s a view we share.