Champions of the total return arena

Investment trusts, as listed companies themselves, face many of the same pressures, challenges, and tailwinds as the businesses they invest in. When they buy back their own shares, the accretion to NAV is very easy to calculate (much more so than is the case with operating companies), adding another dimension to the measurable cash return to shareholders. Below we show how many shares have been bought back by each trust in the AIC UK equity income sector over the past three years (to 10/01/2025). We also show the percentage of market cap bought back.

AIC UK EQUITY INCOME SECTOR: BUYBACK RETURN

UK equity income trustsTotal share buybacks (in £)Three-year buyback return (as a % of market cap)
FGT518,074,06025.8
EDIN132,232,27212.1
TMPL75,097,8119.7
BRIG2,524,0766.1
JCH27,209,6866.0
MUT37,771,4993.6
SHRS2,579,9813.1
LOW7,321,0202.0
CTY8,478,0350.5
CTUK1,476,0000.4
DIG526,8330.1
SCF123,5260.1
LWDB212,8750.0
AEIN/A0.0
CHI/CHIBN/A0.0
DIVIN/A0.0

Source: Morningstar, Kepler calculations (data range 10/01/2022 to 10/01/2025). N/A – trusts that didn’t initiate a share repurchase over the period (share redemption and additional listing corporate action types have been excluded).

Below we take it a step further by annualising each trust’s buyback return over three years and combining it with their historic dividend yields to give a rough idea of the potential total cash return on offer. This reveals several trusts putting forward a strong case to be considered total return champions. We stress that this approach isn’t a precise calculation—due to market variables and the fact that trust boards may alter their policies moving forward— but we think it provides a useful indication of which trusts, relative to their size, offer the highest all-in cash “yield”, or total cash return as we refer to it below.

RETURNS TO SHAREHOLDER

UK equity income trustsAnnualised three-year buyback return (%)Historical yield (%)Total cash return (%)
FGT8.02.210.2
EDIN3.93.77.6
SHRS1.06.07.0
JCH1.95.06.9
TMPL3.13.56.6
MUT1.24.75.9
LOW0.75.15.8
CTY0.24.85.0
BRIG2.02.54.5
CTUK0.13.94.0

Source: Morningstar, as of 10/01/2025

Finsbury Growth & Income (FGT) – amplifying shareholder returns

FGT stands out in the UK equity income sector for its focus on quality growth companies and a concentrated portfolio of just 23 holdings. Its 8.0% annualised three-year buyback return leads the group, complementing a lower dividend yield of 2.2% to deliver a total cash return, based on our rough calculations, of 10.2%—the highest among peers. This high buyback return reflects FGT’s commitment to its discount control mechanism, which aims to ensure shares trade within a range of a 5% discount to a modest 2% premium. Combined with the defensive and compounding nature of its portfolio, FGT offers investors a compelling mix of capital growth and incremental shareholder value.

Edinburgh Investment Trust (EDIN) – quality focus, steady returns

Based on our workings, EDIN’s total cash return of 7.6% reflects a 3.7% historical yield and 3.9% annualised buyback return. Whilst its yield is more modest compared to some peers, EDIN has built a steady track record of reliable income and capital growth, alongside a strong commitment to share buybacks. Under the leadership of Imran Sattar, the trust has focusses on high-quality, cash-generative companies with strong growth potential and competitive advantages, positioning it for both income generation and long-term capital appreciation.

Despite trading at a higher price-to-earnings (P/E) ratio than the index, the emphasis Imran places on profitability and growth prospects supports its superior long-term performance potential. Additionally, the focus on companies with lower debt also provides added resilience in times of market stress, helping the trust navigate challenging periods, including rising interest rates, with greater financial stability. Combining robust dividend growth and an attractive buyback strategy, EDIN remains a reliable option for income and growth-focussed investors.

Shires Income (SHRS) – punching above its weight

Despite being smaller in size compared to some of its peers, with a market cap of around £127m, SHRS has consistently returned value to shareholders through buybacks, annualising 1.0% over the past three years, according to our rough indications, on top of its already generous 6.0% historical yield. Additionally, we also think SHRS’s high, yet growing dividend, benefits from its unique income strategy. The trust’s allocation to preference shares offers stability and predictability to its yield, whilst its ability to invest in small- and mid-cap businesses strikes a strong balance between current income and future growth potential. SHRS’s inclusion on the AIC Dividend Hero list further reinforces its commitment to consistent income, distinguishing it as a reliable option for income-focussed investors.

JPMorgan Claverhouse (JCH) – all-cap income in action

JCH takes a more income-focussed approach than some peers in the sector. It has consistently returned value to shareholders through buybacks, annualising 1.9% over the past three years, on top of its already generous 5.0% historical yield, one of the highest in the group. The change in the management team has introduced a refreshed strategy, embracing a “genuinely all-cap approach” and rethinking income exposure by diversifying into mid-cap companies with strong dividend growth prospects and a three-bucket yield strategy which prioritises income stability and growth. Moreover, JCH boasts a 51-year dividend growth track record and significant reserves, which we argue places JCH as a strong option for both reliable income and consistent growth potential.

Temple Bar (TMPL) – focussed value delivery

TMPL disciplined value investing approach prioritises businesses offering attractive valuations, strong cash generation, and sustainable dividend growth, a combination which helps the portfolio deliver both resilience and upside potential, even in challenging market environments. TMPL’s total cash return of 6.6% reflects this disciplined approach, balancing a solid historical yield of 3.5% with a 3.1% annualised buyback return. TMPL’s managers are advocates of the power of total returns, consistently highlighting the importance that both buybacks and dividends can have to shareholder returns over time.

Over the last three years, the board has shown a clear commitment to returning value to shareholders and putting its strategy into action. Whilst its dividend yield is lower than some peers, TMPL’s focus on undervalued opportunities with strong recovery potential, alongside its commitment to added additional returns through buybacks, remains a core attraction for long-term investors, further enhancing its appeal, in our view.

What about smaller companies?

We’ve focussed much of our attention on trusts that invest predominately in larger companies. However, when it comes to smaller companies, we think they often fly under the radar. Some investors might assume that smaller companies sacrifice income potential for capital growth potential—or vice versa. Whilst this can be true for some, many smaller businesses offer the best of both worlds: strong, rising income alongside impressive capital growth.

Trusts that specialise in smaller companies recognise this potential, offering investors a differentiated source of total returns not often seen in large-cap stocks. Aberforth Smaller Companies (ASL) is a prime example. Although ASL does not explicitly target income, it has consistently demonstrated its ability to provide a solid yield of 3.0%, with annualised dividend growth of 7.4% since inception. This growth has outpaced inflation (2.5%) and surpassed both small-cap and broader market indices. Additionally, ASL has returned value to shareholders through share buybacks, annualising 1.0% over the past three years, bringing its total cash return to 3.9%.

In the first half of 2024, fourteen of ASL’s holdings repurchased shares, with boards taking advantage of depressed stock market valuations. This activity highlights the catalysts we discussed earlier are prevalent across the UK market-cap spectrum.

ASL’s commitment to buybacks and conservative approach to income management, supported by significant revenue reserves, strengthens its ability to sustain and grow its dividend. In addition to its regular dividend, ASL has also paid special dividends, though these are not guaranteed. Overall, its blend of value-driven capital growth, a rising income stream, and buyback activity underscore it as a compelling option for those looking for UK smaller company exposure, with strong total return potential.

Conclusion

The UK market, long overlooked and undervalued, is positioning itself as an unexpected powerhouse for shareholder returns. Beneath its seemingly stagnant surface, a battle of transformative catalysts—corporate takeovers, rising buybacks, and resilient businesses—is quietly reshaping the landscape. These dynamics are forging a new breed of total return champions for those willing to look beyond short-term pessimism.

The synergy between buybacks and dividends presents a potent formula for total returns, uniquely suited to the UK’s current valuation landscape. Buybacks not only signal management’s confidence in undervalued businesses but also enhance shareholder value by reducing share count and increasing earnings per share, delivering welcome additional returns in today’s current environment. We should acknowledge here, that the economics of buybacks are not quite the same for trusts as for commercial companies. Shell will generally not be selling oil fields to buy back shares, but one way or another, an equity income trust will be selling equities to buy back shares. This means the compound effect on EPS over time is much higher for a commercial company. That said, trust buybacks do boost NAV per share and have some positive effect on EPS too. Considering these payments and robust dividend payouts, we think investors are well-placed to benefit from both the immediate income and amplified long-term gains the UK has to offer.

UK-focussed investment trusts are capitalising on these evolving dynamics and harnessing their structures and expertise to deliver tangible results for investors, in our view. For those with a long-term perspective, the UK’s once-overlooked market is poised for transformation — potentially as a coliseum ready to crown the next generation of total return champions.