1. Growth,
    Income &
    Dependability

    Scottish American Investment Company P.L.C.

  2. April 2020

    The value of an investment and any income from it is not guaranteed and may go down as well as up and as a result your capital may be at risk.

  3. SAINTS is one of the industry’s oldest trusts, dating back to 1873. Baillie Gifford has managed it since 2004. It has total assets of £654 million (as at 29/2/20) and aims to provide shareholders with a greater yield than global equity markets, together with a dependable dividend income stream that grows faster than inflation. The strategy is to allocate most of its assets to a portfolio of carefully selected global equities in order to access the inflation-beating capital and income growth potential that equities offer over the long term.

    When investing SAINTS’ capital the managers deliberately construct a portfolio which is very different from conventional equity market indices, whose income can be unreliable because of their undue dependence on dividends from a small number of companies in cyclical and capital-intensive industries such as financials and oil & gas. The managers scour global equity markets looking for exceptional growth companies that have the potential to deliver persistently robust cash flow growth and dependable dividends, irrespective of the prevailing economic climate. The investment time horizon is deliberately long term, and in patient ownership of such companies the managers expect to generate superior capital returns over time, alongside a growing and dependable income stream. A portfolio of these stocks is constructed in a considered manner, ensuring appropriate diversification of both income and capital, as well as a balance of growth potential and income generation.

    In order to identify such businesses, Baillie Gifford’s analytical process focuses on the dependability and growth potential of companies’ cash flow available for dividends. The nature of the opportunities for cash flow growth vary. To illustrate this SAINTS’ equity investments are clustered into four main categories:

     

    Compounding Machines

    strong companies which benefit from enduring competitive positions in attractive markets and are expected to generate consistent, above-average cash flow and dividend growth.

     

    Exceptional Revenue Opportunity

    leading companies which are part of rapidly-growing markets and are expected to generate exceptional growth in earnings and cash flow.

     

    Profitability Transformation

    Companies whose management teams have identified a clear path to realising the full margin potential of their business and are expected to generate exceptional cash flow and dividend growth.

     

    Capital Decisions

    Companies expected to experience a structural increase in cash flow available for dividends, for example, as a result of falling capital expenditure requirements.

     

    As an investment company, SAINTS benefits from the ability to use borrowings to enhance the ability to meet its investment objectives. The money is invested opportunistically with the intention of beating the cost of these borrowings. In addition to equities, other asset classes including property and fixed income instruments are considered.

    A directly-held portfolio of UK commercial property (13% of portfolio as at 29/2/20) managed by a third party, OLIM, has been a favoured investment for the borrowed funds for many years, although the allocation to this property portfolio has varied over time. Properties are selected for the portfolio on the basis of their growth, income and dependability characteristics. 

    Fixed income investments (2.0% of portfolio as at 29/2/20) are used more tactically, as the unchanged nature of their income stream does not support SAINTS’ primary objective of dividend growth over time. Investments are therefore made only when the total return potential and the absolute level of income is significant.

  4. SAINTS is co-managed by James Dow and Toby Ross, whose process and philosophy are embedded. The proof is in the performance of the trust. SAINTS offers an above market yield and the prospect of capital growth alongside dividend resilience. This relationship is particularly beneficial as a source of retirement income.

      

  5. Important Information and Risk Factors

    Baillie Gifford & Co and Baillie Gifford & Co Limited are authorised and regulated by the Financial Conduct Authority (FCA). The investment trusts managed by Baillie Gifford & Co Limited are listed UK companies and are not authorised and regulated by the Financial Conduct Authority.

    If you are unsure whether an investment is right for you, please contact an authorised intermediary for advice. A Key Information Document is available here.

    The information contained within this article has been issued and approved by Baillie Gifford & Co Limited. All data is as at 31 March 2020 and source Baillie Gifford & Co unless otherwise stated. It contains information on investments which does not constitute independent investment research. Accordingly, it is not subject to the protections afforded to independent research and Baillie Gifford and its staff may have dealt in the investments concerned. Investment markets and conditions can change rapidly and as such the views expressed should not be taken as statements of fact nor should reliance be placed on these views when making investment decisions. They should not be considered as advice or a recommendation to buy, sell or hold a particular investment.

    SAINTS has some direct property investments, which may be difficult to sell. Valuations of property are only estimates based on the valuer’s opinion. These estimates may not be achieved when the property is sold.

    SAINTS can borrow money to make further investments (sometimes known as ‘gearing’ or ‘leverage’). The risk is that when this money is repaid by the trust, the value of the investments may not be enough to cover the borrowing and interest costs, and the trust will make a loss. If the trust’s investments fall in value, any invested borrowings will increase the amount of this loss. Baillie Gifford does not offer personal pensions or annuities.

     

    SAINTS

    2015

    2016

    2017

    2018

    2019

    Total dividend per ordinary share (net) – pence per share

    10.70

    10.825

    11.10

    11.50

    11.875

     

    Source: Baillie Gifford & Co, data as at 31 December 2019.

    Past performance is no guarantee of future performance.

     

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