SAINTS - Seeking An Income That Stays On Track For Years To Come

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  • 07 mins 27 secs
Join Toby Ross and James Dow, SAINTS’ joint managers, on their travels as they seek out the companies from across the globe that they believe can deliver a dependable and growing income along with capital growth.


Baillie Gifford

Tel: 0800 917 4752

Calton Square
1 Greenside Row

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The scottish american investment company, or saints, as we tend to call it, was founded in eighteen seventy three. It was founded by a group of investors who were getting very low interest rates on their investments in the u. K. And we're looking for interesting opportunities overseas. One of the most interesting opportunities at that time was in american railroads, so that was a big focus for them. At first, although the founders started by investing in america over the years, thebes portfolio became increasingly international to the point that today we invest in almost twenty countries worldwide. There are two key aims at the heart of saints. On the first of those is paying a dependable income bye dependable. We mean an income that shareholders couldn't rely on, year in and year out, whatever the economic climate through thick and thin. As an example of that. If you look over saenz's, recent history saints was able to maintain and grow its dividend even through the great financial crisis. The second key aim is growth in both income and capital and by growth, we mean growth ahead of inflation. We believe growth is incredibly valuable to income investors. For example, if you're in retirement, growth is one of the best protections you've got against running out of capital over the years. And that makes us quite unlike many other income generating investments, which tend to lose their value, certainly, in real terms, over time. Essentially, we expect to give st shareholders more income to spend in the long run. Wei have a simple philosophy for delivering these outcomes off dependable income growth over time, and that is to look for companies which can deliver exactly the same outcomes what we're looking for first off our companies, that could deliver strong growth in both earnings and cash flows over many years. Our belief is if we invest in those companies, dividends and share prices are likely to follow the same path as part of bailey. Different. We share the research of over one hundred other investors who are focused on finding growth companies, and i think that focus on growth is one thing that sets us apart from some other income managers who focus a bit more on the short term income investment might generate. We believe that successful income investors need to focus at least as much on growth as they do thie second critical aspect that we focus on with any company we look at us a potential investment is the likely dependability of its dividend way. Want to be sure before we invest that we can rely on the evidence to make sure we can meet state's objectives. So we too, understand what factors does the company. Have that will give it resilience during those times of stress has partly about things we can know in advance. So the characteristics of the business, but it's also about board attitudes. How much does the board care about maintaining the dividend during difficult times ? Another way that we underpin the resilience of sense dividend stream is to make sure that the portfolio level we have achieved a great deal of diversification. We limit the contribution of anyone company tio no more than five percent of the portfolios income stream to find those companies that we've got to go outside the uk. States has a global universe of two and a half thousand established dividend paying cos that's about ten times more than we would have if we restricted ourselves just the u k. So a big part of what we do is traveling the world, looking for those about seventy, to eighty names. That's, a level that will give us good diversification on those companies. We really don't care where they're actually listed. They could be anywhere in the world we invest in. You're way, investor, significant part of our last money in north america. But we also invest in latin america, in africa, in asia way have a diversified approach, but ultimately, what we're looking for is something very company specific that will give us dependable income growth. Saint has increased its dividends every year for thirty eight consecutive years, and in fact, if you go back and look at the history of the trust over the long term, you'd find that it had not produced it stupid end any year since nineteen thirty eight. So it has been an exceptionally dependable source of income, forcing shareholders when we're choosing investments for senses equity portfolio way focus entirely on long term income, not short term yields. Each year, we provide a full listing of all of our investments in the annual report of the investment trust. Jennifer seitz, investor looks at the report, reads about the holdings. They'll see that as a very diverse range of different growth opportunities that we've been able to uncover in all sorts of different industries and all sorts of different markets, and often they might be cos many people haven't heard ofthe company like ch robinson. The american truck broking firm, for instance, will take a company like waters clue of the dutch information business. These businesses may not be household names, but we think they're a perfect fit for saints objectives. There's, a trust since has two great advantages compared with an open ended investment company. The first one is that we can invest in a really wide range of different types of assets. So the bulk of our poor rodeo is invested in equities because we think they're a great asset for delivering real growth over time, but we can also invest in bonds. We do that selectively when they meet our objectives way also havea directly held property portfolio, so lots of different opportunities for us to meet the objectives were seeking another genuine tangible advantage. That sense of trust is its ability to save some of the income from good years, tuck it away for a rainy day. Today, we start with nearly a year's worth of revenues in our revenue reserve, and that means that we can use that to support the dividend in future if we go into tougher economic environments. That's. Why, you see, for example, during the global financial crisis, when companies were cutting their dividends when the economy was slowing rapidly down, since income steadily grew, we were able to supplement income from the revenue. If you look at the yield on the global equity market today, you'll see it's much too low to meet spending needs of many of our investors. Saints has typically delivered a significantly higher level of income than the market over time were expected to in future as well. Typically, we would expect to generate about thirty percent more income from the global equity market in any given year. Saints aims to keep your income and your capital on the right track for years to come. No.