Results analysis from Kepler Trust Intelligence

Schroder Income Growth Fund PLC

18 May 2026

 

Schroder Income Growth (SCF)

18/05/2026

Results analysis from Kepler Trust Intelligence

·      Schroder Income Growth (SCF) delivered a NAV total return of 17.4% for the six months to 28/02/2026, against the FTSE All-Share Index return of 18.9%. Positive performance came from stocks including Rio Tinto, SSE and Balfour Beatty. Relative underperformance stemmed largely from an unusually concentrated market, with a small number of index constituents delivering exceptionally strong returns. Long-term returns remain strong with an annualised NAV total return of 8.5% versus 7.8% for the index, since Sue Noffke took responsibility for the portfolio in July 2011.

·      SCF's higher share price total return of 18.9% reflected the discount narrowing from 8.2% to 7.2% over the reported period. Given the discount, the board repurchased 803,214 ordinary shares during the half-year, equivalent to 1.2% of the issued share capital. Shareholders voted 95.8% in favour of the trust's five-year continuation vote. Further, the board noted the recommended cash acquisition of Schroders by Nuveen, expected to complete Q4 2026, with continuity of management intended.

Kepler View

We think these are good results from SCF, and the income picture is the perfect place to start, as portfolio investment income rose 17.5% over the period. This reflected a special dividend from Lancashire Holdings, alongside a solid 7% rise in underlying ordinary dividend income, supported by double-digit dividend increases from several holdings, including Prudential, XPS Pensions, Hollywood Bowl and Balfour Beatty.

Buybacks are also worth noting. At period end, 30 of SCF's 46 holdings were actively repurchasing their own shares, representing two thirds of the portfolio. For income investors this can look like a headwind, and at the market level it has modestly dampened headline dividend growth. But Sue Noffke argues that the real effect has been on dividend cover, which has strengthened considerably, making the portfolio's income more sustainable over time. She also notes that the UK market may now have reached a peak in buyback activity, with the partial re-rating of certain larger companies undermining the case for further repurchases, and capital increasingly being redirected toward organic investment and acquisitions. Among smaller and mid-sized companies, however, which have not experienced the same degree of re-rating and remain relatively lowly valued, buyback activity looks set to continue, something Sue believes could be a source of ongoing return potential for the portfolio.

SCF has also showed a level of income consistency over the long term. Dividends have compounded at 4.1% annually since 1996, against inflation of 2.5%, delivering genuine real income growth for investors. The board has made clear its intention to pursue a 31st consecutive year of dividend growth, supported by revenue reserves of 7.1p per share, covering 48% of last year's dividend, and a larger pool of distributable capital reserves. Together, we think the foundations to achieve another year of growth are in good shape.

Looking ahead, the conflict in the Middle East has complicated the inflation and rate outlook since the period end, with cuts that had looked likely this year now off the table. Top-tier cash ISAs offering above 4% will inevitably draw some investors, as they did in 2022 and 2023, but they lack the capital growth potential on offer with SCF, alongside the above-inflation dividend growth record it has cultivated since 1996. SCF's smaller company exposure remains a risk if sentiment stays cautious, but it equally represents the trust's most interesting opportunity, those valuations sit at historically wide discounts to larger peers, and any narrowing could be a meaningful driver of returns. At a 6.5% discount, with a 4.3% yield and 30 years of dividend growth ahead of inflation, we think the case for SCF is stronger than the current price suggests.

CLICK HERE TO READ THE FULL REPORT 

Visit Kepler Trust Intelligence for more high quality independent investment trust research.

Important information

This report has been issued by Kepler Partners LLP.  The analyst who has prepared this report is aware that Kepler Partners LLP has a relationship with the company covered in this report and/or a conflict of interest which may impair the objectivity of the research.

Past performance is not a reliable indicator of future results. The value of investments can fall as well as rise and you may get back less than you invested when you decide to sell your investments. It is strongly recommended that if you are a private investor independent financial advice should be taken before making any investment or financial decision.

Kepler Partners is not authorised to make recommendations to retail clients. This report has been issued by Kepler Partners LLP, is based on factual information only, is solely for information purposes only and any views contained in it must not be construed as investment or tax advice or a recommendation to buy, sell or take any action in relation to any investment.

The information provided on this website is not intended for distribution to, or use by, any person or entity in any jurisdiction or country where such distribution or use would be contrary to law or regulation or which would subject Kepler Partners LLP to any registration requirement within such jurisdiction or country. In particular, this website is exclusively for non-US Persons. Persons who access this information are required to inform themselves and to comply with any such restrictions.

The information contained in this website is not intended to constitute, and should not be construed as, investment advice. No representation or warranty, express or implied, is given by any person as to the accuracy or completeness of the information and no responsibility or liability is accepted for the accuracy or sufficiency of any of the information, for any errors, omissions or misstatements, negligent or otherwise. Any views and opinions, whilst given in good faith, are subject to change without notice.

This is not an official confirmation of terms and is not a recommendation, offer or solicitation to buy or sell or take any action in relation to any investment mentioned herein. Any prices or quotations contained herein are indicative only.  

Kepler Partners LLP (including its partners, employees and representatives) or a connected person may have positions in or options on the securities detailed in this report, and may buy, sell or offer to purchase or sell such securities from time to time, but will at all times be subject to restrictions imposed by the firm's internal rules. A copy of the firm's Conflict of Interest policy is available on request.

PLEASE SEE ALSO OUR TERMS AND CONDITIONS

Kepler Partners LLP is authorised and regulated by the Financial Conduct Authority (FRN 480590), registered in England and Wales at 70 Conduit Street, London W1S 2GF with registered number OC334771.

 

END