Merchants Trust ups dividend, expects UK equities growth to continue

Merchants Trust PLC on Thursday said it underperformed its benchmark in the 2026 financial year but raised its total dividend for the year.

The trust invests in high-yielding UK large-cap companies.

Merchants Trust said net asset value on January 31, the end of its financial year, was 653.3 pence per share, up 14% from 572.6p a year before. NAV total return, including dividend payments, was 18.9%, compared to 21.1% for the FTSE all-share index.

The company noted that it lagged the ‘exceptionally strong’ index return, as returns have been concentrated in a narrow band of stocks such as technology, defence and banks.

‘Whilst we have to monitor short term performance against the index and hold the manager to account, we also expect there will be periods like this from time to time,’ Merchants Trust said.

It declared a final dividend of 7.5p per share, up 2.7% from 7.3p a year ago. This brings the total payout for financial 2026 to 29.5p, up 1.4% from 29.1p. It noted that financial 2026 represented its 44th consecutive year of dividend growth.

Chair Colin Clark said the trust welcomes the resurgence in the UK market.

‘During this recent year, we have seen the beginning of a recognition of the genuine value available in UK equities, by both domestic and international investors, and capital has finally started to identify at least certain areas of the UK market. The board is pleased to report that against this background Merchants has benefitted from the renewed interest in the market and delivered strong absolute returns while continuing to grow the dividend - something that has been central to our appeal to investors for over four decades,’ Chair Clark said.

Looking ahead, Clark said the board remains confident in the investment approach and quality of Merchants’ portfolio.

The chair noted that the portfolio managers believe many individual stocks are ‘significantly undervalued’ despite the strong performance in 2025.

‘The global reassessment of valuations, the recognition of the risks inherent in excessive concentration in a small number of US technology stocks, and the supportive policy environment in the UK all suggest that the conditions which have created the opportunity in UK equities may continue, although we have to be mindful of the potential impact from the evolving situation in the Middle East,’ Chair Clark said.

Shares in the Merchants Trust were down 0.2% at 596.97 pence on Thursday morning in London.

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