Murray International, the dividend hero, had a great year; can it maintain its winning streak?

According to James Mackreides, Murray International has been the top-performing global equity trust in the last 12 months

Investors are understandably anxious when a reputable fund manager retires. This was also the case when Bruce Stout left the 1.9 billion Murray International (LSE: MYI) in June 2024 after 20 years. He had produced 20 years of dividend growth from a global income strategy during that time.

MYI has produced a total return of 8.5 percent annually over the past ten years, which is twice the retail price index. Fees of only 0.5 percent annually are extremely minimal. With 50 million loan notes at 2.24 percent that are redeemable in 2031 and 60 million at 2.83 percent that are redeemable in 2037, borrowings (net of cash) represent 5.6 percent of net assets. Why did it trade at a 10% discount to net asset value (NAV) as recently as the start of 2025, and what was there not to like?

Murray International is on the rise again.

The MSCI AC World index compounded at 12.8 percent over a ten-year period, while the benchmark index, the MSCI ACWI High Dividend Yield, consistently underperformed at 10.6 percent. Investors paid a high price for a higher-than-market yield in terms of total return, as is frequently the case.

With an investment return of 19.7% in the year ending in October, four percentage points higher than the benchmark, performance has recently improved. MYI has outperformed all other global funds over the past year, not just global income funds. What has worked well for Samantha Fitzpatrick and Martin Connaghan, who collaborated with Stout on the trust for many years prior to becoming co-managers in 2023?

Long after the bull market ended about 15 years ago, Stout continued to maintain a high weighting in Asia excluding Japan and emerging-market stocks. Although they have improved significantly in the last year, emerging markets have lagged behind developed markets by 4% annually over the previous decade. Fitzpatrick and Cannaghan continue to use a more moderate weighting of thirty percent, which is slightly lower than the weightings for North America and Europe. Indeed, if there had been more in Asia and emerging markets during the past year, returns would have been even higher. However, income funds are best suited for cautious people who are concerned about taking on excessive portfolio risk.

Not only high yields.

The pair's inclination to purchase out-of-favor stocks rather than just high yielders and hold them long after the yield has been reduced due to capital appreciation is also encouraging. Fitzpatrick uses Broadcom as an example, which was purchased five years ago on a 7 percent yield and is currently a 2.5 percent holding (though most likely not for long). Right now, it produces 0.6%. Taiwan Semiconductor, the second-largest holding, is another example. It has "run strongly" and currently yields 1.4%.

With 4% of the portfolio, Philip Morris is the biggest holding. Performance had doubled the year before thanks to smoke-free products, but it has since slowed since the middle of the year. Additionally, BAT is a component of the 9.5% invested in the UK. This also applies to Diageo, a call that proved to be premature but now appears to be a compelling contrarian wager. Healthcare (Merck, AbbVie, and Sanofi) accounts for a sizable 13.5%. Although this industry was once very unpopular, things are now improving.

Latin America, which makes up only 7% of the portfolio in four companies but has returned 29% this year, has been the most successful region recently. The portfolio comprises 3.5 percent emerging-market bonds. Fitzpatrick describes these as "a screaming buy ten years ago; for example, we paid 60 cents in the dollar for Vale bonds." Since then, we haven't purchased any. The "

In accordance with the benchmark index, the portfolio is valued at 15 times potential earnings. The 3.7% yield on MYIs shares, which are currently trading at about NAV, is paid out of income. Additionally, Stout appears to have left behind a first-rate team, even though the trust's overall record may not have been as good as he is credited with.