Schroder Income Growth Fund [LON:SCF], one of the UK’s oldest and most consistent equity income trusts, has capped its thirtieth consecutive year of dividend increases with another strong set of annual results, a milestone that reinforces its status as one of the Association of Investment Companies’ “dividend heroes.”
For the year ended 31 August 2025, the London-listed trust delivered a net asset value (NAV) total return of 9.6 per cent, with its share price climbing 12.9 per cent as the discount to NAV narrowed. Total dividend income rose by 6.1 per cent, a notable recovery after last year’s dip and a reflection of improving corporate payouts across a resurgent UK equity market.
“Both your Board and Investment Manager are confident that the portfolio is well positioned to continue delivering real growth of income and competitive total returns,” said chairman Ewen Cameron Watt. “Our diversified income base, disciplined stock selection, and long history of successfully navigating varied market cycles provide a solid foundation as your Company enters a fourth decade.”
The fund, managed by Sue Noffke, Schroders’ Head of UK Equities, has been a consistent outperformer since she took the helm in 2011. Over her tenure, NAV and share price total returns have climbed 197.9 per cent and 200.8 per cent respectively, comfortably ahead of the FTSE All-Share’s 168.0 per cent gain over the same period.
Dividends per share rose 3.5 per cent to 14.7p, marking three decades of uninterrupted growth and outpacing inflation over both ten- and thirty-year horizons. Earnings per share were 12.55p, up 7.8 per cent, with the trust’s £4.3mn revenue reserve equivalent to more than five months of dividend cover.
The board also fulfilled its commitment to provide smoother quarterly payments, increasing the first three interim dividends to 3.25p each.
Reduction of management fee
In a move aimed at enhancing shareholder value, the board agreed to cut the investment management fee from 0.45 to 0.40 per cent from September 2025, while removing separate administration charges. Importantly, fees will now be calculated on the lower of market capitalisation or NAV, further aligning costs with shareholder outcomes.
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Discount management has also been a priority. The board introduced a more active buyback policy to keep the discount within single digits. Over the past year, 1.4mn shares were repurchased into treasury, representing 2 per cent of issued capital and adding a modest 0.18 per cent to NAV. The discount now stands at around 8 per cent, consistent with broader improvements across the sector.
The trust maintained moderate gearing, averaging 12.1 per cent, which added 1.1 percentage points to returns despite higher borrowing costs. A new £30mn revolving credit facility with Scotiabank will provide flexibility, with lower finance charges expected following recent interest rate cuts.
UK stock market remains one of the cheapest
The board will seek shareholder approval at the next AGM to continue the trust for a further five years, reaffirming its long-term commitment to UK equities. “The UK market remains one of the cheapest globally,” Watt said, adding that low valuations and record levels of share buybacks among British companies suggest “a vote of confidence in the medium-term outlook.”
Noffke echoed this optimism in her investment manager’s review, describing a “profound shift in capital allocation” among UK companies as they balance dividend growth with disciplined share repurchases. “When executed without compromising investment or balance sheet strength, buybacks are proving powerful drivers of share price and earnings growth,” she said.
The portfolio’s biggest contributors included Standard Chartered LON:STAN, Lloyds LON:LLOY, and Prudential LON:PRU, as well as industrials such as Balfour Beatty LON:BBY and IMI LON:IMI. Mid-cap holdings temporarily lagged the FTSE 100 Index but continue to offer what Noffke called “mispriced long-term opportunities” amid subdued valuations.
Attractive prospects in financial and healthcare stocks
Looking ahead, the fund sees attractive prospects in financials and healthcare, alongside structural reforms to boost UK capital markets. Both the board and manager believe that a supportive policy backdrop, combined with disciplined capital allocation and selective gearing, will underpin continued growth in income and capital returns.
“After three decades of steady progress, our focus remains unchanged,” said Watt, “delivering real income growth, protecting shareholder value, and ensuring this company continues to thrive in its next thirty years.”
 | Schroder Income Growth Fund plc | AIC: UK equity income LON:SCF / GBP |      |
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