For financial professionals in the UK

Fund Manager July 2021 Commentary – Lowland Investment Company

Laura Foll, CFA

Laura Foll, CFA

Portfolio Manager

James Henderson

James Henderson

Portfolio Manager

12 Aug 2021
3 minute read

July was an encouraging month for UK dividends. The energy company, Royal Dutch Shell, positively surprised with a large increase to its quarterly dividend from its reduced level of last year, while miners including Rio Tinto and Anglo American announced special dividends as a result of high commodity prices (such as iron ore). The banking sector dividend outlook is also improving, partially driven by lower than expected loan losses as a result of the pandemic. The overall dividend growth for the UK market is being driven by large companies in these three sectors (energy, mining and financials). Smaller company dividends are also recovering, but some companies are choosing to rebase payout ratios at lower levels than they were prior to the pandemic.

A number of portfolio companies have now reported on earnings for the first half of 2021 and the results are (broadly) encouraging, with many companies reporting higher than expected sales and earnings. One particularly encouraging trend that we have noted is that among several of the industrial companies held in the portfolio, there is evidence of margins being re-set at higher than historic levels. For example, at engineer IMI, while sales have recovered to approximately in line with 2019 levels, the operating margin is over 2.5% higher. This trend fits with what we have been hearing from companies over the course of the pandemic; which is that many companies have accelerated cost saving programmes and some of these savings (such as closing manufacturing facilities) will be permanent. We continue to think that this potential margin gain is being underappreciated in some company earnings forecasts.

Commodity Expand

A physical good such as oil, gold or wheat. The sale and purchase of commodities in financial markets is usually carried out through futures contracts.

Operating margin Expand

Operating margin measures how much profit a company makes on a dollar of sales after paying for variable costs of production, such as wages and raw materials, but before paying interest or tax. It is calculated by dividing a company’s operating income by its net sales.

Payout ratios Expand

The payout ratio is a financial metric showing the proportion of earnings a company pays its shareholders in the form of dividends, expressed as a percentage of the company’s total earnings.

Special dividends Expand

A special dividend is a non-recurring distribution of company assets, usually in the form of cash, to shareholders. A special dividend is usually larger compared to normal dividends paid out by the company and often tied to a specific event like an asset sale or other windfall event. Special dividends are also referred to as extra dividends.

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These are the views of the author at the time of publication and may differ from the views of other individuals/teams at Janus Henderson Investors. References made to individual securities do not constitute a recommendation to buy, sell or hold any security, investment strategy or market sector, and should not be assumed to be profitable. Janus Henderson Investors, its affiliated advisor, or its employees, may have a position in the securities mentioned.


Past performance does not predict future returns. The value of an investment and the income from it can fall as well as rise and you may not get back the amount originally invested.


The information in this article does not qualify as an investment recommendation.


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Important information

Please read the following important information regarding funds related to this article.

Before investing in an investment trust referred to in this document, you should satisfy yourself as to its suitability and the risks involved, you may wish to consult a financial adviser. This is a marketing communication. Please refer to the AIFMD Disclosure document and Annual Report of the AIF before making any final investment decisions.
    Specific risks
  • If a Company's portfolio is concentrated towards a particular country or geographical region, the investment carries greater risk than a portfolio that is diversified across more countries.
  • Some of the investments in this portfolio are in smaller company shares. They may be more difficult to buy and sell, and their share prices may fluctuate more than those of larger companies.
  • This Company is suitable to be used as one component of several within a diversified investment portfolio. Investors should consider carefully the proportion of their portfolio invested in this Company.
  • Active management techniques that have worked well in normal market conditions could prove ineffective or negative for performance at other times.
  • The Company could lose money if a counterparty with which it trades becomes unwilling or unable to meet its obligations to the Company.
  • Shares can lose value rapidly, and typically involve higher risks than bonds or money market instruments. The value of your investment may fall as a result.
  • The return on your investment is directly related to the prevailing market price of the Company's shares, which will trade at a varying discount (or premium) relative to the value of the underlying assets of the Company. As a result, losses (or gains) may be higher or lower than those of the Company's assets.
  • The Company may use gearing (borrowing to invest) as part of its investment strategy. If the Company utilises its ability to gear, the profits and losses incurred by the Company can be greater than those of a Company that does not use gearing.