Alliance Trust PLC on Friday said it had raised dividends by a third in 2021, but continued to underperform its benchmark, as it failed to capitalise on a surge in US technology stocks in the final quarter.

The Dundee-headquartered global equities investor reported net asset value total return for 2021 of 18.6%, underperforming its benchmark index return of 19.6%. Basic and diluted NAV per share at December 31 was £10.90, up 17% from £9.34 the year before.

Alliance had outperformed the MSCI All Country Work Index benchmark by 3.4% in the first nine months of the year. However, after that point, the trust said a few very large US technology stocks boosted its benchmark index as the market recovered. Given that it did not hold those stocks in the same concentration as the benchmark index, this was not reflected in its own NAV total return.

Alliance also underperformed its benchmark in 2020, with a NAV total return of 8.5% against the benchmark return of 13%. From April 2017 to the end of December, Alliance Trust has had a total NAV return of 63.6%, trailing the MSCI ACI return of 69.2% over the same period.

Pretax profit for operating activities in the year was £543.3 million, over double that of £229.9 million in 2020. Basic earnings per share were 171.71 pence for the year, up from 70.58p in the prior year.

Alliance will pay a fourth interim dividend of 5.8p. It has increased its total annual payout by 33% year-on-year to 19.05p from 14.38p in 2020. The company added that it plans to continue its policy of increasing dividends each year.

Over 2021, it bought back 13.5 million shares for a total cost of £131.0 million, which was 4.2% of its issued share capital. All the shares bought back were cancelled, it said.

Shares in Alliance Trust were trading 2.2% higher at 945.00p each in London on Friday morning.

Despite its underperformance this year, Alliance maintains its portfolio companies are cheaper, with ‘stronger and more stable earnings potential’ than the benchmark. As long term fundamentals are re-emphasised with the recovery from the pandemic, the portfolio is in a position to outperform in 2022, the company said.

However, Alliance also noted it will be difficult to predict how events in Ukraine will predict global markets.

‘In the past year we have seen encouraging signs that when the individual stock returns from global markets are less concentrated and focus on long-term company fundamentals, returns from our portfolio exceed those of the market index. The board and WTW remain confident that over the longer term the company’s diversified but high conviction portfolio is well placed to provide the level of outperformance we target,’ said Chair Gregor Stewart.

WTW refers to its investment manager.

The company’s AGM will be held on April 21.

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