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Fidelity European Trust PLC (LSE:FEV) announced an increase in its interim dividend by 10% to 3.60 pence per share, up from 3.26 pence the previous year. This announcement comes as the investment trust reported a notable rise in its net asset value (NAV) per share, which increased by 11% to 413.01 pence as of June 30, compared to 370.55 pence a year earlier. Despite a challenging economic landscape, the trust achieved a NAV total return of 7.6% for the first half of 2024, outperforming its benchmark, the FTSE World Europe index, which returned 7.1%.
Performance Drivers and Laggers
The trust’s positive performance was bolstered by key holdings such as 3i Group PLC, Novo Nordisk AS—known for its weight loss drugs Wegovy and Ozempic—and ASML Holding NV, a major supplier to semiconductor firms. Conversely, the trust faced challenges from investments in companies like L'Oreal SA, Nestle SA, and LVMH Moet Hennessey Louis Vuitton SE, which detracted from overall performance.
Economic Outlook and Strategic Concerns
Despite the performance, Fidelity European Trust’s management remains cautious about the economic outlook. The trust highlighted that the recovery in consumer spending in China has been weaker than anticipated and has not sufficiently counterbalanced weaker trends in other regions. Portfolio Managers Sam Morse and Marcel Stotzel expressed limited optimism about the short and long-term economic prospects for Europe, citing concerns such as ageing populations, low productivity, and high levels of government debt as factors contributing to expected subdued growth.
Future Strategy and Investment Focus
Looking ahead, the trust plans to maintain its gearing within the prescribed range and will continue to focus on investing in fairly valued companies with strong balance sheets. This strategy aims to ensure resilience and the ability to grow dividends even amidst a difficult economic environment. Despite the gloomy outlook, Fidelity European Trust is committed to navigating the challenging landscape while pursuing opportunities for growth.
