Key Highlights

  • British Smaller Companies VCT2 plc (LSE:BSC) offers a Dividend Yield of 6.20%.
  • Total dividends for 2026 will be 3.00 pence per share, down from 4.00 pence in 2025.
  • NAV per share was 52.25 pence at 30 June 2026, adjusted for the interim dividend.
  • The company raised £31.8 million in the 2025/26 tax year and has made £14.6 million of new and follow-on investments so far in 2026.

Company Overview

British Smaller Companies VCT2 plc (LSE:BSC) is a London Stock Exchange-listed Venture Capital trust that backs growing UK businesses, mainly in software, technology and services. It aims to provide shareholders with a long-term, tax-advantaged dividend while growing the value of its portfolio.

The shares offer a dividend yield of 6.20%, paid tax-free to qualifying investors. For higher-rate taxpayers, the equivalent gross yield is considerably higher.

Dividend Payments in 2026

The company has paid two dividends of 1.50 pence each in 2026. The first was paid on 22 June 2026 to shareholders on the register at 22 May 2026, and the second on 23 October 2026 to shareholders on the register at 25 September 2026. The total for 2026 is therefore 3.00 pence, compared with 4.00 pence in 2025. The board has signalled the lower total in its half-year update.

Payments in earlier years varied, including 8.00 pence in one year when realisations allowed larger distributions, illustrating how VCT payouts depend on portfolio exits.

Dividend Reinvestment

The company operates a Dividend reinvestment scheme. For the October 2026 payment, 13.1% of the dividend was reinvested, with 1,476,711 new shares issued at 50.75 pence. In June, 13.2% was reinvested at 51.60 pence. The scheme allows shareholders to compound returns and gain additional tax relief on reinvested amounts, while helping the company retain cash for investment.

NAV and Performance

NAV per share was 52.25 pence at 30 June 2026 after adjusting for the interim dividend. Total return per share, which adds cumulative dividends to NAV, was 147.00 pence compared with 147.65 pence previously, a broadly stable outcome in a difficult market. In the first quarter of 2026, the portfolio valuation decreased by £4.0 million as valuation multiples for software companies softened, although 19 of 24 revenue-valued companies continued to grow revenue.

The chair noted some improvement in software valuation multiples over the summer, while cautioning that it is too early to judge the second half.

Investment Activity and Fundraising

The VCT is deploying capital actively. During the first half of 2026, it completed four new investments and three follow-ons totalling £11.7 million, followed by further investments after 30 June, bringing the 2026 total to £14.6 million. New holdings include TiPJAR, StudentCrowd, NextWave and Inploi, alongside follow-on funding for GEEIQ, Spotless Water and Summize.

Fundraising supports both Investment and dividends. Alongside its sister VCT, the company raised £85 million in aggregate in the 2025/26 tax year, of which £31.8 million was raised by this company. With around 382 million shares in issue and a Market Value of about £190 million, it is one of the larger VCTs.

How the Dividend Is Funded

VCT dividends are funded from realised gains, income from portfolio companies and reserves. When the market for selling private companies is subdued, fewer exits occur and distributions tend to be lower. The reduction to 3.00 pence in 2026 reflects this environment. New fundraising provides cash for investment but should not be relied on to fund dividends over time. The board's approach of setting a payout that reflects current exit conditions, rather than maintaining a higher level regardless, helps protect NAV for long-term shareholders. When the market for private company sales improves, larger realisations could allow the board to pay special dividends or raise regular distributions again, as it has in previous years.

Risks

Risks include falling valuations of growth companies, fewer exits, failures of individual portfolio businesses and changes to VCT tax rules. Shares in VCTs can also be illiquid, with Buybacks typically at a discount to NAV.

Is the Dividend Sustainable?

The 3.00 pence dividend at British Smaller Companies VCT2 plc (LSE:BSC) appears sustainable given stable total returns, a diversified portfolio and ample Liquidity from fundraising. The 6.20% yield is tax-free, but it will vary with exit activity. A recovery in growth company valuations would be needed for payouts to return to higher levels.