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Bought some more of these yesterday. Hoping the next dividend in April will be better than last years.
So, around 1.7p more to go on the nav (to 108.5) before it goes ex-div in April and then a 5p divi, what do you think Trotsky?
Back down to around 0.2 per week , so it does look as if the income flow in January is higher.
NAV up 0.67p week on week. The trend continues.
I'm not really expecting them to cover the impact of the final divi entirely out of this quarters income, as you say they should already have around 2.5p towards this in the nav (why do they not break it down in the factsheets Nav+/- current income?).
I do recall that they mentioned, in one past presentation, that the start of the year was good for income from several asset classes, so it could be this is why we are seeing the nav stepping up as much as it has so far this year.
Their latest Investor Update presentation (Jan 2024) looks positive for the asset classes in TFIF.
Over the next 8-9 weeks TFIF is going to need to grow its NAV by c5p+ (about 0.6p+ per week) if it's going to cover it's final expected dividend without impacting it's current NAV after it goes ex-dividend. Part of that growth should be delivered by the coupons paid on its bond portfolio in the intervening period. Assuming it coupon income arises even over the year, it's already carrying c2.5p of unpaid dividends within its NAV (assuimg it's annual dividend will 11p+). Interesting times.
Nav up another 0.6p (after allowing for the divi ), so 1.5p in two weeks. One more week like this and it will have covered the 2p taken off for the 3rd quarters divi in only three weeks!
Nav up by 0.9 last week - quite a jump and almost half of this quarters divi.
Based on the current projectory, with no further changes in interest rates between now and the end of FY24 and no further increase in the quarterly dividend, I'd say that TFIF looks set to pay a final FY24 dividend of at least 5p in May 2024.
Interest income of c£39.6m in 1H24 was up c46% on 1H23. At the end of 1H24, the purchase yield was 11.3% and the cost of investments was c£792.3m; so, all other things being equal, interest income for 2H24 looks set to be about c£44.8m (which would be a c20% increase on 2H23). It should be noted that the purchase yield has since increased to 11.46% at the end of October 2023.
To date, TFIF has distributed c£29.9m for FY24 and, given its current policy of distributing all of its investment income, that would suggest that it will have c£54.5 to distribute for the remainder of FY24 i.e. with c747.8m shares in issue at the end of 1H24 that would imply c7.3pps available to distribute (a third quarter divided of 2p at the beginning of February 2024 and the balance at the beginning of May 2024).
If there's no change in interest rates during FY25 (that would appear unlikely) then TFIF could feasibly have interest income of c£90m for FY25, providing a dividend of c12pps. However, allowing for a modest fall in interest rates during FY25, I would hazard that dividends for FY25 are more likely to be in the range of 10-11pps.
The discount is now close to 4% and starting to look attractive again.
From Bloomberg-
Although there has been an increase in BTL in arrears with an increase in repossessions, homeowner mortgage repossessions dropped 19% from the first quarter to 610, which is close to historic lows.
They are presenting at the AIC in London (and online) in October so it should provide an opportunity to question them on this.
Back in April I predicted that the quarterly dividend could increase to 2.25p from Q2 onwards if rates stayed at the same elevated level. Given the increase in interest rates since that's looking more than likely a shoe-in now (a profiorma annual dividend of 9p)
Not sure whether they'd increase the proforma annual dividend to 10p (2.5p per quarter) unless interest rates continue to rise or stay at the current level for a prolonged period; working on the basis that they'd not want to increase the proforma dividend one quarter just to reduce it the next if rates peaked and started to fall. That said, not sure whether interest rates will start to fall much before the start of next year now.
For a while the nav has been steadily increasing by around 0.3p per week. After the latest interest hikes by the BOE and ECB the purchase yield must now be around 12% with a MtM of near 15%. Clearly there will be no problem covering the 2p per quarter divi, but I wonder if they will increase this (again) to avoid there being a very large final one next year, otherwise it could potentially be >6p .
Bloomberg-
Mortgage approvals picked up in June to the fastest pace since October, data from the central bank showed. That aligns with what we heard last week from Lloyds CEO Charlie Nunn, who noted the resilience of the bank’s mortgage customers despite higher rates.
I added about 20% to my holdings in the dip (although not quite at the bottom), I would have done more but I am already very overweight on this, so I don't believe that you are missing anything. I would add a proviso that I have been wrong about other things in the past!
I could sell now at a >3p capital profit and have the 2p divi but I am holding them for now. It is in my 'income pot' so a 5% return alone is almost all I target. I think that the job market is too strong for defaults to get too high at the moment.
Monkshood, many thanks for the heads-up. The portfolio update is a very interesting read and serves to reinforce my confidence in the value of these shares and that the earlier discount of 5% was based on overly pessimistic future interest rate assumptions. I can buy these now for 99.81p implying a discount of less than 2%. Still good value, unless I am missing something?
Todays portfolio update is worth a read, it reiterates (far more lucidly!) some of the points I was trying to make in my last post.
That is what I believe is the main cause for the fall. It has happened on a low volume though, so probably more a case of few buyers atm rather than lots selling.
There was an interesting article in Bloomberg today looking at mortgage repayments, it highlighted the difference between Spain /Portugal/Italy where most are on variable rates and so have been rushing to pay them off, compared to Germany/France/NL where most are on 10 year + fixed mortgages and have reduced repayments as they can get a better return from savings accounts.
TFIF has around half its assets in the UK, the other half are mixed/NL/other, their focus is very much UK/NL/Germany/France, not Iberia/Italy - half of the assets are RBMS.
Hopefully this means that the defaults should remain lower than may otherwise have been expected. It also begs the question why we don't have 10-30 year (portable) mortgages in the UK?(although we have at least moved to 5 years being more common)
' In the first five months of 2023, mortgage repayments across France, Germany and the Netherlands dropped a combined €59.5 billion compared with the same period a year ago, according to the data. By contrast, they rose by €8.9 billion in Italy, Portugal and Spain.'
Expectation of defaults perhaps ?
Monkshood, many thanks. I missed that one. All the information available serves to confirm my conviction that TFIF is excellent value; significantly better value now than at June 30 when the discount to NAV was 2.0%. By the way, there is a similar discount on stablemate SMIF with MtM yield also in excess of 14%. I guess the unusual discounts on the TwentyFour ITs (and also NCYF) reflects the expectation that interest rates will increase further (not too much, I hope?).
End of month factsheet.
https://mb.cision.com/Public/22336/3804790/98bd490add2b2e2a.pdf
Along with the monthly commentary the Twentyfour insight pages are worth checking regularly as well.
https://www.twentyfouram.com/insights
Monkshood, many thanks for useful comments. By the way, how did you get your MtM of 14%?
The purchase yield at the end of June has risen to 11.8% with a MtM of over 14%. Defaults are currently low, there is reasonable headroom for these to increase and the divi to be maintained.
Regular quarterly dividend (first interim) increased to 2p. This was increased from 1.5p to 1.75p in October 2022 and has just been increased again to 2p. One can only guess what the final dividend (ex div April 2024) will be, but if this is unchanged at 4.46p then the total will be 10.46p being a yield of more than 10%. There is also an unusual discount of around 5% to NAV. Looks very good to me.