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aims to provide a high level of dividend as well as capital appreciation from a diversified portfolio
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Does anyone remember Micheal Watt? The manager before Mike Kerley.
that would be people invested before 2007.
Looking at the holdings at the end of October there is an indication the managers may be 'dividend washing' to maintain the yield. This may go some way explain why the dividend yield on the fund is so much higher than that of the underlying shares. It also goes some way to explain the weak capital performance.
Sorry ade2a I'm a recent buyer so no recollection. From memory SOI doesn't cover its lower dividend yield but expected to improve.
If you have evidence why aren't you willing to share it.
It's nothing personal with me but I'm willing to challenge things someone says hoping we can both find a solution.
As for dividend washing, I suppose it's possible as they have a high turnover of holdings but are they selling for less than they paid? I've read that undervalued shares, once value added will be sold off and rotated into different undervalued shares.
Is that a coincidence or as you suspect, washing. Would you care to elaborate further on what concerns you.
Hi Gerry,
You cannot expect me to be tottally transparent in the face of the hostility I have faced on this notice board.
If we can start again without accusations of lack of knowledge, lack of evidence I can consider answering genuine questions.
TBH you have knowledge in some areas I suspect I have knowledge in others.
You almost always imply my information is of little or no value.
Some of our conversation is opinion based perhaps based pn our different experiences.
It is your discretion to decide if my experience has value or not.
Hi ade2a, You have raised the suspicion of dividend washing. Which could be correct but I haven't looked at it or for it. Im willing to look closer at what has raised suspicion. Which particular sells and buys are you concerned about.
As of 31st October the fund no longer holds BHP and Rio both of which paid large dividends in September.
How does the fund pay 8% dividend when underlying holdings yield about 5% or so?
Options trading seems to add about 10% to revenue taking us to between 5.5% - 6% at best.
"How does the fund pay 8% dividend when underlying holdings yield about 5% or so?"
The yield received on holdings is irrelevant. It's the physical amount received that's important. A quick look at the annual report shows both revenues paid per share as a dividend, 23.40p, and revenues received per share, 23.22p.
So, using today's share price as a benchmark, say £2.94, the dividend yield paid out annually is 7.96%, whilst revenues received would cover a payout yield of 7.89%.
The small shortfall was covered by using funds from reserves.
ade2a, I think it was you that highlighted a drop in iron ore prices. Add to that the delisting of BHP then you can reasonable assume that their respective SP's might fall. The FTSE trackers all selling BHP etc.
You are right to question how do they replace that income. I suppose it depends on how they replace the shares and what price they managed to sell for. Ive not been keeping track BHP over the last 3m has taken a dip and is recovering. RIO is similar with less of a bounce.
They were expecting other share income to rise approx 15% which should offset some. Is this evidence of washing you were on about?
I think this means there might be more need for the reserve. now why didn't you do that spreadsheet. We might all find it useful. I might look out for the next monthly info sheet due now ish but haven't got anything to compare it with.
I wasnt expecting to get into detail with a fund as I was hoping the managers would be on the ball. I must admit I was expecting a little bit better performance than we have been getting.
Fag packet look, £43M for RIO and BHP so 9% of holdings 31st July holdings.
As I dont follow those too shares did either announce a reduction in dividends.
A quick skeg of usual financial information providers shows lots of mixed messages. HL shows them still holding both, trusnets top 10 is blank for names but has percentages. The horses mouth, Henderson, is dated 31st July
Just shows how poor the info can be
Looks like they are following this thread lol.
Rns says they have bought VinaCapital Vietnam. Thought they had some already so maybe they have added more.
Is VinaCapital Vietnam the same as VOF?
If it is then according to HL its on 20% discount with 2% yield. Worryingly it has over 7% charges. I half expected a move into dividend paying financials. Will have to look back at previous holding to compare changes.
The monthly fact sheet 31/1021 shows 3.5%. The RNS 3.61%
This implies more added assuming a stable base line, which is almost not correct
Factsheet NAV (cum income) 293.6p NAV (ex income) 291.5p
Hendersons website puts Estimated NAV 296.35p As of 01/12/2021
Nice to see a director spending £120k on shares!
Zac
"The yield received on holdings is irrelevant".
Here we do not agree.
You understand we do not have to agree.
if you have a model to explain your position I will be happy to debate it.
Gerry
"They were expecting other share income to rise approx 15% which should offset some. Is this evidence of washing you were on about"?
No. It is the purchase of RIO/BHP cum div and sale of RIO/BHP ex div.
https://www.janushenderson.com/en-gb/investor/product/henderson-far-east-income-limited/
You can see Rio and BHP is no longer included.
"I think it was you that highlighted a drop in iron ore prices. Add to that the delisting of BHP then you can reasonable assume that their respective SP's might fall".
Not necessarily these stocks are on historic yields of over 10%.
Dividends can be cut in half and share prices still rise depending on market expectations.
The whole style of management is now different. It seems not many current share holders remember how this company was run prior to 2007 and some years afterwards.
Zac
"They need to address something. Total returns are appalling. The last 3 years individual performance are as follows: +10.4%, - 15.5% and -2.5%. An overall total return over the last 3 years of -9.0%. And we're paying for this! What an appalling return for investors".
Was this you Zac?
I am confused are you happy with the way managers manage the fund and generate dividends?
I would suggest the capital performance and the outsized yield is connected perhaps you see it differently let us know.
ade2a
"The yield received on holdings is irrelevant".
"Here we do not agree.
You understand we do not have to agree.
if you have a model to explain your position I will be happy to debate it."
Here you go. HFEL have around 150m shares in circulation. They currently receive approx. 23.22p per share in dividend income. This equates to around £35m. You claim this is around a 5% yield to HFEL. Let's assume the holdings in their portfolio double in value. Therefore the yield would reduce to 2.5%. However, they would still receive £35m income. Therefor, as I say, the yield on holdings is irrelevant, it's the monetary value that's important.
ade2a
"Was this you Zac?"
Yes. You know full well it was me! And I stand by my statement. The overall total return here over recent times is appalling. I'm not aware that I've stated that I'm happy with the way the fund is managed. I've simply pointed out that dividend income received is robust compared to dividends currently paid out.
Perhaps you could share a model showing how the current yield received is well short of dividends paid out as you indicate. I'll be happy to debate. But, please, provide factual monetary data.
Surely if the income they receive covers the dividends they pay us bar a small shortfall as documented which is comfortably covered by the stated reserves there is no problem here?
I would think most invested here are for income and their income is from dividends,buying/selling holdings and options trading(aware of it but not au fait with it and frankly don’t care) and the only current issue is the SP which doesn’t want to play over the stated nav at the moment…..is there a fundamental change in SP because there’s a fundamental change in the way they operate or is it just a blip on China et al?
Personally I see no reason to reduce unless the SP is higher as I’ve mentioned in previous posts and every reason to add under 3 as has one of the Directors recently.
Hi ade2a.
Yes I can see that they have been sold. Unfortunately I don't know when they were bought so its a little difficult to determine what is actually happening from my point of view.
Yes the overall return has been poor, partly why I joined, hopefull that there would be a turnaround and things would improve. You could always ask the question to Henderson.
I'm not sure the ship has been steadied just yet or if its almost there. Managment seem to think investors are happy with the high yield assuming the SP is steady. This leads me to think that the SP won't be going too far in the near future.
I'm minded to ride this out a bit more to see some improvements but you can sell up and move into aaif or soi.
Out of interest did they sell RIO and bhp for more than they paid?
Zac
"Perhaps you could share a model showing how the current yield received is well short of dividends paid out as you indicate".
I might tackle this one in a new post.
Might be quite detailed which is why I did not share the opinion earlier and are you fully aware of the previous posts such an explanation would have been impossible.
There are a multitude of issues here not just one.
You have cleared up the dividend and performance issue as you see it that is now clear.
I can provide a model but since I do not actually manage the fund I may not be able to fill in all the minute details.
You did not say why the underlying yield of the holdings does not matter.
Gerry,
"Yes the overall return has been poor, partly why I joined, hopefull that there would be a turnaround and things would improve".
This is why I am asking in this post who can remember how the fund was managed prior to 2007 and for some time after.
It really had a different style of management even though the stated objective was similar but not exactly the same.
Previously income and capital growth were given equal significance compared to today where the emphasis is skewed towards income.
As mentioned in a previous reply I might consider a more detailed explanation of the relationship between income on the portfolio and income on the underlying holdings. I think by now we all know these two are not the same.
Everyone is of course welcome to comment.
jamesmaggs
"Surely if the income they receive covers the dividends they pay us bar a small shortfall as documented which is comfortably covered by the stated reserves there is no problem here"?
This is factually correct. Nobody who commented on this post or any of my previous post denied this fact including me.
So why are we debating it? Why the interest and why all the comments?
When I start the new thread you may want to chime in, respectably.
Gerry,
I forgot to mention about the sale of Rio et al.
As I do not manage the fund I cannot say if they sold at a profit. This is not the most significant issue. It is a recent holding or addition prior to a very large diviend and sale shortly thereafter. This is the difinition of dividend washing when I do my model I can add an explanation and explain why it is usually negative for capital growth.
Zac
"Here you go. HFEL have around 150m shares in circulation. They currently receive approx. 23.22p per share in dividend income. This equates to around £35m. You claim this is around a 5% yield to HFEL. Let's assume the holdings in their portfolio double in value. Therefore the yield would reduce to 2.5%. However, they would still receive £35m income. Therefor, as I say, the yield on holdings is irrelevant, it's the monetary value that's important".
What you say is correct.
I am not sure if you mean current holders or previous holders.
For previous holders the current yield is irrelevant.
The yield compared to the market I would argue is significant . I will explain this later.
Zac
My appologies I made an error.
Here you go. HFEL have around 150m shares in circulation. They currently receive approx. 23.22p per share in dividend income. This equates to around £35m. You claim this is around a 5% yield to HFEL.
The fund earns £35m as you claim.
The market cap 150,000,000 * 300p per share is a market cap of £450,000,000.
150 million shares * approx £3 per share = market cap.
35/000,000 / 450,000,000 = 0.077 or 7.7% yield.
This is the earniongs of the fund as claimed in the managers report.
https://www.edisongroup.com/company/henderson-far-east-income/
Shows the market cap as we calculated.
https://www.edisongroup.com/publication/consistently-high-and-growing-income/29746
Scroll down to Investment process at a reasonable price shows the HFEL yield at 4.8% historical 5.2% forward
This yield and earnings of the fund are not the same.
The theoretical point you make about income to previous holders not being dependent on the current yield is of course correct.