Cqs New C.h.y.f Share Chat (NCYF)

Looks like the (hugely successful) NCYF portfolio manager, Ian Francis, is finally retiring within the next 6-12 months, probably in H1 2027. Would expect the NCYF share price to soften from here, until the new boy (Darren Toner) can prove his spurs.

https://www.lse.co.uk/rns/NCYF/appointment-of-co-portfolio-manager-9bdy2x4yb2zqniy.html

"Revenue earnings per share were up 1.3% at 2.29p in the first half from 2.26p a year ago.....It said it expects to follow the same pattern of dividend payments as last year "and maintain or slightly increase the total level of dividends for the year"."

If they repeat in H2 and make 4.58pps that would be an improved full year performance. However, I think we can predict that the full-year dividend will be no better than 4.52p, extending the run of 0.01p increases to something like 7 years. [i.e. a real term decrease when accounting for inflation]

But the stable share price and dependable dividend paid quarterly is welcome.

Good morning zebbo. I agree with you. Assuming the bond holdings are of good enough quality (I assume they are?) then that should help. ALgent.

Yeah, but these med term high yield bonds in the main from strong companies/institutions.

Nothing is immune to a big market pull back. Others will be hit a lot harder . Solid hold for the long term

Good afternoon TC999. I'm a modest holder here. I too wondered whether to buy more. However, when there is a market pullback, whenever that will be, shares in NCYF will surely head south? This is a bond fund but certainly not full of US treasuries or UK gilts. I do not see it as any sort of refuge from a storm. After the fall will be the time to buy some more.

Is the above the right way to look at it? Poster's comments would be welcome. ALgent.

I’m treating this as a high yield cash account. The price barely moves and the divi keeps rolling in. I haven’t been reinvesting into the stock, rather using it to grow other holdings. I’m wondering whether to start to up my holding in this as a hedge against US uncertainty as the rule of law continues to decline over there.

Forget divi increases, this is a pure income play, coupled with slowly rising share price if interest rates fall. During the years of zero interest rates, it reached 66p. I was invested then and remain invested today.

it is zebbo, but my comment was about yet another 0.01p increase masqueraded as a "we've increased the divi every year" claim. in real terms its bull****, and should be called so.

Still a good yield though at todays price

"The Company announces its fourth interim dividend of 1.51 pence per share (2024 - 1.50 pence) payable on 29 August 2025 to shareholders on the register as at 1 August 2025, with an ex-dividend date of 31 July 2025.

Together with the preceding three interim dividends the Company has paid, the total dividend for the year to 30 June 2025 is 4.51 pence per share (2024 - 4.50 pence). The Company has increased its annual dividend each year since its launch in Jersey in 2007."

I appreciate that the company has increased the dividend every year, but I also think they should be transparent to admit that the 0.01p increases for the last seven years puts it way behind inflation over that period. It's almost like they're increasing it by the minimum amount to be able to claim they have increased the divi every year since launch!

Hg. Normally I would agree but I have held this for 4 years and it trades in a narrow range and delivers an excellent dividend and plenty of reserve cover. Depends what you're looking for.

Kentio,

Point taken. I am aware that purchases and sales are not always correctly reported. However, I still believe the current premium to NAV of nearly 8% is excessive and is out of line with similar high yielding ITs.

These were ot all sells - my wn purchase swas. shown as a sell. The. sensor. system is. far from accurate.

Premium is now 7.8% based on ask price of 51.0p. This coupled with lots and lots of sells today is making me a little nervous.

Ok, a couple of days later there was a corrective RNS and the approved figure is 76,000,000 shares in the blocklisting..... it's still big, just not as big!

There's a blocklisting of 108 million shares (which I presume was approved at the AGM). That would be an 18.7% increase in the shares in issue (if they were all issued). OK, the good news is that they can only be issued at a premium to the NAV so no dilution. Doing a quick check of previous years, the 108 million seems to be a larger blocklisting than normal..... Has anyone tracked this through the AGM? Are they expecting high demand?

Sorry, I am a twit. I missed the RNS on July 23!! At least I got the dividend right.

If I was a betting man, I would put a few quid on an RNS today (p.m.) announcing a dividend of 1.50p.

Premium is now 7.7% based on current buy price of 53.035p, paying 8.5%. There may be better value elsewhere .

TFIF is on a discount of around 2.2% paying 9.6%. SMIF also looks like better value.

Hi CaneToad, I can't shed any light on it but it might have been mentioned in the recent webinar.

GS

Anybody able to shed light on this loan facility which supposedly had been due to expire in Dec 2023...

I thought Franco presented well. The writeoff of CS and other bonds, without any major disaster to the fund shows the difficulty of credit analysis and the advantages of holding a diversified fund rather than picking out individual bonds yourself. The dividend history here is quite impressive and it's probably going to continue in my portfolio for the forseeable.

I have now had a chance to review the ShareSoc webinar. Franco does his best to liven it up at times, but if you’re struggling to sleep I’d recommend it! Anyway, my takeaways from it:

- Fund has mostly traded at a premium (~4%) to NAV throughout the year, only unsettled by market events when the share price moves but the NAV doesn’t have time to before the share price recovers. Hence a short-term discount to NAV. If people ever want to top up, look out for those opportunities!

- Pull to par opportunity of ~7% based on top 20 bonds held. In other words, barring “events”, the should be a modest increase in value there.

- Politics is what causes the losses (e.g. Credit Suisse where Swiss politicians decided to rewrite the rules about debt, or Raven in Russia where Putin’s invasion of Ukraine caused the investment loss). More political events could happen, we just don’t know.

- The fund has to invest at the more risky end of the market to generate the yield (we know that). But it also means the political events have more impact.

- QT means there are now a lot of sellers of government gilts and one big buyer. It should keep the prices high for a while. As everything is priced relative to government debt that should be good for bond values in the short to medium term (1-3 years I would say).

- Franco thinks we are basically at peak interest rates, and rates will fall. But unlikely to go back to the ULIR (my interpretation of his remarks). So there should remain opportunity to invest in bonds to keep the yield high. But I don’t expect anything other than 0.01p increases to the annual dividend.

- The 3.05pps reserve is there “to be used, not to be a badge”. So I am sure they will use it to keep the dividend where it is.

- REA should complete a disposal which will allow them to clear their arrears to pref shares. They need to do this before they can do other things they want, like pay an ordinary dividend.

- Franco hinting he might work for another 3 years to make it 50 years in the industry. What’s the succession plan?

NCYF is almost touching 50p. I don’t think I would add more at that price, but if it dropped to 47p I could be tempted for a buy and hold. And keep you’re eye open for a non-specific “political” issue that hits the share price but not the NAV.

Let luck be upon us!

What did folk think of the recent commentary on last year's results (12 months to 30 June 2023)? I read Franco's report with interest and, on the whole, it seemed a bit more upbeat.

- Called and maturing bonds being replaced at higher coupons (due to higher interest rate environment).

- EPS boosted by late payment of REA from year before.

- 4.51pps slightly above dividend (4.49pps) but includes above late REA payment.

- Matalan and Credit Suisse bonds written to zero after they hit trouble (combined 1.5% hit to NAV).

- More opportunities to invest at better coupons now that the ULIR environment is behind us (for now at least).

- But falling interest rates should raise bond prices over the next few years. Share price should improve but more pressure on the dividend cover I guess.

- Frequent mention of the increasing dividend history and the 3pps reserve. So I'd imagine we should expect more of the same (i.e. 3 x 1.00p, then 1.50p for the final payment).

- Yield is around 9.5% currently even if the dividend barely changes.

Did anyone attend the webinar? Any feedback on it and overall level of confidence?

Guitarsolo

Clearly a falling knife, think I would wait before buying this one. Maybe next year a buy in point.

Now yielding over 10% along with a lot of other stuff, but this still look attractive within a well-diversified portfolio. I'm expecting rates to continue marching upwards and if so, this is likely to continue falling, giving the opportunity to achieve an even higher yield.

As ridiculous as it seems, this dropped to 22.9p back in March 2020 so it's anybody's guess how low it could go this time...

Thanks hghotshot a lot tob think about there ,will see how things transpire .

Interest rates rise, bonds and preference shares fall. Even the safest prefs such as GACA have been falling consistently in this time. It's that simple...

Hello Actuary, yes I am aware of the fall in NAV around March time. It was my understanding that a default/failure of the nature you describe requires reporting? I can see no evidence (RNS) of any such reporting. Do you have any evidence of any such failure or default? My feeling was that the NAV decline was occasioned by the interest rate expectations rather than the result of the crystallisation of specific losses on investments.

Dividend of 1.49p declared (1.48p 2022). Total of 4.49p for the year, (near enough 10%) but discount has evaporated.

This can be bought for 44.95p now; a discount of 1.96%. This looks like good value to me as it is very rare for this to trade at a discount. It normally trades at a premium of between 5% to 10%. Unless, I am missing something?

The premium of almost 10% on NAV is a worry to me. Time to look elsewhere, I think?

From 28th Feb: "So I would say that means they expect earnings will not be fully covered, possibly for a few years, but they will use the reserve fund to keep increasing the final Q4 dividend by the minimum amount of 0.01p. And then they will say; but we've increased the dividend every year!"

Turned out to be spot on! Not a hard prediction though.

I await Franco's commentary at end August/early Sept (?) to see (i) how much they had to dip into reserves to cover the dividend and (ii) what the outlook is like.

Bottom line is that capital is depreciating and dividend increases are way behind inflation having increased by 0.01pps in each of the last four years. It's all very well saying "we've increased the dividend every year" but when it is by that amount you know if has only been done to be able to make that claim and should therefore be challenged as to its actual benefit to anyone.

Still holding but would like to hear the prognosis from the horse's mouth.

Guitarsolo

Exactly correct . Difficult to match the yield in any other stock so clearly risks as always . The mechanism you describe is accurate and the defensive reserves of investment trusts are what we investment trust fans have always emphasised in our choices . I am a big investor here and will stay put or even accumulate on downtrends

Well, the 6-month update is in. Overall, the situation is much as-you-were. It's not bad, but it's not great either. Firstly, the actual figures:

"For the six months to 31 December 2021 the revenue account earnings per share were 2.09p compared to 2.12p for the same period last year." As I said, not bad but not great either.

What's been happening? Well, as we knew, many of the bonds were being called whilst rates were low and being refinanced:

"Typically, this means that the higher yielding bond is "called" by the relevant company and replaced with a lower yielding instrument. For New City High Yield this means that we can get a capital uplift as the bond is repaid at a higher price but means that we have to replace the yield as the new instrument normally has a much lower interest rate."

We knew that was happening, but still a problem if inflation swings wildly up and wildly down. It would be nice if some of the refinancing occurred when it was favorable to NCYF (and us!).

But on the most important subject of dividends:

"As things stand, the Board expects to follow the same pattern of dividend payments as declared last year and maintain or slightly increase the total level of dividends for the year. Based on an annual rate of 4.47 pence and a share price of 55.4 pence at the time of writing, this represents a dividend yield of 8.07%. Should earnings fall below the anticipated annual dividend amount, the Board is prepared to use a modest amount of reserves to make up a marginal shortfall and believes that this will be the most likely scenario for the next few years. The Board pays great attention to dividend payments, receiving regular feedback from shareholders on their importance. Since its launch in 2007, the level of dividends paid by the Company has increased every year."

So I would say that means they expect earnings will not be fully covered, possibly for a few years, but they will use the reserve fund to keep increasing the final Q4 dividend by the minimum amount of 0.01p. And then they will say; but we've increased the dividend every year!

Overall, dividends have only risen by just over 1% over the last 4 years when I suspect cumulative inflation is over 10%. So in real terms, it is dropping. But the dividend yield is still high I guess. Hard to replace from anywhere else.

Guitarsolo - still holding

Hi Mr Solo, on the litigation front I meant more directly than holding the shares of an IT. I've dabbled with investing directly into to the litigation process. Well, the special vehicles set up to provide a corporate curtain and fund individual cases.
Usually as part of that process you get an external "valuation/risk reward" advice and look to see what the insurers are offering as way of cover in case the case is lost. After that, it applying some commercial judgement, DD and common sense, a well as a big dose of risk evaluations.
If it helps, there appear an growing interest from the US over VOD and it's done a recent deal with Elon Musk's satellite business if you believe the speculation and some media reported wins in health care. The recent digital conference material is interesting. It's on VOD's site.
The 400%! I was mildly disappointed with that, but in the context over present markets, I can't complain.
Interesting times at VSL. There could be more down the track with that particular little win, it's moved up sharply, the US listed vehicle and I wouldn't be surprised if it runs further, that could benefit VSL more over the short term, but I guess they have some form of lock-in that doesn't allow them to exit any time soon.
"The Company's Class A Common Stock shall be subject to a one-year post-closing lockup unless otherwise accelerated based on average trading performance measured six months post-closing."

Hi Devon, well there's a lot in that post! To answer a couple of points you raised:
- Litigation funding. I have dabbled in here before with the likes of Juridica Investments (got it, got out for small profit!). I've also looked into Manolete Partners but it was too expensive for the potential returns. If you can live with the idea of actually encouraging lawyers to pursue claims (!) then it's an area of interest. But I don't quite know how to assess value etc.
- Vodafone! I have some of these in my mother-in-law's account! They're way underwater but I see quite a lot of research that suggests the future cost of infrastructure investment will begin to wane (pipe dream!). But such a big beast has to come good eventually. I just wish they had lower debt.
Rea: Thanks for confirming you think it is the same coupon. If that has been paid to NCYF post results it would bring the 4.18pps report up closer to the dividend. I'll hope that was a factor why they felt OK to keep the dividend going.
Other: Impressed by your 400%!
All the best,
Guitarsolo (stuck in East Devon!)

https://production-matalanlive-assets.s3-eu-west-1.amazonaws.com/uploads/asset_file/asset_file/362063/1634312978.9171162-Matalan_Q2_FY22_Press_Release_Final.pdf
Matalan update.
"I mentioned in last year's report that the most notable investment negatively affected by COVID-19 issues was Matalan Finance where the company was badly affected by the lockdown and its bond price fell to 41 as at the end of June 2020. We believe that this security will recover, have remained holders throughout the year and have seen the bond price recover to 60 at our year end. "
Senior is close to par @95%
Second Lien @65% c30 YTM

Hello Devon,
Many thanks for your note, albeit to relay sad news. Indeed I do remember Soi and would often take note of his posts. In fact, somewhere on my laptop I have a list of about 20 of Soi's recommendations for high yielders! It is probably a bit out of date now but I took some comfort from the fact that I hold/held a decent share of the companies he recommended - it made me feel I was doing something right! He was always willing to share info and opinions and that was appreciated. I'm sorry to hear of his passing.
I hope you're well down there?! It's been a tough old time trying to find income that isn't associated with capital loss. Here's hoping for "value" to have its time in the sun!
Kind regards
Guitarsolo

Hi Mr Solo, I don't know if you remember, or followed, soi on the old ii boards. I understand he's recently passed away.
He was a prolific, smart and decent guy who was always willing to share his views and discuss the merits of a position. I'm sure he'll be missed.

So, that drop a few weeks back to sub 50p and below the NAV was only temporary. NCYF has returned to its long-run circa 4-6% premium to the NAV (which is a good sign in my view and a nod to Franco's management here). I hope people were able to take advantage of the cheaper shares even if it means someone was probably being forced to offload in a hurry. I added a few to average down a penny and just sit back to take the dividends inside ISAs.

With Cqs New City High Yield Fund Limited being a CEF thought this would be useful for anyone new to investing in funds

https://www.fidelity.com/learning-center/investment-products/closed-end-funds/what-are-closed-end-funds

should read "so around 9.5% based on current SP" etc.
Wish we could edit posts - sorry

Decided to get back in here today as part of my core p/f for income.
Happy with the 48.1p paid, as down 9% in last couple of months.
The divi seems secure for this year at a massive 4.46p, so around 9.5p based on current SP of 47p.
My plan is to hold for the divi, or sell if gets back to 53p.
If SP remains static, we're getting over 9% p.a return.
Always a slow burner, that traded bw 57 and 63 for several years before Covid.
The divi has been maintained despite the 20% drop in SP since 31/12/19.
Fits nicely into my SIPP p/f.
GLA - CSDI

Totally agree CSDI. Wise words! I have my cash from the UCG tender to deploy, but will stand still for now. All the best. A

I was looking for an update from the fund manager but nothing since nov report yet.
I did read they were able to hold the divi short term and would use reserves if needed.
A couple of good closures in november report suggest a bit of help was on hand for this current divi.
I would like to buy back in but only once the divi is rebased as expect the SP fall would be more than the divi cut when it comes.
Patience required for now, but has done well to get back to 52-53p level, but still down a good 13% over 12 months.
I've gone to SUPR for now as expect that is more secure with big supermarkets behind it.
Cheers - GLA

Hello CSDI and adv11. Keeping this relevant, I hope. The divi has been declared, and maintained. Recent article in The Times said equity dividends are unlikely to recover for three or four years, as Covid 19 losses are repaired. This is therefore not a good time to be shopping for income payers, unless you are looking to the medium term returns. Given that, I think we abandoned this too early. Interest rates may remain low, but there will remain a lot of entities, commercial and otherwise, who are distressed enough to be required to pay a higher rate. Great minds think alike, and fools never differ!

Used to trade this between 57-61p .... kept clear this past year but could not resist after this morning’s fall.

And in a flash today's early morning fall was erased (I knew I should have jumped in). It could just be a desperate seller trying to offload and the market taking advantage of it - like they did to Woodford.
Still, if anyone has any thoughts I would be grateful to hear them. There used to be an investor on ii.co.uk called Soi who was very knowledgeable and willing to share. Shame that website went to pot.

Not a clue but I've bought some .... trading well below NAV is a first for this share in recent times.

Fellow NCYFers,
Anyone aware what is going on recently? For this stock to fall 10% in 2 days is highly unusual (when not part of a market-wide drop). I can't see any RNS and the recent NAV notices were similar to those that went before it.
I can only think this is concern over bond yields/ inflation/ interest rates. But the move is rather drastic and not a long-term trend that would be more typical. On the back of recent advice that the company expects dividends to remain on trend this is surprising so I would be grateful if anyone here has any ideas.
Thanks
Guitarsolo

Looks like a holder is bailing ..... happens .... happy to buy for a 10% yield.

Also not sure why this has been marked down..I’m a buyer this morning. Last NAV no where near SP.
Won’t speculate.

Some positive comments about the dividend in the H2 2020 update:

"In the absence of unforeseen circumstances, the Board expects to follow the same pattern of dividend payments as declared last year and maintain or slightly increase the total level of dividends for the year. "

"In the current financial year, a dividend of at least the same as the previous year (4.46 pence) is likely to be covered by earnings. Should this not be the case, the Board is prepared to use a modest amount of reserves to make up a marginal shortfall and anticipates that this will be the most likely scenario for the next few years as well. "

I'm guessing we might get 3 x 1p and 1x 1.47p this year then!

Still, I welcome a degree of predictability and news that companies are paying their coupons/ dividends.

Guitarsolo

well, that little spurt got you up to 100 posts.... Good Day !

Another good day at the office

Hi Mr Solo, they publish their Fact sheet and there's often a comment about what they've been buying. I think one of the last I saw was a recent purchase of Punch Taverns, Punch Taverns 7.75% 2025. When I last bough it, it's notes, in August the yield was over 10%. What is less easy to see if the small additional purches that Franco makes. For example, one of the bonds he's keen on is Matalan. I bought some this last week with a YTM of 30%. If you look on NCYF site, Sitting Pretty https://ncim.co.uk/sitting-pretty/ they talk about Matalan in detail. So, it may not just be the case that he's swapping high coupons for lower, but he may also add running yield and yield to maturity to the portfolio. There's still plenty of options around. Again, by example, the August Fact Sheet "The only transactions during the month was to roll the Navigator Holdings 7 3/4% 2021 bond into the replacement bond of 8% with a date of 10th September 2025." Coupons aren't all going in the same direction. Along the way he's also going to be picking up consent payment, and bonds that are being called for maturity that will be paying him accumulated coupons and sometimes premiums to par! I have one been matured at the moment, that I bought at sub par, paying 101% of par plus consent payment 0.5% and accumualted coupon.
Just for fun, myself managed portfolio has YTM of almost 70% - not that I'm expecting that.
I'm not sure which direction the shre price is going, hence a toe hold purchase and them monthly buy, but I am confident he could build a high yield diversified portfolio with a decent total return - but that does, in my opinion, come with more risk.

Afternoon Devon!
Does anyone know if NCYF publish details (specifically coupons/ effective yields) on its new purchases and compares these to maturing investments? What I am basically trying to estimate is what is the long-term yield likely to fall to?
Let's say that NCYF held a selection of bonds with an 8% coupon that it bought at £1.25 = a 6.4% yield. Now let's say they all mature and are replaced with a 4% coupon bought at £1 = 4.0% yield (obviously!). Assuming all other things equal, the level of income would fall 37.5% from 6.4pps to 4.0pps.
So when we see NYCF say that it is not sure the level of pay out can be maintained for the longer term we need to see what the currently held investments are being replaced with. Does anyone have a handle on this that they're willing to share?
Guitarsolo

I topped up today at 45.8 .

Hi Mr Solo, long time!

Opened a small position this morning, I'm planning to use a low cost monthly fundction my brokers offers going forward to build a full position.
I may buy a lump, rather than a toe hold, if we reach 45p as lth position.