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To provide Ordinary shareholders with a high income and opportunity for capital growth, having provided a capital return sufficient to repay the full final capital entitlement of the Zero Dividend Preference shares issued by the wholly owned subsidiary company SDVP.
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At the current price of SDVP (buy: 119.40p), I make the yield of the ZDPs to be roughly 8.5%, with repayment still possible in full after more than a 50% in the equity portfolio. This looks like a decent punt. I'm less convinced about SDV itself except on a momentum basis.
I think I now have a basic understanding of SDV. Please feel free to correct me if you think I'm wrong. I might be wrong - do your own calculations before making any investment decisions!
In summary, Chelverton UK Dividend Trust uses leverage in order to enhance the yield. It has no bank debt, but has a £19.3m liability to the holders of 'zero-dividend preference shares' which are due to be repaid on 30 April 2025. The preference shares trade under the symbol SDVP.
As of 30 Sep 2023, the gross value of the share portfolio is £49m. The trust also has a small amount of cash and is due some dividends etc., but let's forget about those here. This gives a net figure of £30m, which roughly corresponds to the 'Net Assets' figure on the September Fact Sheet.
The key question is what happens to the SDV NAV as the value of the share portfolio drops. From what I can tell, the SDV NAV will drop to zero if the gross assets drop below £19.3m, which would require a 61% decline in the portfolio as of 30 Sep. I'm not sure what the current value of the portfolio is, but we do know that the SDV share price has dropped from 156p to 138p in that time. As a stab in the dark, my guess is that SDV shares become worthless if there is a market decline of roughly 50% from the current levels.
Though it's not an impossibility, I see a 50% decline as unlikely. But I think the more interesting question is what happens when Chelverton need to issue a new tranche of prefs in 2025. The last set of prefs yielded roughly 4% (note that all of this yield is paid at maturity, because these prefs have no coupon), but I think they'd need to yield 8-10% in the current rate environment, given the risk. I am not sure how viable this is, given the current yield available on the portfolio. If for any reason, they can't issue any more prefs or borrow on a margin-loan facility or take on bank debt, the only way forward will be to sell down the portfolio, which will obviously have a serious impact on the yield...
I'll leave people draw their own conclusions from here.
Classic secular downtrend since January 2023, as shown by lower peaks and lower troughs. The long term chart reveals the sp, plumbing new lows, which is unhealthy for equity holders. Rally today , can probably be best described as a "dead cat bounce". Best avoid SDV, as the processed trust intention was to provide both yield and capital appreciation, and it has failed on the appreciation.
And the dividend was paid out of revenue with a modest addition to revenue reserves.
Dividend up to 3.15p per quarter a 7.05% increase.
Aiming for 12.6p for the year.
My first buy in SDV was around 84p, very happy to hold.
The only slight negative is the change of policy in that if a company delists, SDV still want to hold, but not increase the holding.
Another nice dividend increase announced today, no RNS showing here though.
“The interim dividend of 2.9425p per Ordinary share will be paid on 14 October 2022 to the holders of Ordinary shares on the register at 23 September 2022, with an ex-dividend date of 22 September 2022.
It is the Board's intention that this payment will be the first of four equal core dividend payments of 2.9425p each, being a total of 11.77p, for the year ending 30 April 2023”
Guess there will be a further fall because of SDV holding in DEC ? Only hope that SDV saw it coming and got out quick.
Added a few on today's dividend announcement. Ruined my average and dropped my yield of course, but will give more scope for profit taking in the future and the dividend after this one comes quickly. As DEC is SDV's biggest holdings, maybe investing is SDV is a more tax efficient way of holding DEC (for those of us having to pay 30 percent withholding tax) ? Must look into this a little more. Both DEC and JIM are fairly certain to rise from here, that should add to SDV's NAV.
Next year should be interesting for all UK biased ITs, regarding the current dividends as revenue reserves get squeezed.
However, buying into the same over this stressed period can only be seen as an opportunity in the long term. Personally I’m going all out to buy as many ITs and as much as I can afford!
Not that people post here, but great having another rise in the quarter divi to 2.5p, and commitment to pay the same rate for the next three quarters for a total of 10p for the year.
Had a holding for years and picked up another 10,000 @ 109p recently.
Grim here
Anyone know what is up with SDV?
jr
Afternoon. Short TV interview with David Horner: www.fmp-tv.co.uk/company/chelverton-investor-video/
163 shares. Go Nige!!
though not SDV, it's still a relevant, and interesting, read: http://www.thisismoney.co.uk/money/investing/article-2950520/Gervais-Williams-tips-AIM-stocks-best-tough-times.html?ITO=1490&ns_mchannel=rss&ns_campaign=1490
has added SDV to his portfolio @ 1.59. Noting " dividend potential of the sector" http://www.johnbaronportfolios.co.uk/site/history.php
I'm no expert but i'd hope its their margin of safety on Nav, wiggle room if things get in a tight spot. google it for far more professional explanation :)
How come the trust is trading at such a large discount to NAV?
rather a large buy in these uncertain times.
market liquidity is rubbish atm. took some profit a while ago so not too worried about the current weakness. Will wait for an autumn pickup in volume.
worth noting there was an positive effect on this fund from August onward
lovely performance. Mr Lamont and Chelverton are managing this fund well.
a couple of large delayed trades from monday appeared today. no change to price. yet.
Bought in on my ISA. This Small cap fund seems to weathering red days on the 100/250 ftses very well. Possibly helped by the CGT changes on Aim stocks recently? Hope this continues to be well managed fund.