Aberd Asia Inc Share Price (AAIF)

It is a disgrace that the manager has decided to start paying dividends from capital. This means it is no longer a fully-fledged income fund and they are being paid high fees to return capital to shareholders, instead of doing their job in seeking out income opportunities. Another nail in the coffin for fund managers and investment trusts. Active fund managers have done nothing over the past decade but prove they can't be trusted with other people's money.

I will be replacing this Motley Crew with ETFs. Wisdomtree do a good Emerging Markets Income ETF and L&G do a goof Asia Pac income ETF.

FlyingF

I am a Share holder and a substantial one.

Over the last 20 or 30 years many of these income orientated collective investments are changing the way they pay distributions.

Some older heads like us are then stuck in investments that have a different ethos from when we first bought them.

Thanks for letting us know.

Just a thought , If you don't hold AAIF why are you even on the site ?

I have posted previously about Investment Trusts increasing income faster than earnings I am not a fan.

I have been through this with HFEL which had a torrid time from 2018 to 2022 trying to maintain an artificially high yield but this is somewhat different. The specifics:

Promising to pay a dividend of 6.25 yield on NAV. This is a little higher than the typical cash earnings of the company. For reference on launch the company targeted a 4.5% yield somewhat more typical of cash flows.

If the capital growth is particularly strong this is perhaps not a problem as some capital will be recycled to pay the dividend.

The problem will be if or when prices fall. Given this formula 6.25% X NAV if the NAV falls the dividend should be cut. I am not sure they will do so. They themselves expressly stated this is an enhanced dividend policy not an alternative dividend policy.

The other danger here is that the total return on assets after charges need to exceed this 6.25% floor to maintain both the capital level and dividend pay-out assuming dividends are not cut.

I much prefer plain vanilla income funds.

Enhanced dividend policy

AAIF’s investment objective emphasises the importance of income and income growth as well as capital growth in delivering an attractive total return. In recognition of investor appetite for yield, the company’s dividend will be set at 1.5625% of its quarter-end NAV, which equates to 6.25% of NAV per year. Based on the end-December 2024 NAV of 251.39p per share and the current share price, the notional annual dividend yield would be c 7.1%.

The first enhanced dividend will be based on the end-March 2025 NAV and will be paid in May 2025. In periods when AAIF’s revenue is less than the dividend, distributions can be made from a combination of revenue and capital reserves.