Chelvertn Uk Share Price (SDV)

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.