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Zac

Then you should be interested in how the income is generated and its likely effect on capital.

Zac

I am not sure how many people realise, I have mentioned earlier but the poor capital performance and the outsized yield is related. You lament the capital performace but that is the price to pay for a 7.7% yield even though the running yield is of no benefit to previous holders.

Thanks Gerry,

Nothing surprising of course but the worst of all worlds locking in a large capital loss for a dividend that is smaller than the lost capital.

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.

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.

jamesmaggs

Appreciate the thread.
The reduction or loss of premium is the markets way to express lower levels of confidence in the quality of management.
If you are not fond of these funky ways of producing income may I ask why you are invested in HFEL?

The weakness in capital performance is connected to the yield being in excess of the yield on the underlying shares I will give an explanation in a model. I just need to wait tilolo I am on holiday as I will need some investigation and probably time to respond to comments.

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.

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,

"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.

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.

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.

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

"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.

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.

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.

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.

Does anyone remember Micheal Watt? The manager before Mike Kerley.
that would be people invested before 2007.

Gerry

You might very well think I have no evidence.
Fair treatment certainly not this is the most hostile notice board i have commented on.

As I always you do not have to agree with me and you are welcome.

Come on people in HFEL land everyone was telling me I do not know how to count or do percentages or how the read the management report.

This company has been going for more than 15 years since 2007. The name was changed but the portfolio was still run by the same management team and the same company.
This was a very different company when it was run by Micheal Watt. Anybody remember him?

I have not bothered monitoring the portfolio further for a couple of reasons. Because the holdings are foreign it is not easy to find a site that will host the portfolio without paying a subscribtion. If anyone knows one perhaps you can let me know. Secondly my opnion has not changed sice my first postin you are all welcome to your opinions.

At the very least dividend growth is likely to slow IF the near 24p dividend can be maintained returns will be healthy.

But if buybacks are effective all points below noted why are we underperforming L&G which has no buy backs???