Member Info for ade2a

Gerry

"Is it that the yield on the shares held within the fund currently is lower than the yield on the dividend paid by HFEL"?

That is all any conclusions you can decide yourself.

Gerry

I checked the yield on the holdings of the funds.
HFEL issued a document that stated the yield on underlying assets. Not the Final/Interim reports. i am sorry I do not have the link.
I also compared with competing funds Schroders Oriental Income and Aberdeen Asian Income.
All these checks you can do yourself and come to your own conclusion.
When I started investing in this fund it yielded 3,8% and was managed by Micheal Watt. Different style of management obviously. This was more than 20 years ago. Again you can check yourself and come to your own conclusion.

I certainly hope you are right.
As I have said repeatedly in this thread I am a shareholder and a substantial one.
The more reason to ensure our managers are doing a good job.

I am not really discussing the share price movement for now just the sustainability long term od the dividend.

You have to buy today at £2000 dividend is £100.
Yield is still 5% same as the underlying assets.

You might be right there are methods of producing income greater than that provided by the yield from the underlying assets.

"But you started this thread by casting aspersions on the HFEL yield claiming it is not covered because the (current) yield on the investments HFEL holds are lower than what HFEL pays out. The current yield on any of the investments is irrelevant as all that matters is the cash payout HFEL receives"

Yes this is the main point of the thread.
If you are correct why does Aberdeen Asian Income have a yield of 4% and Schroders Oriental Income 3.7%.

You all don't have to agree with me.
I feel the question is worth asking.

If someone were to buy that share from you today what will they have to pay?

"But share price has risen to 520p so 33p dividend is a 6.3% yield for new purchases"
Of course that is the current yield today.

So 24p/240 = 10%. 1s the current yield.
33p/240 = 13.75% = yield on cost.
HFEL 23.5p/293.5 = 7.9% is the current yield for HFEL. By my understanding.

If you buy HFEL today at 293.5p you will get 23.2p in dividends today.

"6% at current prices, but are 15% on the price"
6% is the current yield 15% is the yield on cost.

"I have investments made 7 years ago that are yielding 6% at current prices, but are 15% on the price I invested at. I'm getting that real cash, it doesn't drop just because the yield for new investors is lower"?
What yield would you get if you buy those stocks today in the market?
Please list the stocks and we can check the yield.

Or did I get it wrong and you need to quote the yield when you bought the stock either way?

Sorry EPS should be based on the yield on the underlying stocks. Yield = EPS/Share price

"Because that is pointless! You don't know what price HFEL invested at. The current yield doesn't tell you what they are earning in dividends from their holdings".

They are listed in the reports. Top ten holdings are listed on Trustnet.
Once you know what shares are held there are loads of websites that will quote the yield on those stocks.

"Reported EPS are very tightly regulated. If they report 23.74pps as EPS"
We all know that. I am questioning how they came up with the number given all the points I posted in the OP.

You do not have to be sceptical. It is a free world but I am.

I am concerned that the fund may not be doing what the managers say it is.
Many in these threads say 'just trust the manager'.
The ever rising yield and falling share price suggests some scepticism is warranted.
Should they be able to navigate these markets, keep the dividend intact and return to capital growth we will all be happy but recent performance give some pause for thought.

How about checking the yield yourself on the major holdings and averaging them out?
I believe we all know what is in the Final and Interim reports.

There are many reasons that lead me to be sceptical.
1. At 7.5% yield with its sister OEIC it is an outlier among purely or mostly equity based funds.
2. A quick scan of the top ten holdings only has 1 at more than 8% yield most are less than 5% and TSMC a large holding yields less than 3%.
3. Most stock markets do not have low risk stocks yielding more than 7%.
4. There was a report by HFEL themselves that shows the fund's holdings yield which is close to 5%. Close to the average yield on Asian high yielding stocks.
5. In their interim report they show that interest from options are approximately 10% of the earnings from stock holdings.
6. There seems to have been a step change in the last 2 or 3 years when the yield moved way above yield on competing funds. At the nadir of the GFC HFEL yielded a bit more than 8% Schroders oriental Income also yielded 8% at the same time. Now Schroders Oriental yields 3.7%, Aberdeen Asian Income 4%.
7. Yahoo finance shows the payout ratio to be 150% of earnings, Simply Wall Street shows a payout ratio of 116% of earnings.
8. The fund trades at a premium which reduces the yield.

Maybe the managers are highly skilled and have chosen distributions over capital growth and perhaps they can maintain the distribution level. As an outlier 7.5% yield is a lot when inflation is about 2% and most government bonds yield 1% or less.

There are many reasons that lead me to be sceptical.
1. At 7.5% yield with its sister OEIC it is an outlier among purely or mostly equity based funds.
2. A quick scan of the top ten holdings only has 1 at more than 8% yield most are less than 5% and TSMC a large holding yields less than 3%.
3. Most stock markets do not have low risk stocks yielding more than 7%.
4. There was a report by HFEL themselves that shows the fund's holdings yield which is close to 5%. Close to the average yield on Asian high yielding stocks.
5. In their interim report they show that interest from options are approximately 10% of the earnings from stock holdings.
6. There seems to have been a step change in the last 2 or 3 years when the yield moved way above yield on competing funds. At the nadir of the GFC HFEL yielded a bit more than 8% Schroders oriental Income also yielded 8% at the same time. Now Schroders Oriental yields 3.7%, Aberdeen Asian Income 4%.
7. Yahoo finance shows the payout ratio to be 150% of earnings, Simply Wall Street shows a payout ratio of 116% of earnings.
8. The fund trades at a premium which reduces the yield.

Maybe the managers are highly skilled and have chosen distributions over capital growth and perhaps they can maintain the distribution level. As an outlier 7.5% yield is a lot when inflation is about 2% and most government bonds yield 1% or less.

The other method of increasing distributions is to have a relatively high gearing and repay the borrowing from capital. HFEL has not done this as their gearing remains very low at 5% of assets.

I feel some scepticism is warranted here given all the points mentioned above.

Even with options trading the estimated yield is about 5.5% not the 7.5% the fund currently yields. All this suggests a dividend may be in the long term future of the fund.

Can anyone explain how the HFEL pays a 7.5% yield when underlying assets yield around 5% on Henderson's own figures.
In addition the shares trade at a premium and the is a 1% annual charge.
I do like the fund and I am a long term holder but I would like to test these fundamentals.