20 May 2021 14:25
Aberdeen Standard Equity Income (ASEI)
20/05/2021
Results analysis from Kepler Trust Intelligence
This week, Aberdeen Standard Equity Income (ASEI) released its interim results for the financial year (FY) 2021. Over the six months ending 31/03/2021, ASEI generated NAV total returns (with income reinvested) of 29.0%. Over the same period, ASEI's share price rose 34.8% (with income reinvested); share price returns were boosted by a narrowing discount to c. 8.8% from c. 12.5% in September 2020. ASEI outperformed the benchmark on both an NAV and share price total return basis, with the FTSE All-Share Index generating a total return of c. 18.5%.
Kepler View
Aberdeen Standard Equity Income (ASEI) has enjoyed a purple patch, with a return to favour of cyclical stocks and value strategies playing to its favour in recent months. After the announcement of the successful development of vaccines for COVID-19, there was a substantial 'catch-up' rally in many areas of the market which had previously lagged the presumed 'covid-beneficiaries'.
When, in November 2020, we last updated our research on ASEI, we noted that manager Thomas Moore had highlighted such a scenario as a potential tailwind. In the face of widening valuation dispersions between 'value' and 'growth' stocks within the market, we reported that: "Thomas sees it as providing the scope for a very sharp recovery in performance should conditions change. An economic recovery, potentially (in the team's view) linked to the announcement of a vaccine, could prove a tailwind to a recovery in many of ASEI's holdings." This has subsequently materialised, with ASEI outperforming the benchmark substantially over the interim reporting period.
The board has indicated it intends to raise dividends for FY 2021 by 0.1% over FY 2020, through the payment of a third interim dividend of 5.2p per share and a fourth interim dividend of at least 5.1p per share (giving a total dividend of at least 20.7p per share for the whole financial year). This would represent a yield of c. 5.5% on the current share price. However, it has noted that the final dividend level will remain somewhat dependent on the degree of recovery in the revenue account.
With FY 2020 revenue returns per share of 15.61p per share, a covered dividend at this level will require significant further acceleration in revenue receipts. However, the board retains recourse to significant revenue reserves, totalling c. £7.6m as at 31/03/2021. This is prior to the payment of the 2nd interim dividend. Kepler estimates that, after deduction of the 2nd interim dividend, but accounting for reported retained earnings (based on reported differences in ex-income and cum-income NAVs as at 17/05/2021), ASEI retains revenue reserve cover of c. 0.77x the FY 2020 dividend.
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