Listen to our latest Investing Matters Podcast episode 'Uncovering opportunities with investment trusts' with The AIC's Richard Stone here.
aims to provide a high level of dividend as well as capital appreciation from a diversified portfolio
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In case you missed our webinar with Henderson Far East Income Limited (#HFEL), the recording can be found on our YouTube channel: https://youtu.be/kVgqJeI2ChM
It is interesting that they say dividends in India (and Indonesia) are comparatively quite low. This is no doubt a reason why they are not investing more in India. They do however point out that there is a potential for these dividends to increase. All a balancing act.
Many thanks ShareSoc! I missed the live event.
I haven't had a chance to watch the webinar yet. But for anyone who did, is the dividend plan still as we have anticipated; maintain at current levels until earnings full cover it, using reserves in the meantime? Was there any hint how long it will take to reach a fully covered dividend (at 24.4p)?
Many thanks
Guitarsolo
They did not summarise the dividend situation in a single statement so you really need to watch the whole video which I appreciate is quite lengthy. Towards the end, a question was raised regarding dividend 'value traps' being the cause of the decline in the share price. As you would expect, this was not openly admitted but they stated the fund would be avoiding and moving away from those in the future.
For this presentation, you would expect a certain amount of sugar-coating but they did at least address the issues that have been mentioned on this forum, are aware of them, and did not attempt to sweep them under the carpet.
Realist1, I would disagree and say the manager is as opaque as an old dog's eyes. There was no admission that the options trading had increased in the year because they need to convert capital in to income if buying higher quality growth companies. This is the function of put options. He also danced around the question about the top 10 companies not seeming to pay an aggregrate yield that equates to the yield of the trust, but we already know why this is. He did atually admit to being caught out by value traps, which is hard listening given they are paid handsomely to avoid common investment mistakes, including value traps.
The trust has clawed back some of the huge losses I have incurred as a long term investor, and I will continue to hold in the hope that his luck (not judgment) continues.
Damienmoore, you are no doubt correct. I suppose what I got out of it is that I don't feel the need to sell (at the moment) and there is a potential for the price to increase. As you say, probably more by good luck rather than good management. The dividends are a concern though.
And then I look at my S&P 500 ETF and wonder.
Hello Damienmoore,
I must say I'm surprised you're still investing in this trust given the issues you've uncovered. I hope the price continues to recover from the recent low.
Regarding options, I believe the strategy to convert capital growth into income is selling call options on shares you hold (covered call writing). I think this is less objectionable than dividend-washing because it doesn't increase capital losses, it only reduces capital gains. Do you have any reason to believe they have stopped buying cum-dividend shares purely to obtain the next dividend?
Hello Actuary 63,
I don't invest in this trust at all anymore, and nor will I. I simply look at my holding acquired many years ago with disdain, and hold on to it in the hope the manager will have the luck to make me my money back. A crazy logic, I know, but the truth. It is possible also the manager's "style" will go on a good run, but I won't hold my breath. But make no mistake, my trust in all active managers has been wiped out, and for far east exposure I have been adding to my ETF's:
IAPD
LDAG
LDEM
I see no reason why I should put my money in to untrustworthy active management, when an index tracking ETF provides a simpler, cheaper function and better performance without the opacity.
I have very little faith the manager has stopped buying companies cum-dividend, given the opacity within the interview. Janus Henderson, as far as I am concerned, is a toxic investment management brand.
It is a minefield out there, especially for novice investors like myself who have other issues in life to focus on. Investors Chronicle recommend AAIF as an alternative to HFEL. Are they kidding? AAIF has had hardly any growth since 2012. Okay, it does pay 5.5% interest but even I can do better than that. Maybe there is some self-interest here?
Maybe there is much to be said for the Buffett theory where you put 90% of your money in a Vanguard S&P 500 ETF and the other 10% in bonds. The Vanguard S&P 500 ETF is the top selling ETF in the UK. Maybe there is a reason for this?
Realist1, as a novice investor you should simply go for an index tracker. The arguments are compelling:
https://kroijer.com
You can't go far wrong with a Vanguard LifeStrategy fund.
I totally agree. As a new investor before you do anything else set up a monthly direct debit and invest in a global equity tracker fund. At the end of each year increase the value of your monthly investment by a minimum of the rate of inflation. More if you can. Never panic. Never sell. Let time do its stuff. You'll end up with a substantial pot.
Here's 3 I use. Legal & General International Index Trust Acc, Fidelity Index World Acc and Vanguard FTSE All Cap Index Acc.
I aslo use various 'factor' based funds and ETFs. Happy to share if needed.
The longer I hold dividend paying assets the more I realise that, generally speaking, their performance is poor. I'm now down to only 17% of my portfolio by value in dividend payers.
Well thankfully I have been putting most of my cash into JGGI which is up 73% in 5 years and 15% YTD, plus about 3.5% p.a in dividends. I figured this fund out for myself. I just shake my head at the behaviour and incompetence of some of these fund managers. Its all about money so no doubt they have their own agenda. But thanks for the information.