Author: admin (Page 279 of 441)

The Results Round-Up: The week’s investment trust results

Baillie Gifford Japan’s (BGFD) net asset value (NAV) total return per share comes in at exactly 10% for the full year; Henderson International Income (HINT) does slightly better with a 10.4% total return as it joins the Association of Investment Cos. Next Generation Dividend Hero list; while New Star (NSI) tops the lot with an 11.69% total return for the year.

By Frank Buhagiar

Baillie Gifford Japan (BGFD) philosophical approach woos markets

BGFD posted a +10% net asset value (NAV) per share total return for the full year. That’s a little short of the TOPIX index’s +14.7% total return (sterling). Encouragingly, the fund modestly outperformed the benchmark in the second half of the year but not by enough to recover the ground lost against the benchmark in the first half. The latest full-year numbers mean five and ten-year NAV total returns now stand at +12.6% and +151.8% respectively compared to the TOPIX’s +36.7% and +140.0%.

The investment managers note “The obvious question on shareholders’ minds following a 5-year period with a disappointing relative outcome will be whether they should remain confident in the prospects for their Company’s portfolio.” The answer, “Nothing in life is guaranteed but we believe there are both philosophical and practical reasons for optimism.” Philosophical includes the fund’s consistent approach that has previously served the fund well for long periods; the portfolio’s low turnover; and also “the lack of recent interest in what the Company is offering, which means that it is unlikely that we are at a peak of optimism where everything is already in the price.” As for practical, the portfolio has demonstrated higher sales growth than the market over the past five years and is forecast to grow by 9.2% p.a. over the next three years versus 3.1% p.a. for the market. “If this superior business growth materialises as anticipated, we are confident we will be able to report on more share price success”. The market liked what it heard, marking the shares up 3p to 704p.

Numis: “The fund has experienced a difficult few years as growth stocks have fallen out of favour and its mid-cap bias has hurt performance. Exposure to Japan remains a useful portfolio diversifier, benefiting from an established and stable political system, and an increasing focus on returns to shareholders. The shares may offer value on a c.13% discount, although a turnaround in sentiment towards growth stocks will be required for it to come back into favour.”

Investec: “The manager has a clear and successful growth-focused philosophy which has generated superior long-term returns.”

Henderson International Income (HINT) increases total dividend

HINT’s +10.4% NAV total return for the year, a little behind the MSCI ACWI (ex UK) High Dividend Yield Index’s +14.2% (sterling). Not all about capital appreciation though. For HINT has a dual-focus: to provide shareholders with a growing total annual dividend, as well as capital appreciation through a diversified portfolio of global stocks outside of the UK. And on the dividend front, the fund continues to deliver with a +3.2% increase in the total dividend for the year. That makes it 10 consecutive years of dividend growth which sees HINT make it onto the Association of Investment Companies’ “next generation dividend hero” list.

Still, the shortfall in total return did prompt a strategic review, resulting in a tweak to the investment strategy. As explained by chairman Richard Hills, while dividends will remain “the primary contributor” to the fund’s distributions, when the fund managers spot “compelling opportunities in stocks, regions or sectors that would otherwise be excluded due to their yield”, the board is prepared to dip into reserves to supplement dividends. “This will expand the potential universe of stocks in which the investment team can invest.” Shares closed down at 165.75p compared to 168p the previous day – well it was Halloween after all.

Winterflood: “Share price TR +6.5% as discount widened from 9.6% to 12.8%. Underperformance relative to benchmark predominantly due to stock selection.”

New Star Investment Trust (NSI) goes defensive

NSI reported an +11.69% total return for the year to 30 June 2024. For comparison, a whole host of indices provided: the Investment Association’s Mixed Investment 40-85% Shares Index (a peer group of multi-asset funds with allocations to equities in the 40-85% range) up +11.80%; the MSCI AC World Total Return Index up +20.61% (sterling); the MSCI UK All Cap Total Return Index up +13.16%; and UK government bonds up +4.50%. The reason for the multiple indices, because, as the investment managers explain, the fund invests across asset classes “to increase diversification and reduce longer-term risks.” This did mean that over the year performance fell short of “a strongly rising equity market.”

Sounds like the investment managers have adopted a defensive stance too, as “changes over the year have resulted in a higher allocation to more lowly-valued countries and sectors, which may prove defensive if investors become disenchanted with the scale or pace of the commercialisation of AI advances.” Another defensive-oriented word included in a sentence or two later “A focus on equity income investments may provide some defensiveness in times of heightened volatility and facilitate the payment of dividends.” The shares were largely unchanged – off just 0.5p to finish the day at 105.5p. The market sympathising with the defensive stance perhaps.

Winterflood: “Relative performance hurt by allocation to cash and low-risk multi-asset investments. Within equity allocation, the fund’s relatively high Emerging Markets weighting at the expense of the US was also negative. As at 30 June 2024, portfolio comprised: investment funds (71%), investment trusts & ETFs (15%), unquoted investments incl. loans (2%), other quoted investments (1%) and cash (12%). Board is proposing to widen the fund’s investment objective towards total return rather than simply capital growth.”

There are at present so many IT’s I could buy, it’s like a shoal of herring but I have decided to stick to the knitting.

I am going to buy a position in  Global X ETFs ICAV – Global X Superdividend UCITS ETF

Bull points.

They pay a monthly variable dividend of around 10%, current monthly income on a 10k investment of around £100 per month.

Provides monthly income for re-investment.

No discounts to worry about.

Bear Points.

No discount to NAV.

No reserves to support the dividend in times of market stress.

It may turn out to be a share that turns capital into income.

The dividend is paid in u$ dollars so a small charge to convert to British pounds.

Dividends can be more reliable than share prices as they’re driven by
the companies performance itself and not by the whim of investors.

As part of a total return / reinvestment strategy, this income could be
reinvested into income assets or back into the equity market
depending on the relative valuations.

The emotional benefits of dividend re-investment.
In fact, with this investment strategy you can actually welcome falling share prices.

AJ Bell Shares Magazine

Everything you need to know about dividends (but were afraid to ask)

We outline the basics about dividends from what they actually are to how they can provide a regular income

A dividend is quite simply a portion of a company’s earnings distributed to its investors.

In the UK most companies pay two ordinary dividends per year, one at the half-way stage (the interim or first-half dividend) and one at the end of the year (the final dividend). Some UK firms pay quarterly dividends.

Sometimes, companies will decide to pay a special dividend on a one-off basis if their earnings have been particularly strong or they have sold a business and have no use for the cash themselves.

Investment trusts and funds also pay dividends to investors and they can be half-yearly, quarterly or even in some cases every month.

HOW DO YOU RECEIVE AN ORDINARY DIVIDEND?

To receive a dividend, you need to have a holding in a company, fund or investment trust that pays a dividend to its shareholders.

There are four important dates to keep in mind:

• Declaration date – The day the board of a company, fund or trust reveals its intention to pay a dividend, including the date and the amount per share.
• Ex-dividend date – Investors who own the shares before this date qualify for the upcoming dividend, those who buy the shares after this date and before the payment date are not entitled to the dividend.
• Record date – This is the date the company, fund or trust uses to determine who owns its shares and are therefore entitled to the dividend.
• Payment date – The dividend is dispensed and appears in your account. This is usually around one month after the record date.

In the days leading up to the ex-dividend date, the price of your shares might go up as other investors decide to buy because they also want the dividend.

On the day the stock goes ex-dividend, the share price usually drops by the same amount in order to compensate for the fact that if you buy the shares now you have no right to the dividend (they are ‘ex-rights’, in market parlance).

KISS. For any new readers there are only 3.

One. Invest in a portfolio of Investment Trusts* that pay a secure** dividend and use those dividends to buy more Trusts that pay a secure dividend.

Two. Any Trust that drastically alters their dividend pay out, must be sold even at a loss.

Three. Remember the rules.

*The Snowball invests only in Investment Trusts as they have reserves to pay dividends in time of market stress.

**No dividend is 100% secure although some dividends are more secure than others.

No savings? I’d put £100 a month into this sleepy giant to generate passive income of £7,772 a year.

Story by James Beard

by The Motley Fool

I recently read that “passive income is the fuel that powers your dreams, giving you the freedom to pursue your passions and live your life on your own terms”. I have no idea who came up with this quote, but I hope they dream well and are in a position to spend their time doing something fulfilling.

Another investing concept that gets a good press is compounding. In the case of income stocks, this is the act of reinvesting dividends to buy more shares, generating an ever increasing level of return. This has been described as the eighth wonder of the world.

Just imagine how happy we could be by combining the two! Well, that’s what I try and do.

Now, I must be honest. I still have to work for a living and I’d love to have more freedom to do what I want. But I do have a steady stream of passive income that I’m reinvesting with a view to having a more comfortable retirement.
Take two
If I were to start my investing journey all over again, I’d put a relatively modest amount (say £100) into UK income stocks. If I then received dividend payouts of 5.9% a year — payable two-thirds/one-third in January and July, respectively — my hypothetical sum would grow to £67,248 after 25 years.

At this point, my shareholding would be generating income of £3,967 a year.

Readers may be wondering why I’ve chosen such specific numbers. Well, that’s because National Grid (LSE:NG.) presently offers a 5.9% yield and pays a dividend twice a year.

And it’s a share that has a long track record of increasing its payout.

My example assumes zero growth in its dividend. However, factoring in an increase of 3.6% a year — the company’s average annual increase over the past five years — would increase my investment pot to £131,731. This could give me an annual passive income of £7,772.

Remember, there could be some capital growth too.

Caution
Of course, the stock price could fall. And dividends are never guaranteed. But this example highlights the potential long-term gains achievable from picking a steady and reliable income stock.

National Grid is able to pay a generous dividend because its earnings are reasonably secure. It operates in a regulated industry, which means as long as it keeps the lights on (literally), it will be able to achieve a pre-agreed level of return.

Because of this its share price performance tends to be unspectacular. This — along with the fact that it’s the UK’s 13th-largest listed company — is why I describe it as a sleepy giant. I think there’s always room for this type of stock in a well-balanced portfolio.

But there are a couple of things that could threaten its ability to maintain its healthy dividend.

Although it doesn’t face any competition it must meet its regulatory obligations. This requires huge capital expenditure.

It surprised shareholders in May by asking them for more money. Due to the company’s large borrowings, perhaps its directors felt they had no alternative other than to approach its owners for additional cash. I wonder if the terms offered by lenders were unfavourable.

However, despite these challenges, the next time I’m in a position to invest I’m going to seriously consider taking a stake.

The post No savings? I’d put £100 a month into this sleepy giant to generate passive income of £7,772 a year! appeared first on The Motley Fool UK.

I’ve sold the shares in M&G credit for a loss of £8.00 including the earned dividend but not yet received. The funds to be re-invested in Private Equity.