Tip Sheet

This is Money says Alliance is doing little wrong, while The Telegraph tips HICL Infrastructure to build itself back up.

ByFrank Buhagiar

This is Money ALLIANCE TRUST: The ‘dividend hero’ that’s poised to maintain its amazing record

What makes a record amazing? How about 58 consecutive years of dividend growth. For that’s the number of years in a row Alliance (ATST) looks set to raise its payout to shareholders after the global investor unveiled a 6.62p quarterly dividend, its first for the year. Crucially, 6.62p is higher than last year’s 6.18p paid.

But ATST is not just a dividend growth story, “As for share-price gains, Alliance is also doing little wrong. These have been 13 and 18 per cent over the past six months and year, respectively.” A thumbs up for the fund’s differentiated approach – rather than hand over the funds to one investment manager, ATST uses Willis Towers Watson (WTW) to identify the best managers around. WTW then gives these best-in-class managers a portion of the fund’s assets to invest and manage as they see fit – typically each manager invests in around 20 different stocks. Currently, the £3.4 billion fund employs 10 managers who run 11 different segments of the fund’s assets.

The article concludes by highlighting the tagline on Alliance’s website “The trust has its own website (alliancetrust.co.uk) and has taken to the airwaves to promote its suitability as a long-term investment – tagline: ‘Find your comfort zone’. It is a sign, some say, of the confidence that the trust’s board has in WTW.” And speaking of airwaves, you can have a listen of the fund’s latest doceo video update here.

Questor: This infrastructure fund is building itself back up

The infrastructure fund in question? HICL Infrastructure (HICL), first tipped by The Telegraph tipster back in 2014. Different world since then of course. Look no further than interest rates – Bank Rate was 0.5% back in 2014; today its 5.25% with most of the increase taking place over the last couple of years. Trouble is, infrastructure funds, which are viewed as bond proxies due to the government-backed revenue streams they receive from long-term contracts, are “sensitive to rises in the yields on government bonds which increase when interest rates go up.” Cue a steep fall in HICL’s share price from 176p back in early September 2022, at which point the shares traded at an 8% premium to net assets, to 121.8p today, a 22% discount to NAV.

But there could be light at the end of the tunnel. For as Questor points out, with both the Canadian and European Central Banks both cutting rates earlier this month, “it is probably only a matter of time before the Bank of England follows suit and lowers the Bank Rate from 5.25pc”.

The £3.2 billion fund hasn’t been sitting on its hands waiting for rates to be cut though. During the last financial year, HICL raised £500m by selling nine infrastructure projects. Crucially, the sales were at prices either at or above their previous valuation, thereby validating the internal valuation process. What’s more the proceeds raised have enabled the extensive credit facilities to be repaid and a £50m share buyback programme to be launched. And thanks to savings made, a pick-up in inflation-linked revenues and its investment in Channel Tunnel HS1 rail link resuming distributions to its shareholders, the fund has raised next year’s dividend target.

Questor goes on to note that broker Stifel rates HICL, along with other infrastructure funds, a “buy”, highlighting how dividend yields across the sector offer “an attractive margin over gilts, especially with their shares on wide discounts.” Questor concludes “That’s a view we share.

The Results Round-Up – The Week’s Investment Trust Results

Which two funds are celebrating 10 years as listed companies but face continuation votes later this year? And which fund is looking to grow net assets organically to £5 billion?

ByFrank Buhagiar

Hansa’s (HAN) star performer

HAN reported a +25.1% NAV total return for the year. The star of the show was the fund’s holding in Oceans Wilsons which was up +55.3%. Excellent timing, as HAN is waiting on the findings of a strategic review that is running the rule over Brazil’s largest integrated provider of port and maritime logistics. According to the latest update, non-binding indicative offers have been received for Oceans, which accounts for around 30% of HAN’s net assets.

JPMorgan: ‘In our view as a package Hansa Trust is an eclectic mix of assets and any investor has to be comfortable in particular with the large strategic holding and concentrated shareholder register until there is more clarity on what Ocean Wilsons will do, we remain Underweight’.

Ashoka WhiteOak Emerging Markets (AWEM) punching above its weight

AWEM’s Annual Report included an +11.81% NAV total return, comfortably ahead of the MSCI EM (GBP) Index’s +7.94%. Reward for those shareholders who backed the May 2023 IPO, the first and only investment company listing on the Premium Segment of the Main Market since 2021 (the only equity-focused investment company listing since 2018). Post period-end, the £37 million market cap proposed a tie-up with the much larger Asia Dragon Trust (DGN). AWEM ‘intends to participate’ in a full strategic review subsequently launched by DGN. Begs the question, what will AWEM get up to in its second year?

Winterflood: ‘Stock selection contributed to relative performance, particularly within SME segment. India overweight was key geographic contributor.’

NextEnergy Solar Fund’s (NESF) ten-year anniversary

NESF’s tenth full-year results included some major milestones: net operating capacity hit 1GW; the number of operating assets passed 100; the capital recycling programme saw a 60MW ready-to-build solar project sold for £15.2m, a 100% premium to the holding value. And according to CEO Michael Bonte-Friedheim, the 11% dividend yield is ‘one of the highest in the sector and FTSE 350’. Total dividends paid since the April 2014 IPO now stand at £345m. One blot on the report card, NAV per share dropped to 104.7p from 114.3p a year ago due, in part, to lower UK power price forecasts.

Jefferies: ‘NESF has announced a £20m share buyback programme. This is helpful given the weakness in the shares so far during calendar 2024, although material extensions of the programme are unlikely while the fund is still repaying its RCFs.’

Numis: ‘Further progress on disposals would be welcomed and remains an important driver for share price improvement. The forthcoming discontinuation vote at the AGM in August will be a key event for assessing the market’s appetite for the long-term prospects of the business.’

Personal Assets (PNL) remaining cautious

PNL’s ‘investment policy is to protect and increase (in that order) the value of shareholders’ funds per share over the long term’. And it’s done just that. According to Chairman Iain Ferguson, since 1990, ‘NAV has grown at an annual compound rate of +6.5% compared to +3.4% for the UK Retail Price Index and +4.3% for the FTSE All-Share Index, our two main comparators.’ As for the latest financial year, NAV grew +1.2%, compared to the FTSE All-Share’s +3.4%. The investment manager thinks ‘Grounds for caution remain. This is a time for patience and prudence, not ebullience.’

Numis: ‘We continue to believe that Personal Assets is an attractive long-term vehicle for cautious investors.’

Cordiant Digital Infrastructure (CORD) exceeding expectations

CORD’s +9.3% full-year total return came in ahead of the 9% target. So too, the annualised NAV total return which, at +10.5%, exceeds expectations set at the time of the IPO. Total dividends for the year were also ahead of guidance, up 5.0% to 4.2p. What’s behind the forecast-busting numbers? Strong overall performance at the portfolio-company level: aggregate EBITDA grew 7.2% year-on-year to £139.3 million. Everything seemingly going in the right direction, apart from the share price which languishes at a hefty discount to net assets. Chair Shonaid Jemmett-Page ‘believes the causes are macroeconomic rather than specific to the Company’.

Investec: ‘We believe that the diversified and highly contracted nature of the revenue streams, combined with high EBITDA margins underpins future NAV growth. Combined with an attractive yield (5.8%), we believe that the shares offer a compelling total return proposition and we reiterate our Buy recommendation.’

Jefferies: ‘The twin portfolio pillars of Emitel and CRA continue to drive aggregate earnings growth and the overall valuation/NAV. Here the recycle of the cash flow back into the portfolio bodes for ongoing growth.’

Liberum: ‘These results reinforce our view that the market has been undervaluing CORD’s performance. We rate CORD as BUY with a 120p TP.’

Numis: ‘We believe the share price discount of 36% is an opportune entry point and undervalues the potential of the portfolio.’

JPMorgan European Discovery Trust’s (JEDT) year of two halves

JEDT’s full-year results were boosted by a second half pick-up in performance: NAV per share was up 4.5% for the year to 31 March 2024, but up +19.8% from 30 September 2023 to 31 March 2024. The +6.8% total return on net assets also beat the MSCI Europe (ex UK) Small Cap Index’s (GBP) +5.9%. Chairman Marc van Gelder’s appears to have included a weather forecast in his statement ‘The outlook for European small cap companies seems considerably brighter than when I wrote my last statement to shareholders for the Half Year Report six months ago.’ All set fair then?

Numis: ‘Within its annual results, the Board has committed to return up to 15% of share capital via a tender offer at a 2% discount to NAV. It is unsurprising to see some proposals put forward ahead of the continuation vote at the upcoming AGM in July’.

Henderson Opportunities (HOT) set for a HOT streak?

HOT’s +18.6% NAV total return for the half year trumped the FTSE All-Share’s +14.2%. The Interim Management Report puts the outperformance down to stock selection and the benefits of gearing. The Report points out that ‘This was a welcome recovery in both absolute and relative terms, although we recognise that on a long-term basis performance remains disappointing and therefore we need this trajectory to continue.’

Winterflood: ‘Performance drivers were recovery in smaller company share prices from oversold levels as well as ‘recovery’ shares.’

Syncona (SYNC) eyes up £5billion

SYNC’s +1.2% NAV per share return for the year was down to ‘Positive returns from our life science portfolio and capital pool, enhanced by accretive share buybacks.’ CEO Chris Hollowood described the performance as ‘resilient’. He also reminded readers of the healthcare investor’s ‘ambition to organically grow net assets to £5 billion.’ Progress is being made ‘Our maturing strategic portfolio of 13 companies expects to deliver eight key value inflection points with the potential to drive significant NAV growth by the end of 2026, including two in the next six months.’ Code for watch this space

Jefferies: ‘The portfolio’s shift towards later-stage assets has become a lot more apparent. Looking forward, this should provide additional flexibility to make shareholder distributions from the capital pool, and also potentially accelerate near-term NAV performance.’

JLEN Environmental Assets’ (JLEN) resilience

JLENmarked its 10th anniversary as a listed company with a -1.6% NAV total return for the year. Chair Ed Warner believes ‘this year’s performance is another demonstration of our resilience, despite it being a challenging year for the listed renewable investment company sector.’ Warner hopes’ JLEN’s excellent record of delivering consecutive dividend growth since the Company’s launch in 2014, combined with the exciting prospects for the broad range of technologies and assets that it invests in, will encourage all shareholders to vote ‘against’ the discontinuation resolution put forward at the AGM.’ Question is, will that be enough for shareholders?

Jefferies: ‘Dividend cover remains strong, but the most pertinent takeaway is that an asset sale is expected over the coming months. This is particularly positive in the context of the very limited disposal activity to date, the material RCF balance still to repay, and the lack of share buybacks.’

Liberum: ‘we view greater income and NAV growth potential for the portfolio than for lower-risk solar peers and maintain our BUY rating.’

JPMorgan Japan Small Cap Growth & Income (JSGI) believes growth will out

JSGI’s +5% total return on net assets for the year, some way off the MSCI Japan Small Cap Net Return Index’s (sterling) +12.0%. A better reflection of the company’s portfolio is the MSCI Small Cap Growth Index which was up +6.6%. That’s because JSGI has ‘a bias towards smaller cap, quality, growth names’. Chair Alexa Henderson ‘shares the Portfolio Managers’ conviction that good quality companies with strong growth prospects will always perform well over the longer term.’ Henderson has the numbers on her side: the fund’s annualised return on net assets of +8.0% over the ten years ended 31st March 2024, not far off the benchmark’s 8.5%.

Winterflood: ‘Underperformance partly attributed to fund’s bias towards smaller cap, quality, growth names, whereas market favoured larger, lower-quality value-oriented stocks.’

Not naval gazing !!

With the cash return from ADIG the blog portfolio should have around 6k for re-investment next month.

That should produce income of around £540.00 when re-invested, less a reduced dividend from ADIG of £240.00.

An addition to the Snowball of £300 a year for ever.

GRS

The blog is in an accumulation phase, so Investment Trusts that will be favoured are those that pay a secure yield, nothing is a hundred percent secure.

In an accumulation phase if u buy Investment Trusts that pay a dividend and trade at a discount, when/if the discount narrows u should make a capital gain to re-invest in another higher yielder. The current blended portfolio discount is 33%, remember this is a Brucie bonus and not the reason to buy.

Brucie Bonus: The catchphrases he was known for

A staple of Saturday evening entertainment for decades, many of his one-liners have passed into the public lexicon years after.

De-accumulation.

When u need to spend your dividends rather than re-invest them, hopefully u will have built up the dividend stream to have a surplus to re-invest but that is a topic for another day.

U need your dividends to pay your living xpenses, so income is more important than the chance to make a capital gain, so one ETF that could be of interest

Global X ETFs ICAV – Global X Superdividend UCITS ETF

An ETF, so it will trade around its current NAV, the yield is 11% but pays a monthly dividend, similar to SMIF

For DYOR google SDIP SMIF

Now it’s unlikely u will make a capital gain, possible but u are more likely to lose some capital. U need to compare to

‘If u took out an annuity where u would lose all your capital and a smaller pay day but at a lower risk’.

I’d start investing £1,000 a month from July for £60,000 passive income!

Story by Dr. James Fox

The Motley Fool

Millions of us invest for a passive income. And while reaching our goals may appear daunting, with consistency, patience, and intelligent stock picking, it’s more than possible.

Work the ISA
The Stocks and Shares ISA is a hugely important vehicle for our investments, allowing us to grow our wealth in a tax-efficient manner.

The key benefit is that any income or capital gains earned within the ISA are exempt from UK income tax and capital gains tax.

This means that all dividends, interest, and profits generated from investments are completely tax-free, enabling us to maximise our returns.

And if I were to invest £1,000 monthly, it’d certainly make sense to use the Stocks and Shares ISA, which has an annual allowance of £20,000.
Please note that tax treatment depends on the individual circumstances of each client and may be subject to change in future. The content in this article is provided for information purposes only. It is not intended to be, neither does it constitute, any form of tax advice. Readers are responsible for carrying out their own due diligence and for obtaining professional advice before making any investment decisions.

Compounding for glory
£1,000 a month adds up quickly, but our portfolio grows even faster when we compound our investments. This means we reinvest our returns every year.

It might not sound ground breaking, but the impact’s huge. It’s like the snowball effect, with an ever-increasing pot of money gaining pace year after year.

For context, assuming £1,000 of monthly contributions and a 10% return, it’d take me a little over six years to reach my first £100k. But it’d take just four years for my portfolio to grow from £100k to £200k. Then the next £100k jump would take just three years. After 21 years, my portfolio would be growing by £100k a year.

Using this example, it’d take me 22.5 years to reach £1m. That’s enough to generate at least £60,000 annually, referencing current dividend yields available on the FTSE 100.

Turning a £20k ISA into a stunning £38,023 a year passive income

Harvey Jones says investing regular sums in a Stocks and Shares ISA is a brilliant way of building up a tax-free passive income stream over time.

Harvey Jones

MotleyFool

Published 21 June

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

My favourite way to use the £20,000 ISA allowance is to invest in a spread of UK stocks that will pay me a high and rising passive income.

London’s FTSE 100 index is home to some of the most generous dividend payers in the world. The average yield is 3.7%, but I can get double or even triple that, by targeting individual companies.

I’d start by opening a Stocks and Shares ISA account with a reputable broker. Then I’d work out how much I could afford to pay in. Most people can’t afford to max out their ISA allowance every year, and sadly, I’m one of them.

FTSE 100 dividend stocks

Let’s say I started with no savings and invested £300 a month. After a year, I’d have put away £3,600 a month. That’s a pretty tidy start.

Now let’s say I increased my contribution by 5%, year after year. After 30 years, I’d have paid in £394,534.

Then let’s say my portfolio grew at 7% a year, which is the average long-term return on the FTSE 100.After 30 years, I’d have £633,714. That’s a pretty staggering sum. And as it’s inside an ISA, I wouldn’t have to hand a penny of it to HMRC. I’d keep 100% of the money.

Please note that tax treatment depends on the individual circumstances of each client and may be subject to change in future. The content in this article is provided for information purposes only. It is not intended to be, neither does it constitute, any form of tax advice. Readers are responsible for carrying out their own due diligence and for obtaining professional advice before making any investment decisions.

I wouldn’t put all my money into one stock, but invest in a spread of FTSE 100 companies. In time, I’d aim to hold 15 to 20 different shares.

I’m tempted by oil and gas giant BP (LSE: BP). It’s been a FTSE 100 stalwart for as long as I can remember but no company has everything its own way. The BP share price tends to rise and fall with the oil price. As with all cyclical stocks, I prefer to buy when they’re down rather than up.

High growth and yield

That’s handy, because BP shares have fallen 5.36% in the last three months, and are up just 1.58% over the year.

They could fall further, of course. The world is trying to wean itself off oil. While BP is investing more in renewables, it’s a long way from giving up on fossil fuels. Searching for oil is hazardous, and accidents can happen, as BP knows better than most.

Yet the shares look cheap trading at just 6.7 times earnings. They’re forecast to yield 5.16% in 2024, covered 2.3 times by earnings. Markets expect the yield to hit 5.47% in 2025. Although, dividends are never guaranteed.

By investing in a spread of high yielders like this, I think I could generate an average long-term yield of 6% a year, and possibly more.

At that rate, my £633,714 portfolio would pay me a second income of £38,023 a year. That’s without drawing any capital. My calculations are theoretical but point to an important underlying truth. Investing in a Stocks and Shares ISA is a brilliant way of building capital and passive income over the longer term. Entirely free of tax.

We are pleased to have met our stated target dividend of 7.57 pence per share for the year, up 6% compared to the prior year and still well covered by net cash flows from the Company’s diversified portfolio. Despite the difficult operating environment, future cash flows remain robust with comfort provided from near-term fixes, such that the Board has set a dividend target of 7.80 pence per share for the current year, an increase of 3%. This will be paid in quarterly instalments as usual.

Jack Carter takes over to explain Why dividend stocks are more important now than ever before. — The Dividend Wealth Journal Team