Trust Intelligence from Kepler Partners

Fund Profile HHI

08 May 2026

Disclaimer

Disclosure – Non-Independent Marketing Communication

This is a non-independent marketing communication commissioned by Henderson High Income (HHI). The report has not been prepared in accordance with legal requirements designed to promote the independence of investment research and is not subject to any prohibition on the dealing ahead of the dissemination of investment research.

Overview Analyst’s

HHI has hit its 13th consecutive year of dividend growth.

Overview

Henderson High Income (HHI) continues to differentiate itself within the UK equity income space through its blended approach, combining equities with a meaningful allocation to bonds. This structure supports a higher and more diversified income stream, whilst also introducing an element of defensiveness relative to more traditional equity-only strategies.

The Portfolio is focussed on financially robust companies capable of delivering sustainable and growing income, complemented by a bond allocation targeting higher-quality issuers. Recent activity reflects this approach, with additions to the bond portfolio including large, well-capitalised financial institutions such as AXA, ING Group and NatWest Group, alongside new equity positions in Bodycote and selected REITs such as Big Yellow Group.

This approach is also reflected in the trust’s Dividend profile. HHI currently offers a yield of 5.6%, a premium to both the broader UK market and peer group, alongside a 13-year track record of consecutive dividend growth, achieved at an annualised rate of 2.1%. Income is also well diversified, with less reliance on a small number of large-cap payers than the wider market. This is complemented by the use of cheap long-term Gearing, agreed in the past at very attractive rates, which supports income through positive carry and helps fund the bond allocation, whilst also contributing to a more stable overall return profile.

Performance has been resilient over the longer term. Over five years, HHI has outperformed its composite benchmark, reflecting the benefits of its dual equity and bond allocation. Over the past 12 months, returns have been solid in absolute terms, although relative performance has lagged the strong and concentrated rally in UK equities, alongside the moderating impact of the bond allocation. At the time of writing, the trust trades on a 4.2% Discount, in line with its five-year average.

Analyst’s View

We think the case for UK equities is finely balanced. Valuations remain undemanding relative to global peers, and many companies continue to generate strong cash flows. However, the outlook for inflation and interest rates has become more uncertain. Whilst rates have eased from their peak, the recent rise in energy prices, driven by geopolitical tensions in the Middle East, has complicated the path forward. Markets had begun to price in rate cuts, but the risk of more persistent inflation means policy could remain tighter for longer, sustaining competition from alternative income vehicles.

In this environment, we think HHI’s approach holds up well. The combination of equities and a meaningful bond allocation provides both a higher starting yield and a more diversified income stream than the broader UK market, where dividends remain concentrated in a small number of large-cap names. The bond sleeve, funded in part through gearing, is particularly notable. It supports the trust’s premium yield and, with borrowing costs below portfolio yields, creates a positive carry whilst helping dampen volatility. At the same time, the equity portfolio retains exposure to areas where valuations appear more compelling, including UK mid-caps, without an overreliance on energy or other highly cyclical sectors facing heightened uncertainty.

There are, of course, trade-offs. The bond allocation may limit upside in strongly rising equity markets, whilst a higher-for-longer rate environment could renew competition from lower-risk, high-income-generating alternatives. However, in our view, HHI’s combination of one of the higher yields in the sector, diversified income across equities and bonds, and a more defensive profile leaves it potentially well placed to navigate a more uncertain backdrop whilst still offering capital growth potential.

Bull

  • Differentiated investment process combines equities and bonds to deliver a high, sustainable and growing income, alongside capital growth
  • Merger with HDIV has increased liquidity and enhanced asset base, lowering costs and broadening appeal
  • Unique approach to gearing helps boost income and capital growth, alongside reducing volatility in the portfolio

Bear

  • Allocation to bonds may see the trust struggle to keep pace with a strongly rising market, relative to a pure equity strategy
  • Tilt to mid-cap companies may bring more sensitivity to state of the UK economy
  • Whilst the approach to gearing helps dampen some volatility through bond exposure, it will still magnify losses in down markets