Currently xd for 2.11p per share payable on the 31 March

Yielding 12.6% trading at a discount to NAV of 32%

The most important thing to check is how secure is their dividend, although it could still fall or not be increased it would still be a high yielding Trust.

Remember it’s only a fcast but a positive fcast is better than a negative fcast.

What does the company say about it’s dividend.

Dividend:

·  The Board is pleased to reaffirm its full-year dividend target guidance of 8.43p per Ordinary Share for the financial year ending 31 March 2025.

·   The full-year dividend target per Ordinary Share is forecast to be covered in a range of 1.1x – 1.3x by earnings post-debt amortisation. 

·    Total Ordinary Share dividends paid since IPO of £346m.

·    As at 19 February 2025, the Company offers an attractive dividend yield of c.12%.

The paid dividend is covered, so until news it’s looks secure.

Let’s work on a flat dividend for the next ten years.

You would have received all your capital back and achieved the holy grail of investing of having a share in your portfolio that pays you a quarterly income at a cost of zero, zilch nothing.

U could also re-invest the dividends in another High Yielding Trust that would pay u an income, although over ten years the percentage u could re-invest at is the unknown but there is normally one or two unloved sectors to re-invest in.

You simply need to monitor the declared dividends and the company’s guidance on any future dividends. The price of the share in ten years time is of no consideration as the intention is never to sell but use the income as an ‘annuity’.

The worst possible scenario is, if they don’t cut the dividend would be the Trust to be taken over but with the discount u would most probably print a profit.

This case study is not a recommendation to buy.

NESF is in the current Snowball but there is no intention to add to this position at this moment in time.

Story by James Beard

Passive and Active: text from letters of the wooden alphabet on a green chalk board© Provided by The Motley Fool

High dividend yields need to be treated with caution. On paper, they could be excellent for passive income. But sometimes they’re too good to be true. 

Let’s explore this by doing some maths

An investment of £10,000 in a stock yielding 16.5%, would generate dividends of £1,650 in year one. Assuming the amount received was reinvested, income of £1,922 would be earned in the second year. Repeat this for another 18 years — a process known as compounding — and the investment pot will have grown to £212,089. At this point, the company will be paying annual dividends of £34,995.

This shows that, in theory, it’s possible to take a relatively modest lump sum and use it to generate a very healthy level of passive income. Yes, it’ll take a couple of decades but as they say, Rome wasn’t built in a day.

Is this really possible?

While such high returns are unusual, they do exist.

For example, based on the dividends it’s paid over the past 12 months, Liontrust Asset Management (LSE:LIO) is currently yielding 16.5%.

However, like most shares offering a double-digit yield, this figure needs to be treated with caution.

For the past three financial years, the specialist fund manager has maintained its dividend at 72p a share. Indeed, it looks as though this run will be extended to a fourth, when its results for the year ending 31 March 2025 (FY25) are declared.

However, the generous yield indicates a problem that’s been around for a while now. Namely, that the company’s share price keeps falling. Since its peak in September 2021, it’s down 81%.

And this fall has boosted the yield. At the end of FY22, it was 5.6%. As the stock price continued to fall – and the dividend remained unchanged – the return soared. It was 7% at the end of FY23, and 10.7%, a year later.

Buyer beware

This is a good example of why shares apparently promising high levels of passive income need to be treated with caution.

And in my opinion, the reason why Liontrust’s value is declining is because its assets under management (AuM) are getting smaller.

The company makes money by managing funds on behalf of its clients. But as the table below shows, its AuM have fallen during each of its last four accounting periods. If the funds acquired from buying other companies are removed, the position looks even worse.

And if this trend persists, I think it’s inevitable that the dividend will be cut.

However, the company’s chair appears to interpret events differently to me. He confidently asserts: “The underlying business is in better health than it has ever been with regards to investment proposition, quality of people, reach of sales and marketing, and strengthening business infrastructure.”

If challenged, no doubt he’ll point out that the company’s profitable — it reported earnings per share of 13.67p for the first six months of FY25. But with this level of performance, it remains a puzzle to me how a dividend of 72p can be maintained. And I fear if it’s cut, there’ll be a major knock-on effect on the company’s share price.

For this reason, I don’t want to invest, despite the attractive dividend on offer.

The post Could this 16.5%-yielder turn £10,000 into annual passive income of £34,995? appeared first on The Motley Fool UK.

The other trusts getting innovative with dividends 

There are plenty of other trusts which pay a dividend from capital spread across all the major equity sectors. JPM has a whole suite of funds from Asia to Europe and the UK with an enhanced dividend, all of which have a growth-heavy investment approach.

In fact, in AAIF’s own sector, there are now three trusts with an enhanced yield: AAIF, JPMorgan Asia Growth & Income and Invesco Asia Trust (IAT). Interestingly, AAIF has seen its discount move in from being the widest in the sector to being in line with these other two trusts, which have discounts between 10 per cent and 11 per cent. Schroder Oriental income (SOI) is trading on a much narrower discount of 7.1 per cent, but has a lower yield and does not pay out of capital, with the income being purely ‘natural’. I think the crucial factor here is size: SOI has a market cap of around £650m while the others are all below £300m.

With IAT soon to complete a combination with Asia Dragon that will more than double its size, it may be that this is a catalyst for the discount to narrow, as a broader pool of professional investors can consider it.

One of the additional secrets behind JGGI’s success may be its size, which means it can be invested in by wealth managers and institutions which need to own large blocks of shares as well as retail investors.

Paying from capital hasn’t always been possible, but regulations have changed over the years. One of the pioneers of this approach was European Assets Trust (EAT), which adopted it in 2001. The trust pays 6 per cent of the closing NAV of the previous financial year in dividends, and the historical yield is 6.6 per cent at the time of writing.

The portfolio is invested in European smaller companies, not typically a great source of dividends, but a market with great growth potential. I think like IBT this is a slumbering growth market which should produce great returns at some point in the future when the market environment shifts.

Are these really dividends? 

Not everyone approves of this sort of policy, although perhaps fewer people object each year as it becomes more established.

Sometimes people object that it is not really a dividend at all but just drawing down from capital. Imagine you had a cash account of £10,000 which paid you 5 per cent a year in interest, and you took out 6 per cent each year. Then you would be drawing down your capital. But in the case of equities, they go up over the medium term.

Now, nothing in finance is as certain as a law of physics, but there are all sorts of reasons to think this will continue to be the case. So we should expect to see any growth in an equity portfolio more than offset any contribution from capital to the dividend, assuming the board have struck the right balance and not committed to a truly excessive contributions from capital.

And crucially, it is always possible for the end investor to reinvest their dividends, in which case this isn’t a concern at all.

People sometimes choose to focus on the effect in a falling market. If the NAV is falling, and the trust makes a contribution from capital to the dividend, then the portfolio value will fall by more than the market. This is true, but over a medium to long-term investment horizon, we should expect the market to rise, and again, investors can simply choose to reinvest their dividends.

There is a short-term negative effect from this dynamic though: if the capital paid out is higher than the income earned, the fund will shrink and so costs will be higher for remaining shareholders. But funds without an enhanced dividend will also be shrinking when this happens thank so the falling market, and their costs rising too, so what we are really talking about is slightly magnifying this risk we take by investing in pretty much all funds.

What you need to watch out for 

One issue you do have to watch out for with these strategies is the variability of the dividends. Paying from capital typically involves paying a fixed amount of NAV each year. Dividends therefore change as the NAV does, which means that if the NAV falls, next year, or next quarter, depending on the exact policy, the dividend might be lower.

Some investors might not like the irregularity this brings. Investment trusts can use revenue reserves to smooth dividends and provide very reliable payments. There are at least 51 trusts which have maintained or held their dividends for at least 10 years, largely due to the ability to build up reserves for when income falls.

During the pandemic, when dividends were cancelled by many companies, almost all equity income trusts were able to maintain their distributions to investors, unlike open-ended funds which have to pay out all income earned.

Buying a trust with an enhanced dividend might, therefore, mean accepting less regularity in the income stream received. Any effect of this could be moderated by owning other trusts with a natural income stream, high revenue reserves and an obvious commitment by the board to maintaining the dividend.

Investors don’t seem to mind this feature, judging by the generally positive impact on the discount an enhanced dividend has had.

Where things have come unstuck though, is when boards have changed the policy too often. This was a major problem for Invesco Perpetual UK Smaller Companies (IPU). 

The trust paid 4 per cent of NAV, like many others discussed, with a big contribution from capital. 

During the pandemic, presumably nervous about the drop in portfolio income – and maybe listening to the critical voices about the impact of this policy in a falling market – the board slashed its dividend target to 2 per cent of NAV, leading to the share price plunging.

Despite reverting to the 4 per cent target later on, the trust has never regained the very narrow discount it used to enjoy pre-pandemic.

I think the lesson is that investors are comfortable with enhanced, or manufactured yields, and they are comfortable with the variability from quarter to quarter, but they want a consistent policy over the medium to long term they can use to help build a portfolio.

Investors have been sucked back into bonds in recent weeks, looking to take advantage of a spike in yields early in January. Eventually, they will time this right, although the last few years have seen expectations for interest rate cuts, which would see bond prices rise, pushed back and watered down again and again and again.

With UK equity valuations being low, yields are also pretty high in that market too, with greater potential for price appreciation if rates stay higher for longer.

There are high dividend ETFs out there with decent yields, the iShares UK Dividend ETF having a trailing yield of 5.6 per cent at the time of writing. But I think when it comes to income, the advantages of investment trusts means that passive is a poor option.

High yields can be earned from all sorts of underlying growth markets, some of which are supported by bulletproof revenue reserves and some of which are raised well above the yields on bonds or ETFs thanks to the use of enhanced dividends.

All in all, it’s never been a better time to use investment trusts for income.

Weekly Gainers

JPMorgan Emerging Europe, Middle East & Africa (JEMA) comes from nowhere to take top spot on Winterflood’s list of highest monthly movers in London’s investment company space and it seems it’s all down to one phone call. Schiehallion (MNTN), another new entry while Golden Prospect Precious Metals (GPM), BBGI Global Infrastructure (BBGI) and Tritax Big Box (BBOX) all retain their top 5 places.

By Frank Buhagiar 17 Feb

The Top Five

New leader at the top of Winterflood’s list of highest monthly movers in the investment company space – JPMorgan Emerging Europe, Middle East & Africa Securities (JEMA). Shares are up +30.3% on the month with the majority of the gains made on 13 February 2025. No news out from the emerging markets investor but can’t be a coincidence that the share price added +18.5% on the day it was announced that President Trump had had a long chat on the phone with his Russian counterpart. Market thinking an end to the Russian/Ukraine conflict could be in sight which raises the prospect that there may well be some value in the trust’s frozen Russian assets after all.

Golden Prospect Precious Metals (GPM) is in second – shares are up +24.7%, an increase on the previous +22.2% gain. Still no material news out from the fund so put the strong share price down to the strong gold price. According to Reuters, gold hit a record high of US$2,942.7 on Tuesday 11 February. Just a hop and skip to US$3,000 from there.

BBGI Global Infrastructure (BBGI) edges up into third after seeing its monthly share price gain increase to +19.4% from +16.1%. Shares still basking in the afterglow of the 6 February announcement that BBGI has received, and is recommending, a 147.5p per share cash offer from a vehicle indirectly controlled by British Columbia Investment Management Corporation. Shares closed at 143p, so market not expecting a rival bid to emerge.

The Schiehallion Fund (MNTN), a new entry in fourth courtesy of a +15.9% share price gain on the month. Only news out from the growth capital investor this past week – more share buybacks. In all the fund bought back 500,000 of its shares at 111.5c a pop. A look at the graph though shows the shares have been on an upwards trajectory ever since the US election. MNTN’s largest holding, none other than Trump ally Elon Musk’s Space X – 9.7% of total assets as at 31 December 2024.

Tritax Big Box (BBOX) retains fifth spot with a +15.6% monthly share price gain. That’s an improvement on the previous week’s +11.2%. Last week, we reported that the shares had responded well to the fund’s 31 January full-year trading update. This week the shares got a further boost after a positive write-up by The Times’ Tempus Column on 11 February – Tempus – Should you buy shares in Tritax Big Box Reit? Don’t be fooled by the question in the title. The article went on to conclude “Advice Buy. Why? Tritax is on the verge of long-term transformation”. By the end of the week, the shares were up a further +3.5%. The power of the press.

The Telegraph’s Questor Column thinks markets are being “irrational” when it comes to valuing London’s renewable infrastructure funds and believes Bluefield Solar Income Fund (BSIF) is one of many bargains to be had; while The Times’ Tempus flags how a deal to develop a large data centre near Heathrow could be a game-changer for Tritax Big Box Reit (BBOX).

By Frank Buhagiar

Questor – There’s money to be made waiting for the regulator to fix its problems

The Telegraph’s Questor Column thinks markets are being “irrational”, at least when it comes to valuing London’s renewable infrastructure funds. That’s because share prices across the space continue to trade at gaping discounts to net assets despite news of the £1bn takeover of BBGI Global Infrastructure by a Canadian fund at a 21% premium to the then prevailing share price. “Remarkably, despite the obvious potential upside for investors if this turns out to be the first of many such deals, share prices of UK-listed infrastructure trusts barely moved. Share price discounts to net asset value (NAV) in the renewable energy sector, which shares many similar characteristics, actually widened.”

Questor blames the Financial Conduct Authority and unfair cost disclosures rules that discourage wealth managers from buying trusts for their clients. “There is considerable anger within the industry over this failing, but while we wait for it to be addressed, there are bargains to be had.” One of which is Bluefield Solar Income Fund (BSIF). Questor admits “It is not the cheapest of these trusts, yet it does trade on a discount that implies a greater than 50% upside if it reverted to trading at NAV, as it did for almost all of its life up until May 2023.” There’s also a double-digit yield based on a dividend that is well covered by earnings and cash flow. And it belongs to “a growing sector, where conditions are moving in its favour. It is also focused solely on the UK, so does not come with currency risk.”

As the name suggests, the portfolio is dominated by solar assets, all of which are operational: as at end of September 2024, the portfolio consisted of 824MW (megawatts) of solar and 58MW of onshore wind. To drive future NAV growth the fund has a 1.5GW+ development pipeline which, as well as solar, includes battery storage projects. Problem is, the wide discount means new shares cannot be issued to finance the pipeline. So, BSIF has secured funding from a consortium of UK pension funds. As for the discount, Questor notes that like most of the sector, BSIF’s discount widening was triggered by rising interest rates. Yet despite UK interest rates being cut three times from their peak, “the trust’s share price has continued to slide. Questor believes that Bluefield Solar is oversold.”

Tempus – Should you buy shares in Tritax Big Box Reit?

The Times’ Tempus appears to immediately answer its own question with its opening line “A deal to develop a large data centre near Heathrow will be a game-changer for the warehouse investor”. To be clear Tritax Big Box Reit (BBOX) is already no tiddler – the £3.6bn market cap has a portfolio of warehouses let to blue-chip customers including Amazon, B&Q and Ocado.

So, what’s the big deal about the big deal? BBOX plans to turn 74 acres near Heathrow airport into a major data centre. Work to create 448,000 sq ft of data halls across three floors is due to start in the first half of next year and there could be scope to add further capacity in the future. The scheme is subject to planning approval, but as Tempus notes “it would be a brave local authority that turned this down in defiance of a government desperate for economic growth.” And doesn’t sound like BBOX intends to stop there – management has said they want data centres to become “a meaningful part of the portfolio”. Tempus thinks this would have a positive impact on profits as the data centre project is set to generate a 9.3% yield compared to 7% for new logistics centres.

In terms of funding, Tempus points out BBOX has “plenty in the locker”. Last year’s all-share acquisition of UK Commercial Property Reit added higher yielding small warehouses as well as hotels, offices and leisure centres to the portfolio which were expected to be sold post-merger. Meanwhile, debt currently stands at a relatively low 29% of NAV and there is £500m available to borrow. All of which leads Tempus to conclude: “Advice Buy. Why? Tritax is on the verge of long-term transformation”

“The beauty of periodic rebalancing is that it forces you to base your investing decisions on a simple, objective standard” – Benjamin Graham

Investors sometimes forget to rebalance their portfolios periodically. Over time, certain investments may outperform or underperform others, leading to an imbalance in the portfolio’s asset allocation. This means your potential returns over the longer term are more at risk. Rebalancing simply means making the trades necessary to bring a portfolio back to its intended asset allocation (investment mix) after fluctuations in the market has caused your portfolio mix to change. By rebalancing regularly, investors can sell high-performing assets and buy underperforming ones, ensuring their portfolio maintains the desired risk profile and potentially maximising their returns over the long term. On occasions when the asset allocation mix (small-cap stocks, large-cap stocks, funds/investment companies, bonds), are distorted to the extremes the now over-weight segment of the portfolio can be reduced/re-sized back to its original intended percentage and the under-weight segment can be increased if/when it appears undervalued. Long-term this rebalancing and buying of undervalued assets can lead to the regularly rebalanced portfolio outperforming the pure buy-and-hold portfolio.

“Far more money has been lost by investors preparing for corrections, or trying to anticipate corrections, than has been lost in corrections themselves”. – Peter Lynch

Attempting to time the market is a common mistake made by Investors. Trying to predict the market’s highs and lows is extremely challenging and often results in missed opportunities or poor timing. Even when fundamental analysis has led investors to add to their armoury by using technical analysis, this can be fraught with long-term regret. Instead, investors should adopt a systematic approach, such as pound cost averaging, where regular investments are made regardless of market conditions. This can mitigate the effects of market volatility and potentially enhance long-term returns. Whilst also reduces the emotional urge to scalp quick gains which are not always easy to replicate and enables the prudent investor to focus on investing and the power of compounding.

NextEnergy Solar Fund Limited

(“NESF” or “the Company”)

Unaudited Quarterly Net Asset Value & Operational Update

NextEnergy Solar Fund, a leading specialist investor in solar energy and energy storage, announces it has today published its Q3 Net Asset Value and Operational Update for the period ended 31 December 2024.

Key Highlights

Financial:

· Net Asset Value (“NAV”) per Ordinary Share of 97.4p (30 September 2024: 97.8p).

· Ordinary Shareholders’ NAV of £565.7m (30 September 2024: £572.2m).

· Gross Asset Value of £1,071m (30 September 2024: £1,104m).

· Financial debt gearing (excluding Preference Shares) of 28.6% (30 September 2024: 30.2%).

· Total gearing (including Preference Shares and total look-through debt) of 47.2%
(30 September 2024: 48.2% ).

· Weighted average cost of debt (including Preference Shares) of 4.9% (30 September 2024: 4.9%).

· Weighted average cost of capital of 6.6% (30 September 2024: 6.6%).

· Weighted average discount rate across the portfolio of 8.0% (30 September 2024: 8.0%).

Dividend:

· The Board is pleased to reaffirm its full-year dividend target guidance of 8.43p per Ordinary Share for the financial year ending 31 March 2025.

· The full-year dividend target per Ordinary Share is forecast to be covered in a range of 1.1x – 1.3x by earnings post-debt amortisation.

· Total Ordinary Share dividends paid since IPO of £346m.

· As at 19 February 2025, the Company offers an attractive dividend yield of c.12%.

Portfolio:

· 101 2 operating assets (30 September 2024: 102 ).

· Total installed capacity of 934MW 2 (30 September 2024: 983MW ).

· Remaining weighted asset life of 25.0 years (30 September 2024: 25.6 years).

Share Buyback Programme:

· As at 31 December 2024, the Company had purchased 10,089,403 Ordinary Shares for a total consideration of £7.8m through its up to £20m Share Buyback Programme, producing a NAV uplift of 0.4p per Ordinary Share.

· As at 19 February 2025, 12,484,767 Ordinary Shares have been purchased for a total consideration of £9.4m and are currently being held in the Company’s treasury account.

Capital Recycling Programme:

· As at 19 February 2025, the Capital Recycling Programme has:

o Sold three asset sales totalling c.145MW of capacity from the 245MW Programme.

o Raised £72.5m total capital.

o Added a total estimated Net Asset Value uplift of 2.76p per Ordinary Share.

· The remaining 100MW in the Programme is progressing through a competitive sales process to third-party buyers. The Company will publish further updates about Phase IV of the Programme in due course.

Capital Structure:

· As at 31 December 2024:

Debt facilities

Original size (£m)

Amount outstanding (£m)

Long-term amortising debt

£212.5m

£148.6m

Short-term revolving credit facilities

£205m

£134.4m

· Short-term revolving credit facilities drawn of £134.4m (30 September 2024: £153.4m).

· Long-term amortising debt paid down by £60.4m (30 September 2024: £52.4m). The remaining outstanding long-term debt of £148.6m is on track to fully amortise in line with the remaining subsidy life of the portfolio’s government subsidies.

· Of the Company’s total debt of £481.4m :

o 72% remains at a fixed rate of interest (including the Preference Shares).

o 28% remains at a floating rate of interest via the short-term revolving credit facility.

· Total look-through debt of £23.6m (30 September 2024: £23.5m). This represents the total combined short and long-term debt in the Company’s investment into NextPower III LP, and its two co-investments (Agenor and Santarem) on a look-through equivalent basis. This is included in the Company’s total gearing ratio of 47.2%.

ESG & Sustainability:

· Published its first Nature Strategy Report in November 2024 outlining the Company’s strategic plan for nature and nature targets, which includes commitments to strong nature-related governance, evidence-led action plans, use of Science-Based Targets, and ongoing transparent disclosures.

Investment Manager Update:

· NextEnergy Group announced that it bolstered its leadership and senior management team with several key appointments and promotions. This adds significant expertise and experience to ensure its successful trajectory for NextEnergy Group’s next wave of anticipated global growth across the renewables sector.

o Ross Grier: Promoted to Chief Investment Officer of NextEnergy Capital.

o Andrew Newington: Appointed as Senior Advisor and Chair of the Investment Committee of NextEnergy Capital.

o Carrie Cushing: Appointed as Group Chief People Officer of NextEnergy Group.

o Armin Sandhövel: Appointed to NextEnergy Group’s Advisory Board.

o Zoey Carver: Appointed as Group Chief Technology and Information Officer

Management Fees:

· As part of its ongoing detailed dialogue around the future strategy of the Company, the Board is in discussion with the Company’s Investment Manager on its management fee structure. A further announcement in connection with this is expected to be made after the end of the Company’s financial year, 31 March 2025.

Helen Mahy, Chairwoman of NextEnergy Solar Fund Limited, commented:

“NextEnergy Solar Fund is pleased to report stable Q3 performance given the backdrop of financial markets, global politics, and adverse weather conditions. The Board and the Company’s Investment Manager have an acute focus on proactively narrowing the share price discount, making good progress over the quarter by purchasing c.4.5m shares from its up to £20m Share Buyback Programme, and raising £72.5m in total capital from its Capital Recycling Programme to date.”