|Gartmore High Income Trust
||ORD INC 10P
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||Market Cap (m)
|Equity Investment Instruments
Gartmore High Income Trust Share Discussion Threads
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|Optimist, alas, I pay 40% income tax (too much of it, despite trying every tax avoidance known to man, AVCs, VCTs etc), so after April 2004, my ISA divis will be taxed at 10%, my non-ISA divis will be taxed at 32.5%, so its well worth holding shares like GHI in an ISA from my perspective (after April 2004)|
I think the dividend relief is 10% this year and nothing after Apr 2004.
This means that there is no advantage recieving dividends in an ISA for a standard rate taxpayer but you would still save CGT on any gains, assuming you have used the £7500 allowance.|
I thought there was a full tax credit refund in ISA until April 2004, thereafter, the 10% tax credit will not be refunded, but the divis will still be invisible to Gordon, so no further tax to pay on them if you are a 40% tax payer|
|skyship - yep, i appreciate it's a long way off, but i guess u are writing a way out of the money put option by buying this too, although the value of the call would swamp this concern (even considering the track record). It seems that a change in dividend policy might kick in if the fund were to drop close to it's net debt level. Can anyone confirm that this is the trigger?|
Why do you say that this is particularly suitable for holding in an ISA?
With the abolition of tax relief on ISA dividends I would have thought that shares that are biased towards capital growth rather than dividends are more suitable for ISA's, which these are not.|
|TicTac - the Zeros are above water, so there is no need for the managers to compromise their investment policy. I have perhaps conservatively assumed a future reduction in the payout as they tailor the portfolio ahead of the Zero wind-up date. All seems fairly clear from their published reports and website.|
|Does anyone know on what basis the dividends are determined? They seem to have been static, and if fixed then this is quite a nice play. However if the dividends are determined to protect the repayment of the zeroes then it's much less interesting. Can anyone cast any light on this?|
Thought I would drop by on the PBB to keep you company on this one, agree this is an absolute no-brainer (especially if held within an ISA), I've been accumulating a few (18K) over the last couple of weeks at 16p or thereabouts, I may very well top up ex-divi (no funds currently available to buy any more cum-divi).|
|Over the past 4 weeks the current NAV has advanced from c.13p to 18p; and the Final of 2.2p has been declared. They go ex on Wednesday 7th May, so Tuesday is the last opportunity to get on board. The price is c.15-17.5p.|
|Surely someone has had a chance to look into this over the weekend?|
|A few of us have posted recently on the hidden virtues of the SPLIT Capital sector; making particular reference to the Zero Dividend Preference shares (ZDPs). There are also opportunities in some of the income shares.
I say some advisedly, as most of them are highly speculative and require a considerable growth in the underlying portfolio to provide any capital return on wind-up date. Most of them have no current NAV, so the result can be a good annual return, but the stock acts like an annuity as on wind-up it pays out naught!
As ever, there are gems in among the dross. There are a few which provide a good annual dividend and are also standing at a discount to the current NAV. Exeter Financial Trust Income shares (EFN) is one such:
Price: 19-23p; Annual dividends: 4p; Yield: 17.4%; Current NAV: c.30p
EFN are a great buy on a flat day; but there is another which to my mind provides a 3-yr FREE CALL OPTION on the Market – Gartmore High Income Trust Income shares (GHI).
The Trust has exactly 3 years to run and currently pays out quarterly dividends totalling 7.3p pa. In May there will be a Final for 2002/3, let’s assume an unchanged 2.2p. Thereafter, let’s be conservative and for the sake of argument let’s anticipate a slight reduction in the annual pay-out over the next 3 years, perhaps to 6.8p, followed by 6.5p, followed by just 5.0p in the final year when presumably the portfolio may be in the process of being cashed-up. The market price is 13.5-16.0p, so for an opportunity cost of 16p, you receive back 3 years’ dividends totalling 20.5p.
If that is achieved, you will have banked a 28% gain over 3 years – nice, not terrific, but certainly better than money on deposit.
But the point is of course that you still own the shares – and this is where the figures get really interesting. Currently they have an NAV fluctuating around the 13p level. The Gartmore website suggests that 5% pa compound growth for the 3 years would provide 17p capital repayment after first paying out the Zeros their full entitlement. Allowing for the mid/bid price variance in portfolio valuations & perhaps a £1m contingency for wind-up costs and nil values on some remote holdings; I suggest that you will need c.6.5% compound growth and the FTSE somewhere around the 4400-4500 level in March ’06 to pay out that 17p target.
So, the upshot is that barring some really catastrophic market falls, to levels well below the recent 3250 low, you will receive more than your investment back in dividends over the next 3 years. But, if the market rises by c. 20% over that period, your payback will be c.20.5p in dividends + c. 17.0p in capital = TOTAL 37.5p = A 134% GAIN.
You owe it to yourself to look into this. If you use a broker, ask him to validate it for you. If you know Gartmore – ask them to do so! There is an old adage that “If it looks too good to be true, then it probably is”. I take comfort from the “probably̶1; and personally, I’ve looked at it every which way; yet I still see GHI as a FREE CALL OPTION. I joined with a few others to pick up stock @ 14p when some institution (most likely another Split Capital Trust) dumped a line @ 12p last week. Check it out carefully, there should still be time to get on board as this market looks set to continue churning as the conflicting war news blows it first one way and then the other.|
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