Henderson Far East Income Share Discussion Threads

[kenmitch] 23/7/2022 10:36

zaco_4

The covid share price low of 270p wasn’t much lower than it is now. I would agree with you about lack of potential share price upside if the share price was nearer to the 340p or so high of the last couple of years. But at current 282p share price there could well be 20% or so share price upside on top of that great 8%+ dividend yield.

Conversely over £3.20 and THEN the downside case and dividends being wiped out by capital loss would be much more convincing.

And surely that very high yield should support the share price against further significant share price fall. After all a 270p share price and 9% annual dividend would look a no brainer for investors wanting a big reliable dividend paying Investment Trust. AND upside potential would then be higher too.

If the share does fall further and as long as there doesn’t seem to be a risk of a dividend cut, then arguably there’s a stronger case for buying more rather than selling should that happen. I will likely add to my stake if the share goes below 270p, but fwiw I don’t think it will because of the high yield supporting against further downside at 270p.

[zac0_4] 21/7/2022 21:49

kenmitch - you're possibly right. But I'm not convinced that (i) this hasn't got further to fall, and (ii) that the share price is likely to recover, significantly, as you say.

Certainly, at today's buy price a 8%+ annual yield looks attractive, but not if you're giving up a large proportion of that in capital depreciation. Don't get me wrong, I'm still invested here and will remain so. I'm happy to take the income but not confident enough in its ability to preserve my capital to add to my holding, even at the current yield.

[kenmitch] 21/7/2022 18:09

I agree ZacO_4 BUT isn’t it different now that the share has fallen so far?

I.e anyone buying now has a high chance of getting some, and possibly significant, capital gain AND with a starting dividend around 8.5% on top.

Once the HFE share price has recovered significantly then there’s a stronger case for selling and for alternatives with lower or no dividend, but much better past capital gains and for much better capital gain potential to choose from.

[zac0_4] 21/7/2022 18:00

I agree, this share is for income and it's on that basis I'm invested. However, I see little point in receiving income if it's at the expense of capital. Had you invested £10,000 here on 1st Jan 2017, simply taken the income each year, at the end of this year you'd have received income of £2,924. However, your £10,000 investment (assuming today's share price remains static until year end) would be worth £7,363. That, for me anyway, is not a good return.

[unastubbs] 19/7/2022 12:42

I do have sympathy with Zaco's pov and I first bought in with these in 2014, though I've been in and out since then. My current holding I inititiated in March at 2.85. So I can see where Zaco is coming from but in the end I think I disagree. This share is for income, it's all about the yield. It stands to reason that its constituents are all mature companies, significantly ex-growth. I'm happy to just take the income over the next ten years and not worry about the share price or even the TER. I realise this is not the attitude for everyone but it works for me! GLA

[jfinvestments] 17/7/2022 13:58

It's because of the dividend payment. If the share price falls it is likely due to the nav falling, but income investors will remain and keep buying for 8%+ yield.

[2wild] 16/7/2022 14:38

I've been looking for a re-entry point over last 10 weeks or so. But every time I look this trade at a premium to nav, which appears unjustified.

[petewy] 16/7/2022 13:00

Good post Zaco. My sentiments too

[zac0_4] 16/7/2022 12:35

Gateside - ". . . and you might even get some capital growth too!"

Or maybe not. I recognise this is a paid for report funded by HFEL. But to bang on about how wonderful the dividend yield is compared to its peers, whilst ignoring capital performance is, in my opinion, simply trying to pull the wool over our eyes!

Total return is the acid test. Here's the total return received over the last 5 year period from the funds used in the report for analysis purposes: AAIF+20.4%, SOI+23.0%, JAGI+33.3%, IAT+40.9% and HFEL+0.8%! It's no wonder the yield looks healthy here in comparison!!

I'm heavily invested as HFEL is my second largest holding. However, I certainly don't view this to date as having been a good investment for me. I initially invested in May-17 and have added ever since. That's now stopped! I've seen the value of my capital decline by 19%. I've received dividends to date of around 20% of my investment, so about flat overall.

My plan is to continue to hold and collect the dividends, currently around 7% annually of my investment value. I want to see an overall positive return before I'll consider adding further. Good luck!

[gateside] 15/7/2022 22:26

But if you can buy near the bottom, then you'll lock in a very attractive yield and you might even get some capital growth too!

[zac0_4] 15/7/2022 22:23

It does make me smile . . . the reason for the attractive yield has been the declining share price! Little mention of that in the report!!

[panshanger1] 13/7/2022 15:23

Happy to add a few more at these levels Reassuring comments from the managers about the sustainability of the dividend and modest gearing here too

[speedsgh] 13/7/2022 13:29

New Edison update...

Attractive yield despite modest dividend increase -

[jfinvestments] 08/7/2022 07:09

I actually think in the short term the global economy needs China's goods and in the run up to Xi's election they will try to force growth through production for external markets and construction internally - generally where the China allocation is. It's also 20% of the portfolio, so not by any means overweight. There's also the possible and more likely lifting of tariffs. China trusts have made a bit of a rebound from their lows indicating the reopening and some stimulus into the markets is doing the job for now. In terms of the 'allience' they share a border and will always be cautious of each other, but they have bought a lot of fuels since the war. I think they will just wait to see how it all ends before they try something similar with Taiwan.

[panshanger1] 06/7/2022 16:35

Nice director purchase Every little helps !!

[superiorshares] 29/6/2022 21:52

I have been invested several times in hfe , In the past . The 8.6 per cent yield is telling you something.
There is trouble ahead !.. it is likely to be focused around the China/Russian allegiance.

[gateside] 23/6/2022 16:18

8.6% yield now!

[danieldruff2] 22/6/2022 07:17

I use this share as a holding pen. Get the regular dividends. When the market goes on a downward spiral like now, it tends to fall around 20%, but other stocks I want to own fall 50%. Once I think the moment is right, I sell here and move across, then buy back on recovery. Don't always succeed, but more hits than misses so far...

[zac0_4] 22/6/2022 00:33

Gateside - unfortunately I've only got past performance as an indicator for future performance. I'm happy to take the 8%+ income but not if I have to give 4 or 5% back in lost capital each year. There's no point. I continue to hold and take my dividend but I'm getting to the point, after 5 years, where I'll have to reconsider my position if the share price continues to decline. As we all should do! Total return is all that matters!!

[tim 3] 21/6/2022 23:11

Was thinking the same certainly plenty of candidates for better total return

[gateside] 21/6/2022 23:09

zac... Best to look forward and not back.

Dividend looks safe in my opinion.
I'm happy to take the 8.4% income from HFEL

[zac0_4] 21/6/2022 22:36

gateside - "what's not to like?" . . . the annual total return, that's what. Here's the last 5 years (from today) total return ie including dividend 1.48%, 10.00%, -3.07%, 4.50% & -5.63%. So, total return over 5 years is 6.71%. So, that's what not to like. This is my 2nd (I think) largest holding and I await a turnaround in the share price. I'm invested here for the dividend but not at the expense of my capital!

[gateside] 21/6/2022 19:04

The directors have declared the third interim dividend of 6.00p (six point zero pence) per ordinary share in respect of the year ending 31 August 2022. The dividend will be paid on 26 August 2022 to shareholders on the register on 29 July 2022 (the record date). The shares will be quoted ex-dividend on 28 July 2022.

[jfinvestments] 21/6/2022 18:23

Is that 6p confirmed? I've not seen anything come through about that - great news!Also, a very interesting shift towards China. I think there's about 8-10@% increase in weighting. They have added China Petroleum and Chemical as well as China National Building Materials. Both now make top 2 holdings. Seems smart with China wanting to enforce growth, US possibly reducing tariffs on goods. building materials/resources seems a safe enough play. And in order to produce anything we still need need petrochemicals.