Henderson Far East Income Share Discussion Threads

[zac0_4] 18/8/2022 23:43

I hold this in both my sipp and isa, split pretty much equally. I have a considerable level of investment here. It's my 2nd largest holding. It appears to be going nowhere. At the year end, assuming the share price stays as it is, we will have been paid a dividend yield of 8%. However, we will have given up over 5% of our capital in return. Just looking at total return figures, ie dividends re-invested, over the last 5 years the total return has been . . . wait for it . . . +6.8%. Absolutely appalling! 50% of this will have been sold by the year end. Enough is enough!!!!!!

[peterbill] 18/8/2022 22:32

Thanks for shares mag article.



Interesting Ted talk from Hans Rosling old but still relevant ... growth coming from the far east ? ... Happy to hold.

[scruff1] 18/8/2022 19:13

Goldpig
Thats all very true. However if BHP, Tinto etc, China's economy get into trouble and the Taiwan issue becomes more than a war of words and threats will it really matter where your money is? One of the surprises for me (and even brokers I talk to) is that the market has remained so resilient - thus far.

[scrwal] 18/8/2022 12:51

I am currently out but purely because I am taking a punt on I3E. If things pay off I shall be back in, hopefully for me at a lower price.

The yield should be sustainable for the next few years but after that who knows - there is a buffer which was 50% of annual dividends at the end of 2021. Management expect the 2022 divi to be covered by underlying earnings.

[goldpiguk] 18/8/2022 12:44

Hi Una,

Thanks for posting the 'Shares Mag' article. I don't think anyone could possibly argue that a yield of over 8% looks very attractive.

The real question is about the longer-term sustainability of the HFEL dividend. In the short term, there is already 5.3p of revenue towards the expected 6.0p November dividend, so that looks safe.

However, the dividend does look stretched and it would take very little for it to need rebasing. The write-up in shares mag looks as though it is based on the HFEL factsheet published on 20th July rather than any real analysis by the writer - and the reference to a discount to NAV suggests the author only took a cursory glance at this company. (Any investor following HFEL would know that in recent months it has more often than not traded at a premium to NAV.)

The risks to medium/longer dividend sustainability arise on several fronts.

Rio Tinto and BHP remain two of the top ten holdings. Rio Tinto recently slashed its very generous dividend by more than half due to cooling demand from China, rising expenses, and labour shortages. Although BHP increased its already huge dividend by 8% this year, it too is expected to be cut going forward. HFEL would find it next to impossible to replace these investments with others that could compensate for the expected reduced income in 2023.

The other headwind facing HFEL is China's zero covid policy resulting in whole regions being shut down. This combined with its worst heatwave in 60 years is having a major impact on the Chinese economy. (July Factsheet 23.9% of the portfolio is in China.)

hxxps://www.cfodive.com/news/china-economic-ills-persist-covid-19-lockdowns/629710/

Additionally, the Taiwan issue has not gone away, which is why I have a fairly low weighting to the region.

I continue to hold 5,000 HFEL shares in my ISA, but unlike many here I expect an eventual rebasing of the quarterly dividend.

Goldpig

[melton john] 18/8/2022 10:00

The market doesn't seem to have a lot of confidence I'm afraid MRF. I only held for a year having entered at over £3, adding capital losses with dividends paid out my total loss was bearable so I took the hit. I may come back when things look a bit clearer in the far east. So this probably means the price will start to rise now.

[my retirement fund] 18/8/2022 08:19

has anyone had any thoughts on how safe it the 8.5% yield here may be?

[panshanger1] 18/8/2022 08:09

Thanks for posting Una Long term hold for the dividend and diversification for meAlthough the overall returns have been poor in recent years GLA

[unastubbs] 18/8/2022 07:41

Shares Magazine today

EASTERN PROMISE Henderson Far East Income (HFEL), which as of the end of June had £463 million of assets, describes itself as a ‘strong diversifier for income and growthseeking investors’. The trust uses a value-driven approach to invest both in companies with high and sustainable dividends and in companies with the potential to grow their dividends. ‘High dividends are for today, while rising dividends are for the future,’ says manager Mike Kerley, who has been at the helm since 2007. Companies which are growing their dividends tend to get rerated over time, generating capital gains for the trust, adds Kerley. The trust invests in developed and emerging Asian markets, with a strong focus on cash flow as a measure of both sustainability and profitability as it is cash flow which ultimately finances dividends. Asia has the potential to increase payouts at a faster rate than other regions, argues Kerley, because dividend levels are currently low by international standards. The sector allocation at the end of June was heavily skewed towards financial and telecoms companies, which have a combined weighting of over 40%, although technology and energy stocks also had a significant presence at 13% and 12% of the portfolio respectively. The trust pays quarterly dividends, and this year has so far distributed a total of 17.8p across three interim payments. While it hasn’t confirmed as much, the fourth interim dividend to be paid in November is likely to be 6p in line to maintain the trust’s long history of rising payouts. That would equate to an annual yield of 8.7% based on a 275p share price, and while the discount to net asset value is towards the low end of its recent range, a yield of more than 8% looks very attractive. We think this level of dividend is sustainable.

[panshanger1] 04/8/2022 07:29

Asian markets up / steady overnight

[jonathb] 04/8/2022 07:29

y here goes..

[jfinvestments] 04/8/2022 07:23

I think there could well be a further hit today with China reacting to Pelosi visit.https://www.theguardian.com/world/live/2022/aug/04/china-expected-to-begin-live-fire-military-exercises-near-taiwan-coast-in-wake-of-pelosi-visit-live?CMP=Share_AndroidApp_Other

[zac0_4] 03/8/2022 20:09

I'm beginning to lose patience here. I've held it for years. In fact so long I've received dividends to the value of £10,006. As for my capital . . . well that's down £10,011!! What's the point? At the start of this year the yield going forward was 8.03%. To date this year we've given away 6.80% in capital erosion! It's now becoming a dog within my portfolio!!

[tim 3] 03/8/2022 19:33

Yes my other IT is mrch which am much happier with.Like you will continue to hold here but definitely not adding not a fan of averaging down in these situations anyway as you are basically adding to your losing investments.Better to add to your strong performers when they pull back a little in my experience.

[jfinvestments] 03/8/2022 18:43

-11% down in the last year isn't too bad given the losses some investment trusts have been hit with. It's tough with the 20% weighting to China for this not to be volatile going forward. It is interesting comparing it with other high yielders: EAT and MRCH. MRCH the strongest performer over the 1 year and 5 year.It doesn't look pretty on the max chart. I think I will hold for the dividend over time, but I'll be holding off from further large purchases here and looking to buy into MRCH at 5% yield and more (where it was a short while ago)- especially if there is a dip in Autumn.

[tim 3] 03/8/2022 15:17

That charts looks horrible too, through support.

[thamestrader] 03/8/2022 15:08

The next divi is in the bag (went ex-div 28jul), and I don't see much point hanging around for the next one, tbh.

[panshanger1] 03/8/2022 13:29

No relief here

[gateside] 28/7/2022 13:28

8.7% yield now

[masurenguy] 28/7/2022 13:21

NAV = 275.1p

[tim 3] 23/7/2022 12:57

I have plenty invested here but the weakness does worry me.

I have no issues picking up shares in IT’s when they fall along with general market weakness but what worries me here is it seems to be a more consistent trust related weakness even when markets are rising .

With individual shares this is usually a red flag to me not so much with IT’s as they are usually spread across different sectors but still a concern never the less.

On balance though I still expect it to recover in time or I would sell.

[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.