ReallyVeryFoolish wrote:Thanks Dod, fully understand. Does anyone know how I can check the dividend reserve in place at MRCH?
RVF
https://www.theaic.co.uk/companydata/0P00000VUI
About half way down the page.
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ReallyVeryFoolish wrote:Thanks Dod, fully understand. Does anyone know how I can check the dividend reserve in place at MRCH?
RVF
ReallyVeryFoolish wrote:Answer - 0.91 years. Almost 11 months?
Cheers.
Darka wrote:ReallyVeryFoolish wrote:
Does anyone know how I can check the dividend reserve in place at MRCH?
https://www.theaic.co.uk/companydata/0P00000VUI
About half way down the page.
Itsallaguess wrote:I've now only just realised that I can add the additional 'Reserve Cover' figure for these income-Investment Trusts to my AIC data-tables, so I'll make sure I do that for future releases.
Cheers,
Itsallaguess
Dod101 wrote:otherwise they are just like the rest of us, dependent on dividends from their investments and most have a Revenue Reserve to make up for any shortfall if they choose to use it. In the short term at least, I think most ITs will probably want at least to maintain their dividend, making up any shortfall from their Revenue Reserve if they can afford it.
tikunetih wrote:
Most "equity income ITs" hold very little actual cash. Instead, these reserves are really just an accounting convention such that they form part of the underlying portfolio of stocks. (For example, according to the last annual report, CTY held nil cash at its last year end (30 June 2019). Plus it had gearing of 7.9% funded by bank loans and debentures, which it must pay interest and coupons on)
Therefore, if an equity income IT wishes to pay out a dividend that's in excess of the income stream it itself receives from the underlying stocks that it owns, then, bar a modest contribution from any cash to hand if any indeed exists (note as above, CTY has nil cash + debt to service) it must fund that difference by selling stocks; if markets are down then it will by necessity be selling stocks low. This is just like any other investor seeking to draw more than their portfolio's natural yield provides.
tikunetih wrote:Dod101 wrote:otherwise they are just like the rest of us, dependent on dividends from their investments and most have a Revenue Reserve to make up for any shortfall if they choose to use it. In the short term at least, I think most ITs will probably want at least to maintain their dividend, making up any shortfall from their Revenue Reserve if they can afford it.
Although I'm replying here to Dod's post, this post isn't aimed at him but just to make a general point.
It's simply to ensure people understand that these ITs rarely if ever have a great big bucket of cash set aside labelled "Revenue Reserves" waiting for moments like this.
Most "equity income ITs" hold very little actual cash. Instead, these reserves are really just an accounting convention such that they form part of the underlying portfolio of stocks. (For example, according to the last annual report, CTY held nil cash at its last year end (30 June 2019). Plus it had gearing of 7.9% funded by bank loans and debentures, which it must pay interest and coupons on)
Therefore, if an equity income IT wishes to pay out a dividend that's in excess of the income stream it itself receives from the underlying stocks that it owns, then, bar a modest contribution from any cash to hand if any indeed exists (note as above, CTY has nil cash + debt to service) it must fund that difference by selling stocks; if markets are down then it will by necessity be selling stocks low. This is just like any other investor seeking to draw more than their portfolio's natural yield provides.
I'm sure most are very well aware of this but maybe someone wasn't.
tikunetih wrote:Although I'm replying here to Dod's post, this post isn't aimed at him but just to make a general point.
It's simply to ensure people understand that these ITs rarely if ever have a great big bucket of cash set aside labelled "Revenue Reserves" waiting for moments like this.
Most "equity income ITs" hold very little actual cash. Instead, these reserves are really just an accounting convention such that they form part of the underlying portfolio of stocks. (For example, according to the last annual report, CTY held nil cash at its last year end (30 June 2019). Plus it had gearing of 7.9% funded by bank loans and debentures, which it must pay interest and coupons on)
Therefore, if an equity income IT wishes to pay out a dividend that's in excess of the income stream it itself receives from the underlying stocks that it owns, then, bar a modest contribution from any cash to hand if any indeed exists (note as above, CTY has nil cash + debt to service) it must fund that difference by selling stocks; if markets are down then it will by necessity be selling stocks low. This is just like any other investor seeking to draw more than their portfolio's natural yield provides.
I'm sure most are very well aware of this but maybe someone wasn't.
tikunetih wrote:Therefore, if an equity income IT wishes to pay out a dividend that's in excess of the income stream it itself receives from the underlying stocks that it owns, then, bar a modest contribution from any cash to hand if any indeed exists (note as above, CTY has nil cash + debt to service) it must fund that difference by selling stocks; if markets are down then it will by necessity be selling stocks low. This is just like any other investor seeking to draw more than their portfolio's natural yield provides.
tikunetih wrote:Dod101 wrote:otherwise they are just like the rest of us, dependent on dividends from their investments and most have a Revenue Reserve to make up for any shortfall if they choose to use it. In the short term at least, I think most ITs will probably want at least to maintain their dividend, making up any shortfall from their Revenue Reserve if they can afford it.
Although I'm replying here to Dod's post, this post isn't aimed at him but just to make a general point.
It's simply to ensure people understand that these ITs rarely if ever have a great big bucket of cash set aside labelled "Revenue Reserves" waiting for moments like this.
Most "equity income ITs" hold very little actual cash. Instead, these reserves are really just an accounting convention such that they form part of the underlying portfolio of stocks. (For example, according to the last annual report, CTY held nil cash at its last year end (30 June 2019). Plus it had gearing of 7.9% funded by bank loans and debentures, which it must pay interest and coupons on)
Therefore, if an equity income IT wishes to pay out a dividend that's in excess of the income stream it itself receives from the underlying stocks that it owns, then, bar a modest contribution from any cash to hand if any indeed exists (note as above, CTY has nil cash + debt to service) it must fund that difference by selling stocks; if markets are down then it will by necessity be selling stocks low. This is just like any other investor seeking to draw more than their portfolio's natural yield provides.
I'm sure most are very well aware of this but maybe someone wasn't.
richfool wrote:My understanding is that the dividend reserves held back by Investment Trusts are held in the form of reserves, which are usually things that can quickly and easily converted to cash, rather than cash itself, and thus if the income of a trust proves to be insufficient to support a dividend, it can dip into those reserves rather than sell investments.
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richfool wrote:
Noting that we are talking about Investment Trusts and how they work, on a High Yield Strategies board (!?), rather than on the "Investment Trusts" board..
Julian wrote:Keeping with CTY as an example do they declare anywhere what assets are used to hold the reserve?
Bathonian wrote:The reserves are just an accounting convention. A record of the dividends received but not paid if you like, but that cash is not treated any differently to cash raised from issuing new equity. It all goes into the portfolio.
I think the key here is that actually it seems likely that trusts will utilise the debt facilities available to them sustain the divi rather than sell assets at low prices. In a sense this introduces a safety mechanism whereby trusts are prompted to borrow when revenues fall and shares are lower, and pay that debt back when times are better i.e. when revenues are higher than dividend obligation to shareholders.
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