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HFEL

Closed-end funds and OEICs
GrahamPlatt
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Re: HFEL

#411396

Postby GrahamPlatt » May 12th, 2021, 3:34 pm

monabri wrote:A comparison of AAIF, SOI, JAGI & HFEL over the last 5 years in terms of total return.

Data plotted using HL tools here

https://www.hl.co.uk/funds/fund-discoun ... ion/charts


Image


JAGI removed from the comparison!

Image

JAGI holders are probably pretty pleased with that performance!


I was just doing some “manual” comparisons between SOI, SDP, JAGI & HFEL using Stockopedia and theaic before noticing your excellent work here. The standout for me is that JAGI has been managing to lift its dividend by a fairly consistent 45% every five years. Seems a tad overpriced at the mo, and the SP on a downturn. I’ll wait a bit.

Arborbridge
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Re: HFEL

#411554

Postby Arborbridge » May 13th, 2021, 9:09 am

GrahamPlatt wrote:
I was just doing some “manual” comparisons between SOI, SDP, JAGI & HFEL using Stockopedia and theaic before noticing your excellent work here. The standout for me is that JAGI has been managing to lift its dividend by a fairly consistent 45% every five years. Seems a tad overpriced at the mo, and the SP on a downturn. I’ll wait a bit.


Another "stand out" is that JAGI currently yields 3.3%, according to the AIC. To put this in perspective, it would mean my pension pot needs to roughly double compared with one invested in HFEL. So I either retire later or liveon less. (Clearly life is more complex that this, but you know what I mean 8-) )

I also notice that dividends have increased by 44% over 5 years. This points to some sort of "story" though I'm not sure what. Perhaps their policy changed, or the dividend was at one time miniscule.
I guess if a fund isn't paying out much in the first place, it is easy to increase it, but HFEL being more generous cannot.

However, I can see this IT does have a very useful place in a basket of ITs where one's average yield and diversity becomes important.

Arb.

richfool
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Re: HFEL

#411557

Postby richfool » May 13th, 2021, 9:20 am

JAGI does draw upon capital to support its dividend, but nevertheless its capital growth usually surpasses that of the others in the sector, particularly HFEL, and particularly over longer periods.

I continue to happily hold: AAIF, SOI and JAGI for their various attributes.

88V8
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Re: HFEL

#411576

Postby 88V8 » May 13th, 2021, 10:06 am

richfool wrote:JAGI does draw upon capital to support its dividend, but nevertheless its capital growth usually surpasses that of the others in the sector, particularly HFEL, and particularly over longer periods.
I continue to happily hold: AAIF, SOI and JAGI for their various attributes.

AAIF, HFEL and SOI are AIC dividend heroes https://www.theaic.co.uk/income-finder/dividend-heroes with twelve, twelve and thirteen years of uninterrupted divi growth
JAGI has been patchy.

In pure divi terms, HFEL currently yields 7.2%, AAIF 4.1%, SOI 3.7%, JAGI 3.3%.

I hold HFEL.

V8

jonesa1
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Re: HFEL

#411642

Postby jonesa1 » May 13th, 2021, 12:42 pm

Arborbridge wrote:
I also notice that dividends have increased by 44% over 5 years. This points to some sort of "story" though I'm not sure what. Perhaps their policy changed, or the dividend was at one time miniscule.


The trust switched from paying a dividend out of received income to targeting 4% of NAV, payments set annually and made up from capital and income. This accounts for the large boost in annual dividend, future dividend growth now depends on how well the trust can grow capital. One advantage of this set up is that the trust can invest in a range of companies, not just those that pay a high dividend, which may be why it has demonstrated a better total return than other global income trusts and many global trusts. A number of other JPM trusts have adopted a similar approach (JAGI, JPS, JPCG), but with dividends being set quarterly based on 4% of NAV.

Arborbridge
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Re: HFEL

#411655

Postby Arborbridge » May 13th, 2021, 1:39 pm

88V8 wrote:
richfool wrote:JAGI does draw upon capital to support its dividend, but nevertheless its capital growth usually surpasses that of the others in the sector, particularly HFEL, and particularly over longer periods.
I continue to happily hold: AAIF, SOI and JAGI for their various attributes.

AAIF, HFEL and SOI are AIC dividend heroes https://www.theaic.co.uk/income-finder/dividend-heroes with twelve, twelve and thirteen years of uninterrupted divi growth
JAGI has been patchy.

In pure divi terms, HFEL currently yields 7.2%, AAIF 4.1%, SOI 3.7%, JAGI 3.3%.

I hold HFEL.

V8


I think, like me, you aren't in the first flush of youth: I am 76.. The gamble is whether JAGI's growth rate will overtake the income from HFEL before I get to full term!

Arb.

SalvorHardin
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Re: HFEL

#422303

Postby SalvorHardin » June 25th, 2021, 2:25 pm

Just spotted the third quarter dividend announcement. 5.9p up from 5.8p.

https://www.investegate.co.uk/hendersonfare-incltd--hfel-/rns/dividend-declaration/202106251209201833D/

Given the manner in which HFEL increases its dividends, I think that it's reasonable to assume that the quarterly dividend is now 5.9p, or 23.6p per year, which makes the current yield 7.25%.

As previously said on this thread, realistically this isn't a share to consider if you're looking for capital growth (look elsewhere for that). But HFEL's share price is reasonably stable, and it does provide a rising income from a part of the globe which many income seeking investors (particularly on TLF) tend to avoid or only consider for capital growth investments.

Whilst many HPY stalwarts have cut or stopped paying their dividends during the pandemic, HFEL's dividend has increased. I'm happy to hold.

absolutezero
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Re: HFEL

#423850

Postby absolutezero » June 30th, 2021, 10:45 pm

SalvorHardin wrote:For me Henderson Far East Income (HFEL) does what it says on the tin. It produces a very high yield, currently 7.2%, in part by selling options but mostly by holding a lot in high yieldering sectors, notably banking, mining and telecoms. It provides massive diversification away from the UK, Europe and America, whilst steadily increasing its dividend. Don't invest in it for capital growth though.

A big plus for me is that HFEL increased its dividend last year, whilst UK companies were hitting shareholders with all manner of dividend cuts and suspensions. IMHO HFEL is the sort of company that the HYP purists would benefit from, but they won't since it's a "Nasty Foreign Share" (say this in Gollum's accent!).

A few years ago a friend wanted to dip their proverbial toe into the stockmarket, but didn't want to risk too much and wanted a much larger income than he could get from a building society account. HFEL met his requirements and has continued to do so. He doesn't compare HFEL with other funds, rather it's HFEL vs savings accounts.

Like many on this thread I also own some JPMorgan Asia Growth & Income (JAGI), roughly three times my HFEL stake. JAGI is an interesting income option since it pays out 1% of its NAV every quarter, so that's notionally a 4% yield subject to some fluctuation. A growth investment which produces a reasonably high income without requiring holders to regularly top-slice to generate an income.

What about buying HFEL and JAGI for a 5.6% yield? Or HFEL in combination with another fund(s)?

There are a few posters on these boards who I really rate and when something is suggested by them, it is usually worth further investigation.
You are one of those posters, and without you I would not have found HFEL.
So thank you.

SalvorHardin
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Re: HFEL

#430657

Postby SalvorHardin » July 27th, 2021, 9:56 am

I've just found out that Edison have published another research report on Henderson Far East Income.

The report provides a very good summary regarding HFEL's holdings and investment policy. Its investmentso, given that it has to chase high yielding shares, is fairly concentrated by sector with over 80% of the portfolio is invested in just five sectors; financials, telecoms, technology, basic materials (i.e. miners) and real estate.

https://www.edisongroup.com/publication/consistently-high-and-growing-income/29746

Current yield is almost 7.6%. As usual HFEL provides a level of diversification that many income seeking investors don't get from the usual suspects and HYPs. Though HFEL's second and third largest holdings are well know to UK HYP investors; Rio Tinto and BHP.

Dod101
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Re: HFEL

#430688

Postby Dod101 » July 27th, 2021, 11:31 am

Never mind the price just look at the income seems to be popular mantra. When I opened this thread on 8 May 2021 the price was £3.28, today £3.13. Back in August 2018 it was £3.675. Current price evidently represents a modest premium which means they are really pushing the boat out on the income generated on NAV.

I hold HFEL but I find that worrying. I have had quite enough of buying income with a drop in price and do not understand the enthusiasm for this IT.

Dod

Lootman
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Re: HFEL

#430691

Postby Lootman » July 27th, 2021, 11:55 am

Dod101 wrote:Never mind the price just look at the income seems to be popular mantra. When I opened this thread on 8 May 2021 the price was £3.28, today £3.13. Back in August 2018 it was £3.675. Current price evidently represents a modest premium which means they are really pushing the boat out on the income generated on NAV.

I hold HFEL but I find that worrying. I have had quite enough of buying income with a drop in price and do not understand the enthusiasm for this IT.

Yeah, the yield seems abnormally high at 7.2% and on top of that there is a 1.1% annual expense ratio. So this fund is disgorging itself at the rate of 8.3% annually.

Since it is almost inconceivable that a portfolio of shares would naturally yield that much then one needs to understand how that payout is derived. Over one third of the portfolio is in financials and so that might explain some of it, but also shows where the exposure is, especially as another 10% is in real estate.

Are there preference shares or high yielding "junk" bonds in there?

Even so, there must be a chunk from selling call options, which of course would crimp any gains in the portfolio. And are they paying out some of that dividend from capital or reserves?

Yields like that set off alarm bells for me. But I guess if they can avoid capital losses then you can look at this as a bond-type income fund with the possibility of increasing payouts over time.

Arborbridge
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Re: HFEL

#430693

Postby Arborbridge » July 27th, 2021, 12:09 pm

Dod101 wrote:Never mind the price just look at the income seems to be popular mantra. When I opened this thread on 8 May 2021 the price was £3.28, today £3.13. Back in August 2018 it was £3.675. Current price evidently represents a modest premium which means they are really pushing the boat out on the income generated on NAV.

I hold HFEL but I find that worrying. I have had quite enough of buying income with a drop in price and do not understand the enthusiasm for this IT.

Dod


I'd suggest caution or scepticism too. My XIRR is down to 6.48% which shows that at present dividends must be from my capital (though it was up in double figures within the past two-three years). Not something to worry too much about if one intends to die before it runs out, but not to be encouraged.

I won't be topping up, and might even sell a chunk to go "down yield" if this continues.

Arb.

SalvorHardin
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Re: HFEL

#430697

Postby SalvorHardin » July 27th, 2021, 12:24 pm

Lootman wrote:Yeah, the yield seems abnormally high at 7.2% and on top of that there is a 1.1% annual expense ratio. So this fund is disgorging itself at the rate of 8.3% annually.

Since it is almost inconceivable that a portfolio of shares would naturally yield that much then one needs to understand how that payout is derived. Over one third of the portfolio is in financials and so that might explain some of it, but also shows where the exposure is, especially as another 10% is in real estate.

Are there preference shares or high yielding "junk" bonds in there?

Even so, there must be a chunk from selling call options, which of course would crimp any gains in the portfolio. And are they paying out some of that dividend from capital or reserves?

Yields like that set off alarm bells for me. But I guess if they can avoid capital losses then you can look at this as a bond-type income fund with the possibility of increasing payouts over time.

I can't see any junk bonds (or fixed interest for that matter). The only big holding of preferred shares is Samsung Electronics.

You can find lots of companies in the Far East which yield more than 6% in sectors other than financials. For example, China Overseas Land was one of its largest property company shareholdings in the most recent annual report and its shares currently yields 6.6%. Taiwan Cement 6.6%. China Construction Bank (the largest holding) yields 7.2%

HFEL sells options, though not as much as some might think. Note 4 to the 2019-2020 accounts shows £3.396 million of option premium income (plus £14,000 of interest). Note 3 shows £35.344 million of dividends. So options represented 8.8% of total income. I suspect that there's a fair bit of buying shares shortly before they go ex-dividend, in much the same way as UK income funds do so to boost their yields.

Chasing such as high yield means that it's never going to be a serious capital growth investment. I'm okay with that. I bought mine just over 7 years ago, paying just over 310p so I have a tiny capital gain. It's my smallest investment trust shareholding by quite some way.

monabri
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Re: HFEL

#430698

Postby monabri » July 27th, 2021, 12:30 pm

HFEL is ~28% China and 16% Australia. Government policies in both countries is a major factor. Look at how much "China funds" have fallen recently (BGCG/JCGI) and how quickly! The sell off in China tech and education shares has been steep, especially in the last week or so.

Looking at how the prices have moved over the last year - HFEL has been pretty much stable (note the plot is of price change rather than total return).

Graph from HL tools ...https://www.hl.co.uk/funds/fund-discoun ... ion/charts

Image

richfool
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Re: HFEL

#430700

Postby richfool » July 27th, 2021, 12:35 pm

I have avoided HFEL for the reasons given above (by Dod, Lootman and Arborbridge). Also it has 33% exposure to China and Hong Kong (China: 22%. HK: 11%), and holds c 7.7% in RIO and BHP (combined) which I tend to be over-exposed to through other holdings..

I hold AAIF (recently increased holding) and JAGI (recently reduced, to reduce exposure to China, HK and their tech stocks).

Arborbridge
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Re: HFEL

#430704

Postby Arborbridge » July 27th, 2021, 1:12 pm

SalvorHardin wrote: I bought mine just over 7 years ago, paying just over 310p so I have a tiny capital gain. It's my smallest investment trust shareholding by quite some way.


But that does mean your income is effectively being paid from your capital, does it not?

Not ideal, but tolerable if other ITs make up for it, and it does give some "FE" exposure - though unless the capital is growing and not deteriorating, much good it will do us (NOT!)

Arb.

Arborbridge
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Re: HFEL

#430709

Postby Arborbridge » July 27th, 2021, 1:18 pm

Might be a plan to swap some HFEL for AAIF which is at a discount. However, giving up a big slice of yield would be hard...

Interestingly, I bought AAIF in prefence for Mrs Arb - she is more of a low yield bunny.

Dod101
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Re: HFEL

#430710

Postby Dod101 » July 27th, 2021, 1:43 pm

monabri wrote:HFEL is ~28% China and 16% Australia. Government policies in both countries is a major factor. Look at how much "China funds" have fallen recently (BGCG/JCGI) and how quickly! The sell off in China tech and education shares has been steep, especially in the last week or so.

Looking at how the prices have moved over the last year - HFEL has been pretty much stable (note the plot is of price change rather than total return).

Graph from HL tools ...https://www.hl.co.uk/funds/fund-discoun ... ion/charts

Image


Part of the volatility in BG China Growth at least has been in the premium to NAV. Not sure about the others. In any case stable is one thing but the others are still at the end of your period higher than HFEL and the volatility gives the opportunity to trade at a profit.

Dod

Dod101
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Re: HFEL

#431424

Postby Dod101 » July 30th, 2021, 11:37 am

SalvorHardin wrote:For me Henderson Far East Income (HFEL) does what it says on the tin. It produces a very high yield, currently 7.2%, in part by selling options but mostly by holding a lot in high yieldering sectors, notably banking, mining and telecoms. It provides massive diversification away from the UK, Europe and America, whilst steadily increasing its dividend. Don't invest in it for capital growth though.

What about buying HFEL and JAGI for a 5.6% yield? Or HFEL in combination with another fund(s)?


What bothers me about HFEL is modest capital growth would be fine but a capital loss of around 10% over the last 5 years is not. Admittedly the current 7.5% yield probably more than makes up for that but even so I do not like that and it reduces the total return somewhat.

Take say Schroder Oriental Income. It has a modest yield of about 3.8% but a 22% capital growth over the same 5 years. I am not clever enough to work out a total return but it cannot be far off the same as HFEL. The one trust is more than keeping up with inflation; the other is losing its real value.

I think I may cut my HFEL holding and buy some Schroder Oriental Income but am in many ways not being very decisive in anything at the moment.

Dod

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Re: HFEL

#431434

Postby ReformedCharacter » July 30th, 2021, 12:02 pm

Dod101 wrote:
What bothers me about HFEL is modest capital growth would be fine but a capital loss of around 10% over the last 5 years is not. Admittedly the current 7.5% yield probably more than makes up for that but even so I do not like that and it reduces the total return somewhat.

Take say Schroder Oriental Income. It has a modest yield of about 3.8% but a 22% capital growth over the same 5 years. I am not clever enough to work out a total return but it cannot be far off the same as HFEL. The one trust is more than keeping up with inflation; the other is losing its real value.

I think I may cut my HFEL holding and buy some Schroder Oriental Income but am in many ways not being very decisive in anything at the moment.

Dod


I have held HFEL since 2014 and SOI since 2019. HFEL shows an IRR of 6.96% and SOI 9.27% but perhaps not a good comparison given the different purchase dates.

RC


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