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Acorn Income Fund

Closed-end funds and OEICs
ADrunkenMarcus
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Acorn Income Fund

#297569

Postby ADrunkenMarcus » April 3rd, 2020, 11:43 pm

Acorn Income Fund (an investment trust) recently raised its quarterly dividend 10% to 5.75p a share or 23p annualised. The share price is now 260p, meaning it's on a 8.8% dividend yield. It has a blended portfolio of bonds and equities, with dividend reserves of about a year.

An unusual trust and one that is highly geared using zero dividend preference shares, it's fallen substantially. It also has a high ongoing charge figure. It may be of interest to some but requires serious DYOR!

Best wishes

Mark.

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Re: Acorn Income Fund

#297660

Postby CrackAddick » April 4th, 2020, 11:41 am

I have a small holding in this myself and would add more, even though I am currently well down.

The bit that always stops me is the very wide bid/offer spread. Which COB yesterday was 225p-300p.

ADrunkenMarcus
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Re: Acorn Income Fund

#297696

Postby ADrunkenMarcus » April 4th, 2020, 1:08 pm

The spread is bad, for sure.

They did indicate they had almost a year's worth of reserves back in June 2019 so I wonder if the dividend is actually pretty well covered for the time being despite the eye watering yield.

I think many people don't like the huge gearing and ZDP zero preference shares?

Best wishes

Mark.

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Re: Acorn Income Fund

#298099

Postby CrackAddick » April 5th, 2020, 9:00 pm

The large amount of ZDPs caught my eye too when I initially invested. From memory I think they are all due to be repaid at some point in early 2022, so one can only hope the markets will have recovered by then......

ADrunkenMarcus
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Re: Acorn Income Fund

#298110

Postby ADrunkenMarcus » April 5th, 2020, 10:07 pm

CrackAddick wrote:The large amount of ZDPs caught my eye too when I initially invested. From memory I think they are all due to be repaid at some point in early 2022, so one can only hope the markets will have recovered by then......


Yes, that's it - the last load were basically rolled over into another set of ZDPs as less than 9 percent wanted repayment:

By the time the first continuation vote was held in late 2016, they were about 21.3m ZDPs in issue. 91.4% of holders elected to roll over their money into the second set of the ZDPs. Therefore, Acorn Income only had to repay about £2.5m.

A second continuation vote is due to be held in late 2021. With 21.2m ZDPs in issue, Acorn could theoretically be on the hook to repay as much as £35.5m. Only £31.5m is recorded as a debt on the company’s balance sheet right now, as the rolled-up dividend payment is spread over each year the ZDPs are in existence.

Hopefully, a similarly large majority of ZDP holders will elect to roll over again come 2021. However, if markets are in a slump at that time, who knows what might happen?

Acorn Income Fund’s gross assets are currently £97m with, I would estimate, around £25m in fixed-income securities and cash. If the ZDPs had to be redeemed in full, a sizeable chunk of the small-cap portfolio would need to be sold.
https://www.itinvestor.co.uk/2019/04/ac ... ome-twist/


A lot can change in two years. I would think it unlikely that the ZDPs had to be redeemed in full, however we might well see fewer than 91.4% electing to roll over into a new, third set.

Best wishes

Mark.

ADrunkenMarcus
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Re: Acorn Income Fund

#303864

Postby ADrunkenMarcus » April 28th, 2020, 1:21 pm

Acorn declared another dividend - 5.75p which maintains the 10.6% annual increase.

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Re: Acorn Income Fund

#304182

Postby shawsdale » April 29th, 2020, 4:06 pm

From the Acorn Income 2019 annual report RNS released today:
https://www.londonstockexchange.com/exchange/news/market-news/market-news-detail/AIF/14520777.html

“The Company's income will inevitably be impacted by recent market developments. However, the board recognises the importance of dividends to shareholders and it is the board's intention to maintain the second interim dividend whilst keeping matters relating to future dividends under close review but noting the availability of a healthy dividend reserve.
Earnings per share for the year of 22.31p covered the dividend distribution by 107% and resulted in an addition to revenue reserves of £239,024.”

The report later notes that as of 31st December 2019 the trust’s revenue reserve was £3,417,227, representing 21.61p per Ordinary Share.

ADrunkenMarcus
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Re: Acorn Income Fund

#304298

Postby ADrunkenMarcus » April 29th, 2020, 10:20 pm

shawsdale wrote:“The Company's income will inevitably be impacted by recent market developments. However, the board recognises the importance of dividends to shareholders and it is the board's intention to maintain the second interim dividend whilst keeping matters relating to future dividends under close review but noting the availability of a healthy dividend reserve.
Earnings per share for the year of 22.31p covered the dividend distribution by 107% and resulted in an addition to revenue reserves of £239,024.”

The report later notes that as of 31st December 2019 the trust’s revenue reserve was £3,417,227, representing 21.61p per Ordinary Share.


Their comments are promising given the circumstances. One thing with AIF is that some of its income is from the fixed income portfolio, which should be much more resilient.

Best wishes

Mark.

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Re: Acorn Income Fund

#304471

Postby CrackAddick » April 30th, 2020, 12:54 pm

What's been proving annoying for me over the last few weeks is that the buy(offer) price seems stuck at 300p. It's only the sell price that seems to move around each day.

ADrunkenMarcus
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Re: Acorn Income Fund

#333953

Postby ADrunkenMarcus » August 17th, 2020, 7:47 pm

The company announced another 5.75p quarterly dividend, maintaining a rise of 10.6% over 2019 levels. Some of this was funded from revenue reserves.

The Directors are pleased to declare a third interim dividend for the year ending 31 December 2020 of 5.75p per Ordinary Share which represents an increase of 10.58% compared to the corresponding dividend for the year ending 31 December 2019 and maintains the distribution level set for the first and second interim dividends in 2020.

...

The Company's investment adviser for the Smaller Companies portfolio keeps under close review the dividend outlook for the companies that Acorn is invested in. The investment adviser has been pleased to note that many of Acorn's investee companies reduced or passed their dividends out of caution rather than necessity and are now resuming payments in line with unchanged dividend policies. Against this background the directors believe that 5.75p per share is a reasonable target for the fourth interim dividend that will be paid in December; however shareholders should note that the actual dividend will be set in the light of income earned over the remainder of the year as well as the outlook for 2021 and beyond.


I would guess we'll see another 5.75p dividend in December, then, if dividends come up to what they are currently expecting. Understandably this is not set in stone. The dividend yield is currently c. 8.8%. However, we won't see another double digit dividend raise in 2021! It would not surprise me to see it flat for a while, or even modestly cut.

Best wishes

Mark.

ADrunkenMarcus
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Re: Acorn Income Fund

#335632

Postby ADrunkenMarcus » August 24th, 2020, 9:37 pm

AIF is currently on a c. 21 percent discount to estimated NAV.

Best wishes

Mark.

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Re: Acorn Income Fund

#336199

Postby GJHarney » August 26th, 2020, 9:32 pm

Held it many years ago when it was one of the best performing IT's (think Scottish Mortgage and its performance in recent years). But then its founder and lead manager John Mclure tragically and unexpectedly died in 2014 and it struggled to recover. I've not kept track over the past few years, but I suspect the macro climate hasn't suited it (I'm not sure about stock picking, but I'd guess that suffered too), but the main deciding factor for me of giving it up a few years ago despite still healthy dividends was its very high (but very opaque) charges.

ADrunkenMarcus
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Re: Acorn Income Fund

#359311

Postby ADrunkenMarcus » November 23rd, 2020, 3:18 pm

AIF has maintained the 5.75p quarterly dividend for the fourth quarter of 2020. :)

The dividend yield has come down to 7.6 percent.

They've made comments about needing to keep the dividend under review in 2021, however it would be pretty good if they were able to maintain it.

Best wishes

Mark.


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