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magazineFortify your defences with 5.8% yielding Henderson High Income Trust
Risk-averse investors unnerved by the return of volatility, not to mention slowing global economic growth and European political uncertainties, might view share price weakness at the Henderson High Income Trust (HHI) as a compelling entry point.
We believe the outlook for income from this highly diversified portfolio is robust. Moreover, the historic dividend yield of 5.8% is attractive and we are confident the dividend will be maintained or increased in future, a facet of the trust that should entice patient portfolio builders.
Managed by David Smith since 2014, Henderson High Income aims to provide a high dividend income with the prospect of capital growth by investing in a prudently diversified selection of well-known and smaller companies alike.
Smith scours the market for overlooked, lower valued companies with solid cash generative business models.
Launched in 1989, Henderson High Income has a strong long term performance record, having generated annualised 10-year price and net asset value returns of 11.79% and 11.54% respectively.
The investment trust offers investors exposure to a high and growing income stream. The dividend for the 2017 calendar year was increased by 2.7% to 9.4p and given the trust’s ample revenue reserves, dividend growth looks sustainable in what may prove to be more difficult years ahead.
It uses debt to enhance both income and capital returns for shareholders. This includes investing in shares and bonds, with the significant fixed interest portion of the portfolio providing secure income and boosting the trust’s overall yield.
Fund manager Smith has an unwavering focus on income sustainability, ever determined to avoid dividend cuts and value traps.
According to the latest factsheet, Henderson High Income’s top holdings include dividend paying stalwarts Diageo (DGE), Royal Dutch Shell (RDSB) and HSBC (HSBA).
This reassuringly well-diversified portfolio focuses on three types of stocks: ‘stable growth’ names such as publisher RELX (REL) and pork-to-cooked poultry processor Cranswick (CWK); ‘quality cyclicals’ including packaging outfit DS Smith (SMDS) and chemicals concern Victrex (VCT); and high yielders such as tobacco giant Imperial Brands (IMB) and fixed line telecoms specialist Manx Telecom (MANX:AIM).
One of the trust’s new holdings is Coca-Cola HBC (CCH), the soft drinks bottling business which has scope for margin improvements and a strong balance sheet, giving management the flexibility to deploy capital to accretive acquisitions or return more cash to shareholders.
Important information:
These articles are provided by Shares magazine which is published by AJ Bell Media, a part of AJ Bell. Shares is not written by AJ Bell.
Shares is provided for your general information and use and is not a personal recommendation to invest. It is not intended to be relied upon by you in making or not making any investment decisions. The investments referred to in these articles will not be suitable for all investors. If in doubt please seek appropriate independent financial advice.
Investors acting on the information in these articles do so at their own risk and AJ Bell Media and its staff do not accept liability for losses suffered by investors as a result of their investment decisions.
