Henderson Far East Income
Repositioning to raise total returns
25 April 2024
Henderson Far East Income (HFEL) has consistently delivered on its objective to provide a rising dividend. However, like many investors, HFEL’s managers overestimated the potential for a post-pandemic rebound in China. The trust’s resultant overweight to Chinese consumer and other cyclicals led to a fall in portfolio revenues and underperformance in the financial year ended 31 August 2023 (FY23). With a view to improving future returns, HFEL’s board has since indicated an increased willingness to use reserves when necessary to support dividend payments, which it did in FY23. This reduces the requirement to focus primarily on high income names to fund dividend payments, giving lead manager Sat Duhra scope to move into other areas of the market where he can acquire well-priced value names offering performance and yield, or the prospect of dividend growth over time. Duhra has been quick to reduce the trust’s exposure to China and increase positions into well-priced value names in India and Indonesia. Early signs suggest this repositioning is paying off - HFEL outperformed the market in the six months to end March 2024. MORE »
Consistently high and growing income
23 July 2021
Henderson Far East Income (HFEL) continues to reward its investors with a high, rising and fully covered income from a relatively concentrated (c 45 holdings) portfolio of stocks from across the Asia Pacific region. Managers Mike Kerley and Sat Duhra see good opportunities in banks and materials stocks, both of which are set to benefit from the expected economic recovery as the region and the wider world look ahead to life after the pandemic stage of COVID-19. Although recent returns have been relatively muted (given large gains in areas such as Australian banks, which the managers felt were unattractive from an income perspective), Kerley sees strong earnings growth expectations for the region as eminently achievable, which should support further dividend growth. MORE »
Keeping the faith and covering the dividend
3 December 2020
Henderson Far East Income (HFEL) has experienced a tough period of capital performance as market participants have focused ever more on growth and momentum rather than cash flows and dividends. However, in a year where the majority of investment trusts have needed to dip into reserves to avoid cutting their dividends, HFEL stands out in that it not only delivered year-on-year dividend growth of 2.7% for FY20, it fully funded its dividend from portfolio income and even made a small contribution to reserves to help underpin future dividend growth. Managers Mike Kerley and Sat Duhra remain convinced that market focus will return to value and yield factors, as seen in the quantitative easing era of 2011–13, given the ‘even lower for even longer’ interest rate outlook. MORE »
Access to Asian growth with solid 6% yield
13 January 2020
Henderson Far East Income (HFEL) performed strongly in 2019, unusually outperforming a rising market while continuing to achieve a well-covered dividend and a yield in excess of 6%. The trust, managed by Mike Kerley and Sat Duhra at Janus Henderson Investors, has a relatively concentrated (c 50 stock) portfolio that is split roughly equally between high-yielding stocks and those offering superior dividend growth prospects. Drivers of positive performance during the year included stocks from both sides of the portfolio, with limited impact from the US-China trade dispute given HFEL’s focus on domestic rather than export stocks. The managers are optimistic for a recovery in earnings and continued growth of dividends in the Asia Pacific region during 2020. MORE »
Finding high yields and dividend growth in Asia
7 June 2019
Henderson Far East Income (HFEL) continues to reward its investors with a c 6% dividend yield, fully covered by revenues and growing year-on-year (4.9% CAGR over five years), as well as capital growth (total returns of c 8–14% a year over three, five and 10 years). Manager Mike Kerley notes that payout ratios across the Asia-Pacific region are increasing, supported by the strong cash position of many companies, although at an index level it is hard to observe the improvement, because of the huge growth of non-yielding Chinese internet stocks. The manager holds a relatively concentrated (c 50 names) portfolio of stocks that are broadly evenly split between those with a high starting yield and those offering good dividend growth prospects, and are diversified by sector and geography. MORE »
Asian income fund with 5.9% dividend yield
22 August 2018
Henderson Far East Income (HFEL) is a pan-Asian investment company with a focus on achieving a high and growing income as well as capital growth. While the emphasis on income will naturally lead the management team to focus on some older-economy sectors where there is a long history of rewarding investors with dividends, lead manager Mike Kerley reports that an increasing number of high-growth technology stocks in Asia are now generating healthy cash payouts. However, the manager retains a tilt towards value areas, in line with HFEL’s focus on buying into companies where the current share price does not reflect the underlying business value. The fund has consistently paid a higher dividend than its income-focused peers, supported by an option-writing strategy to generate additional premium income, and currently yields 5.9%. MORE »
Asian recovery sparks attractive opportunities
16 January 2018
Henderson Far East Income’s (HFEL) lead fund manager, Mike Kerley, welcomes the resumption of earnings growth in the region after five years of stagnation. He says that attractive opportunities still abound in his favoured areas of cash-generative companies offering high dividend growth potential or high yields, with the recent rise in P/E ratios across the region only partially addressing the longstanding undervaluation versus the rest of the world. The portfolio currently has a cyclical tilt, with more in financials and consumer stocks and less in utilities and telecoms, yet HFEL still pays a high yield (currently 5.4%), fully covered by income. The fund has tended to trade at a small premium to NAV and issues shares to meet demand. The recent introduction of a tiered management fee above £400m will reduce total expenses for investors as HFEL grows. MORE »
High income and capital growth potential
15 May 2017
Henderson Far East Income (HFEL) is a relatively concentrated portfolio of 40-60 Asian equities, aiming to generate high income with the potential of long-term capital growth. Since February 2007, HFEL has been managed by Michael Kerley. Against a backdrop of the recent rebound in Asian stock markets, he suggests that the attraction of income from Asian equities has not diminished even though he believes investors have been focusing on growth rather than income. HFEL’s 5.7% dividend yield is the highest in its peer group. Having traded at a modest discount for part of 2016, HFEL has returned to trading at a premium. MORE »
Asian income specialist at a rare discount
4 May 2016
Henderson Far East Income (HFEL) seeks to blend the superior growth prospects of investing in Asia with a focus on generating a high income. With a current dividend yield of 6.9%, it is comfortably the highest yielding of its close peer group, and manager Michael Kerley also sees potential for double-digit dividend growth in the portfolio over the next 12 months. Capital performance has been more muted in a period of volatility as investors have focused on the risks arising from a slowdown in China, but NAV total returns in the half-year ended 29 February 2016 were positive in absolute terms and ahead of the FTSE Asia Pacific ex-Japan index benchmark. Having traded at an average premium to NAV of 0.6% since launch in 2007, the fund currently stands at a small discount. MORE »
High-yield Asian specialist with growth potential
13 July 2015
Henderson Far East Income (HFEL) has a high yield (c 6%) and a focus on achieving total returns from a portfolio spread across the Asia Pacific region, including India and Australia. While it has no official benchmark, it has outperformed the FTSE AW Asia Pacific ex Japan index over three of the last four discrete years to 30 June. The bottom-up portfolio aims to achieve a balance of dividend yield and dividend growth, with modest gearing in place and the ability to enhance income through selective option writing. Demand for the fund has been strong and it has issued 2.2m shares so far in 2015 to manage the premium to NAV. MORE »
Asian total return portfolio with a near-6% yield
5 December 2014
Henderson Far East Income (HFEL) aims for a high dividend and long-term capital growth from a focused (c 50 stocks) portfolio of companies across the Asia Pacific region. It has the highest yield in its sector (5.6% at 4 December), which it can support partly through selective option writing. The fund has issued 4.65m shares so far in 2014 in response to high demand, yet has still managed to increase both its full-year dividend (to 18.2p) and the size of its revenue reserve for FY14. MORE »
