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TRIG

General discussions about equity high-yield income strategies
Dod101
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Re: TRIG

#393003

Postby Dod101 » March 6th, 2021, 9:51 am

richfool wrote:Posters often make the point about dilution and investors owning a progressively smaller piece of the cake. I assume they mean owning a smaller part of the investment company, as opposed to that particular holding representing a decreasing proportion of their portfolio.

Either way, does it really matter, as the value of one's investment 'ebbs and flows' over time anyway, as can and does dividend income. Most people who hold these sorts of trusts/companies are holding them for dividend income and some growth. So surely the value of that investment and the dividends arising are in any event going to fluctuate somewhat. Aren't we just being picky about something which in practice is almost inconsequential to the small investor, or just quibbling over semantics? I don't know the answer, so am posing the question for greater minds to consider!!

Is it a 'Big Issue' or just a scrap of paper, type of thing? I.e. Can't we just let it wash over our heads?


It is not quibbling over semantics. It is a simple fact that anyone holding shares in say TRIG and who does not participate in a fundraising against the issuance of new shares is being diluted. It may not matter much at least in the short term but will over time, depending of course on how big the fundraising is in terms of the issuance of the new shares.

Dod

simoan
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Re: TRIG

#393008

Postby simoan » March 6th, 2021, 10:08 am

Dod101 wrote:I am not saying there is anything wrong with TRIG's model and there is nothing sinister about it, just that I do not like companies that keep seeking new funds from investors.

Dod

Me neither. It seems others have a very low bar when it comes to choosing investments though. Any analysis of TRIG just does not pass muster. Some say that it doesn't matter if you put more capital in if you get more dividends out, but you don't!! This is not a building society account.This is not a risk-free investment.

The fact is, the number of TRIG shares in issue has grown at a CAGR of 25% since 2015 and the dividend has grown at a CAGR of 1.9%. Since 2016 the returns on capital (ROCE) have fallen from 9% to nearly 5%, so the new capital injected by the constant placings is earning increasingly less return. Meanwhile the directors and investment manager keep getting paid...

It fails just about every test I'm looking for in a long term investment. BTW I actually owned some for 6 months last year bought during the March selloff but admit I hadn't done enough research at the time.

All the best, Si

Dod101
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Re: TRIG

#393019

Postby Dod101 » March 6th, 2021, 10:38 am

Furthermore, as is usual in these situations, the Investment Manager and Operations Manager are getting a fee of 1% on the value of the assets, reducing modestly as the assets increase so it is very much in their interests to keep recommending new investments.

Dod

richfool
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Re: TRIG

#393023

Postby richfool » March 6th, 2021, 10:41 am

simoan wrote:
Dod101 wrote:I am not saying there is anything wrong with TRIG's model and there is nothing sinister about it, just that I do not like companies that keep seeking new funds from investors.

Dod

Me neither. It seems others have a very low bar when it comes to choosing investments though. Any analysis of TRIG just does not pass muster. Some say that it doesn't matter if you put more capital in if you get more dividends out, but you don't!! This is not a building society account.This is not a risk-free investment.

The fact is, the number of TRIG shares in issue has grown at a CAGR of 25% since 2015 and the dividend has grown at a CAGR of 1.9%. Since 2016 the returns on capital (ROCE) have fallen from 9% to nearly 5%, so the new capital injected by the constant placings is earning increasingly less return. Meanwhile the directors and investment manager keep getting paid...

It fails just about every test I'm looking for in a long term investment. BTW I actually owned some for 6 months last year bought during the March selloff but admit I hadn't done enough research at the time.

All the best, Si

Thank you for trying to quantify and give some perspective to it. That is where I tend to struggle.

By semantics, I meant playing with relatively insignificant figures. However, Simoan says there is a noticeable affect. Point taken.

So does that affect, for example, REIT's like SUPR which I note is also raising further capital currently to support purchases of further assets? Or is just an issue with renewable energy companies?

Besides holding TRIG, I hold: GSF and SEIT.

Gersemi
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Re: TRIG

#393031

Postby Gersemi » March 6th, 2021, 10:58 am

Dod101 wrote:
It is not quibbling over semantics. It is a simple fact that anyone holding shares in say TRIG and who does not participate in a fundraising against the issuance of new shares is being diluted. It may not matter much at least in the short term but will over time, depending of course on how big the fundraising is in terms of the issuance of the new shares.

Dod


I'm sorry Dod, but I'm still struggling to understand the practical effect of being diluted. I know you own a smaller percentage of the (bigger) company, but what is the effect on you as an investor? Surely the only things that matter to you are the value of your capital invested and the income you receive. If the new investments made by the company are producing a similar income to existing ones I would expect there to be little effect on either (of course nothing ever stays the same in practice). What is the effect over time, on you as an investor, of you owing a smaller percentage of the company, if the capital value of the company is getting bigger?

simoan
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Re: TRIG

#393069

Postby simoan » March 6th, 2021, 12:08 pm

richfool wrote:So does that affect, for example, REIT's like SUPR which I note is also raising further capital currently to support purchases of further assets? Or is just an issue with renewable energy companies?

Besides holding TRIG, I hold: GSF and SEIT.

Tbh I am not that familiar with REITs in general, although I do own some Urban Logistics because the management are switched on and trade properties on a semi-regular basis when they believe an asset is fully priced and they find a better use of capital elsewhere. However, I do not consider it a long term holding and it is just a way of playing the growth in on-line shopping.

The problem with all these type of investments is that they have become very popular with income hunters in the past couple of years with interest rates being so low and no inflation to speak of, so most are now trading well in excess of Tangible Book Value. I see SUPR is trading at 1.5x and GSF at 2x TBV currently. There is also the issue with TRIG that when I did further research I wasn't madly happy with the way book value was being calculated.

Historically, you'd find these types of investments at a discount, or at the very least trading around PTBV=1. IMHO it would not take much of a rise in inflation or interest rates to see large drops in the share price of these types of income only investments.

All the best, Si

Dod101
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Re: TRIG

#393322

Postby Dod101 » March 7th, 2021, 1:04 pm

Gersemi wrote:
Dod101 wrote:
It is not quibbling over semantics. It is a simple fact that anyone holding shares in say TRIG and who does not participate in a fundraising against the issuance of new shares is being diluted. It may not matter much at least in the short term but will over time, depending of course on how big the fundraising is in terms of the issuance of the new shares.

Dod


I'm sorry Dod, but I'm still struggling to understand the practical effect of being diluted. I know you own a smaller percentage of the (bigger) company, but what is the effect on you as an investor? Surely the only things that matter to you are the value of your capital invested and the income you receive. If the new investments made by the company are producing a similar income to existing ones I would expect there to be little effect on either (of course nothing ever stays the same in practice). What is the effect over time, on you as an investor, of you owing a smaller percentage of the company, if the capital value of the company is getting bigger?


I am not ignoring you but really do not have much more to say than I already have (which may be too much anyway!)

Dod

simoan
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Re: TRIG

#393404

Postby simoan » March 7th, 2021, 5:59 pm

Gersemi wrote:
Dod101 wrote:
It is not quibbling over semantics. It is a simple fact that anyone holding shares in say TRIG and who does not participate in a fundraising against the issuance of new shares is being diluted. It may not matter much at least in the short term but will over time, depending of course on how big the fundraising is in terms of the issuance of the new shares.

Dod


I'm sorry Dod, but I'm still struggling to understand the practical effect of being diluted. I know you own a smaller percentage of the (bigger) company, but what is the effect on you as an investor? Surely the only things that matter to you are the value of your capital invested and the income you receive. If the new investments made by the company are producing a similar income to existing ones I would expect there to be little effect on either (of course nothing ever stays the same in practice). What is the effect over time, on you as an investor, of you owing a smaller percentage of the company, if the capital value of the company is getting bigger?

Obviously, the main effect is that the share price will not rise as much as a company that does not constantly issue new equity as any increase in earnings is distributed between more and more shares. To illustrate this, the number of TRIG shares has increased by a CAGR of 25% since FY 2015 but earnings have only increased by a CAGR of 14%. Most normal operating companies can re-invest cashflows to grow the business and earn higher returns, and over time, the share price should move higher as increased earnings are shared between the same number of shares, if no new equity is issued.

The real problem with TRIG is that it is essentially not self-funding, and in fact it can't even support it's own dividend payment from the cashflow it generates over time. So if you hold and don't take part in each new equity issue, your dividend is partially being paid by those that do. Of course, there's a name for such a "scheme" :)

For instance, last year TRIG made a net profit of £100.2m and paid out £113.6m in dividends. That is clearly not sustainable. And of course, profits are heavily reliant on electricity prices in an increasingly competitive market. If electricity prices stay low for an extended period this would effect both legs on which the investment thesis stands; net asset value and income.

All the best, Si

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Re: TRIG

#393838

Postby BigBear » March 9th, 2021, 11:16 am

There is no issue with dilution as such. The money is being raised to make new investments. This will not by itself harm existing shareholders. The only relevant question is the one others have highlighted. are these new investments good ones? Ie will they generate a return that is equal to or better than returns on existing investments. I note the discount has currently evaporated.
This would be the same question if the company financed expansion through debt, although in that case you would look in theory for higher returns as you are accepting more risk.

The issue is slightly more complicated in that we might expect the returns in renewables to fall over time on both new and existing investments as the sector becomes more established and increasingly competitive. Good for the consumer and the planet perhaps if not the investor.

Dod101
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Re: TRIG

#393900

Postby Dod101 » March 9th, 2021, 2:06 pm

I have taken some time to take a look at TRIG's numbers. The Reported Profit for 2020 is £100,166,000 but that includes unrealised gains in the value of its investments of just over £41 million.

The total dividend paid was £113,628,000 although £6,600,000 was paid in scrip dividends leaving the cash dividends paid at £107,028,000, that from Revenue of only £59 million. No wonder they are holding the dividend for 2021.

Even if we set aside the matter of ongoing dilution caused by the continual issuance of new shares to raise funds, the dividend must be scarcely sustainable even at its 'held' rate (as Si has already commented)

Shareholders might well be better off if the company simply managed its existing portfolio and kept its expenses low but as I mentioned before it is very much in the interests of the managers to keep adding new assets as their fee is ad valorem. It is the sort of question that I would like to ask at an AGM.

Dod

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Re: TRIG

#394203

Postby Coobster » March 10th, 2021, 10:27 am

I've been a long time owner of Renewables because I liked the idea of a steady income stream. In fact at one time I owned 5 different renewable trusts but that meant that it was almost 20% of my PF.
Trimmed that back to about 12%, retaining Greencoat (UKW), TRIG (The Renewables Infrastructure) and Foresight (FSFL). Always happy to buy the share offers when they arose.
But when I looked at the performance of these trusts over time, their SP is downwards. I decided to get out and take the profits (as I say I've owned these trusts for several years).
I'd post a link but I don't have the authority to do so, probably because I'm a fairly new poster. Google search - FINUMUS Don't invest in Renewables

I've invested the proceeds in mostly growth IT's. I'm really fine with that as, although I'm retired, we currently don't need an income stream from dividends.

I now only have INRG which is a Clean Energy ETF which is <1% of my PF.

LittleDorrit
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Re: TRIG

#394279

Postby LittleDorrit » March 10th, 2021, 1:43 pm

If anyone can fully understand the projections contained within the accounts to this company, good luck to them. There does however appear to be some protection given within the contracts to a short term spike in inflation.

Last October the Sunday Telegrath featured a report by this guy:-
https://www.ref.org.uk/ref-blog/365-win ... nd-reality
An interesting read, if strongly disputed by the Department of Buisness.

For the record I've been in and out of these over the years and am currently in at just under the 125p price of the last capital raise-wrongly guessing that it would represent a floor under future raises!

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Re: TRIG

#394285

Postby airbus330 » March 10th, 2021, 2:01 pm

Coobster wrote:I've been a long time owner of Renewables because I liked the idea of a steady income stream. In fact at one time I owned 5 different renewable trusts but that meant that it was almost 20% of my PF.
Trimmed that back to about 12%, retaining Greencoat (UKW), TRIG (The Renewables Infrastructure) and Foresight (FSFL). Always happy to buy the share offers when they arose.
But when I looked at the performance of these trusts over time, their SP is downwards. I decided to get out and take the profits (as I say I've owned these trusts for several years).
I'd post a link but I don't have the authority to do so, probably because I'm a fairly new poster. Google search - FINUMUS Don't invest in Renewables

I've invested the proceeds in mostly growth IT's. I'm really fine with that as, although I'm retired, we currently don't need an income stream from dividends.

I now only have INRG which is a Clean Energy ETF which is <1% of my PF.


I thought that the blog was worth the read. And so were most of the rebuttals and supporting comments made beneath it. I feel that he/she has a point, but that the time where the point becomes a good case for exiting renewable energy isn't here yet. I think I will be long gone by the time energy is a $1 per kwh.

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Re: TRIG

#394395

Postby Matchless » March 10th, 2021, 7:57 pm

With the dividend that TRIG has historically paid on its shares, in these low interest times, would it make more sense to borrow more and save on paying the dividend on the extra shares issued, unless of course no one wants to provide the money because the prospects are not that good, and then of course the dividend could also be cut, thus providing free money,
I am a holder but not that keen on putting more money in, but continue holding for perhaps a possible take over offer from one of the large energy company’s under pressure to go green.

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Re: TRIG

#394507

Postby Coobster » March 11th, 2021, 9:20 am

airbus330 wrote:
Coobster wrote:I've been a long time owner of Renewables because I liked the idea of a steady income stream. In fact at one time I owned 5 different renewable trusts but that meant that it was almost 20% of my PF.
Trimmed that back to about 12%, retaining Greencoat (UKW), TRIG (The Renewables Infrastructure) and Foresight (FSFL). Always happy to buy the share offers when they arose.
But when I looked at the performance of these trusts over time, their SP is downwards. I decided to get out and take the profits (as I say I've owned these trusts for several years).
I'd post a link but I don't have the authority to do so, probably because I'm a fairly new poster. Google search - FINUMUS Don't invest in Renewables

I've invested the proceeds in mostly growth IT's. I'm really fine with that as, although I'm retired, we currently don't need an income stream from dividends.

I now only have INRG which is a Clean Energy ETF which is <1% of my PF.


I thought that the blog was worth the read. And so were most of the rebuttals and supporting comments made beneath it. I feel that he/she has a point, but that the time where the point becomes a good case for exiting renewable energy isn't here yet. I think I will be long gone by the time energy is a $1 per kwh.

Thanks for your comment. Yes I agree. Whilst the SP isn't doing very much at the moment and I didn't need the dividends, I decided to sell FSFL, UKW and TRIG and top up my holdings in PHI, ATT, HFEL, FEV, IBT, HGT and WWH (quite a few, I realise!).

Dod101
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Re: TRIG

#394517

Postby Dod101 » March 11th, 2021, 9:39 am

Matchless wrote:With the dividend that TRIG has historically paid on its shares, in these low interest times, would it make more sense to borrow more and save on paying the dividend on the extra shares issued, unless of course no one wants to provide the money because the prospects are not that good, and then of course the dividend could also be cut, thus providing free money,
I am a holder but not that keen on putting more money in, but continue holding for perhaps a possible take over offer from one of the large energy company’s under pressure to go green.


I do not hold but is it not the case that the Directors feel that there is quite enough gearing at the operating company level and thus they tend to avoid it at the holding company as well? They seem normally have some borrowing at the holding company but seem to use the fund raisings to pay it down.

Dod

UncleEbenezer
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Re: TRIG

#394835

Postby UncleEbenezer » March 12th, 2021, 9:54 am

Matchless wrote:With the dividend that TRIG has historically paid on its shares, in these low interest times, would it make more sense to borrow more and save on paying the dividend on the extra shares issued, unless of course no one wants to provide the money because the prospects are not that good, and then of course the dividend could also be cut, thus providing free money,


If the objective of the fund were to maximise income regardless of risk then there'd be a case for gearing up like that. But it isn't.

If *your* objective is to maximise income regardless of risk, why not borrow yourself to invest more in it? It has the same effect, but just brings what's going on closer to home.

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Re: TRIG

#394854

Postby Matchless » March 12th, 2021, 10:34 am

It’s the risk / rate and conditions a lender wants that determines the options.


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