European Assets Trust (EAT) Dividend

[monabri]

https://www.investegate.co.uk/european- ... 00128937A/


October Quarterly Dividend

"European Assets Trust PLC ("the Company") announces that a dividend of 2.2 pence per share will be paid on 31 October 2022 to shareholders on the register on 7 October 2022, having an ex-dividend date of 6 October 2022. "

8.8p cumulative for the year.

Note Bene

"The level of dividend paid each year is determined in accordance with the Company's distribution policy. The Company has stated that, barring unforeseen circumstances, it will pay an annual dividend equivalent to six per cent of its NAV at the end of the preceding year. Should the NAV at 31 December 2022 be lower than the NAV at the 2021 year end then the value of the dividend payable in 2023 would be expected to be proportionately lower."

Estimated NAV (close of trading) = 90.28p . Potential dividend 5.41p for next year. Quite a cut from the 8.2p dividend this year reflecting the drop in NAV (not unexpected with what is happening in Ukraine). The NAV must have been around 133p on 31 Dec 21.

I will be looking to top up at some point in the future, hoping for an end to War in Ukraine and a recovery in Euroland.

[scotia]

European Assets Trust (EAT) is having a tough time. Currently it is sitting at -13.3% total return over the past 5 years, and indeed it has spent the majority of these 5 years below zero total return. Is it possibly the high yield that still makes it attractive to some investors?
I have favoured BlackRock Greater Europe IT - and although it, along with EAT, has also fallen by around 37% (total return) over the past year, it is still around 40% up over 5 years. It does however only have a dividend yield of around 1.5%.
Is it possible that chasing a high yield is not an optimum policy?

[moorfield]

European Assets Trust (EAT) is having a tough time. Currently it is sitting at -13.3% total return over the past 5 years, and indeed it has spent the majority of these 5 years below zero total return. Is it possibly the high yield that still makes it attractive to some investors?
I have favoured BlackRock Greater Europe IT - and although it, along with EAT, has also fallen by around 37% (total return) over the past year, it is still around 40% up over 5 years. It does however only have a dividend yield of around 1.5%.
Is it possible that chasing a high yield is not an optimum policy?

There's nothing wrong with chasing high yield. But the trick is not to chase too high yield, and that is much harder to do.

I have a (coarse) rule I apply in the HYP universe which is to avoid buying or topping up anything yielding twice the CTY (City of London IT) yield. Now I am fully aware I am comparing kumquats to aubergines in this case but applying that to EAT has been warning me for a while - very roughly - to be cautious and avoid. That said, I did buy a tranche earlier this year as an initial position into the IT part of my portfolio, but I'm not expecting to be adding for some time.

[Arborbridge]

I have a (coarse) rule I apply in the HYP universe which is to avoid buying or topping up anything yielding twice the CTY (City of London IT) yield. Now I am fully aware I am comparing kumquats to aubergines in this case but applying that to EAT has been warning me for a while - very roughly - to be cautious and avoid. That said, I did buy a tranche earlier this year as an initial position into the IT part of my portfolio, but I'm not expecting to be adding for some time.

That gives you a generous 10.5% to play with. Plenty of choice under that, though not too many ITs 5-10%.


Arb.

[monabri]

European Assets Trust (EAT) is having a tough time. Currently it is sitting at -13.3% total return over the past 5 years, and indeed it has spent the majority of these 5 years below zero total return. Is it possibly the high yield that still makes it attractive to some investors?
I have favoured BlackRock Greater Europe IT - and although it, along with EAT, has also fallen by around 37% (total return) over the past year, it is still around 40% up over 5 years. It does however only have a dividend yield of around 1.5%.
Is it possible that chasing a high yield is not an optimum policy?

There's nothing wrong with chasing high yield. But the trick is not to chase too high yield, and that is much harder to do.

I have a (coarse) rule I apply in the HYP universe which is to avoid buying or topping up anything yielding twice the CTY (City of London IT) yield. Now I am fully aware I am comparing kumquats to aubergines in this case but applying that to EAT has been warning me for a while - very roughly - to be cautious and avoid. That said, I did buy a tranche earlier this year as an initial position into the IT part of my portfolio, but I'm not expecting to be adding for some time.

2xCTY = 10.6% !

[Dod101]

European Assets Trust (EAT) is having a tough time. Currently it is sitting at -13.3% total return over the past 5 years, and indeed it has spent the majority of these 5 years below zero total return. Is it possibly the high yield that still makes it attractive to some investors?
I have favoured BlackRock Greater Europe IT - and although it, along with EAT, has also fallen by around 37% (total return) over the past year, it is still around 40% up over 5 years. It does however only have a dividend yield of around 1.5%.
Is it possible that chasing a high yield is not an optimum policy?

There's nothing wrong with chasing high yield. But the trick is not to chase too high yield, and that is much harder to do.

I have a (coarse) rule I apply in the HYP universe which is to avoid buying or topping up anything yielding twice the CTY (City of London IT) yield. Now I am fully aware I am comparing kumquats to aubergines in this case but applying that to EAT has been warning me for a while - very roughly - to be cautious and avoid. That said, I did buy a tranche earlier this year as an initial position into the IT part of my portfolio, but I'm not expecting to be adding for some time.

The trouble with applying your rule, coarse or otherwise, to EAT is that its yield can be anything its Directors want it to be. I have never held it but it seems to be an even worse proposition than HEFEL. Both are providing a good yield but at a huge cost to the capital value. They both seem to attract certain income investors but they offer a very poor total return and that is what matters in the long run.

Dod

[Arborbridge]

The trouble with applying your rule, coarse or otherwise, to EAT is that its yield can be anything its Directors want it to be. I have never held it but it seems to be an even worse proposition than HEFEL. Both are providing a good yield but at a huge cost to the capital value. They both seem to attract certain income investors but they offer a very poor total return and that is what matters in the long run.

Dod

Yes, that's true. HFEL is slowly eroding my capital, but I reckon it still has a good enough "long run" to see my days out while enjoying the income. Ironically, our fear of capital erosion and trying to safeguard it has been made rather a mockery of by the Tory government - my share values have slipped back a year or so, and my IT values back to December 2020.

Of course, they always recover - don't they?

Arb.

[Dod101]

The trouble with applying your rule, coarse or otherwise, to EAT is that its yield can be anything its Directors want it to be. I have never held it but it seems to be an even worse proposition than HEFEL. Both are providing a good yield but at a huge cost to the capital value. They both seem to attract certain income investors but they offer a very poor total return and that is what matters in the long run.

Dod

Yes, that's true. HFEL is slowly eroding my capital, but I reckon it still has a good enough "long run" to see my days out while enjoying the income. Ironically, our fear of capital erosion and trying to safeguard it has been made rather a mockery of by the Tory government - my share values have slipped back a year or so, and my IT values back to December 2020.

Of course, they always recover - don't they?

Arb.

As a matter of fact, you may be right because as time goes by capital values should mean less, but I suspect that quite a lot of those younger than us are buying both of these trusts but I cannot bring myself to do that. In fact this year for some reason my dividend income seems on course to be its highest ever and that is without adding any new money.

Dod

[moorfield]

The trouble with applying your rule, coarse or otherwise, to EAT is that its yield can be anything its Directors want it to be.

Not quite. The yield is a product of what the Directors want the dividend to be, and what price the Market want to pay for it. By my own observations the latter changes yields much more, increasing to a point which is usually soon followed by a decision from the former to rebase the dividend.

[Dod101]

The trouble with applying your rule, coarse or otherwise, to EAT is that its yield can be anything its Directors want it to be.

Not quite. The yield is a product of what the Directors want the dividend to be, and what price the Market want to pay for it. By my own observations the latter changes yields much more, increasing to a point which is usually soon followed by a decision from the former to rebase the dividend.

Wait a minute. Someone has just said that the dividend per annum is 6% of NAV at year end and yet you are implying that it is somehow related to the share price (the price the Market want to pay for it). The website tells us that the dividend is 6% of the year end NAV. So maybe the dividend is not what the Directors want it to be but I guess they set the rules and could change that parameter, although 6% of NAV seems quite generous and I imagine will require raiding the capital gains for the dividend payment in most years.

Dod

[torata]

Wait a minute. Someone has just said that the dividend per annum is 6% of NAV at year end and yet you are implying that it is somehow related to the share price (the price the Market want to pay for it). The website tells us that the dividend is 6% of the year end NAV. So maybe the dividend is not what the Directors want it to be but I guess they set the rules and could change that parameter, although 6% of NAV seems quite generous and I imagine will require raiding the capital gains for the dividend payment in most years.

Dod

But that's the whole point of the dividend policy they've set. They aren't focused on high yielding stocks in order to pay the dividend. They're focused on "long-term capital growth through investment in quoted small and medium-sized companies in Europe". And then they "raid the capital gains" as you put it.

torata

[Dod101]

Wait a minute. Someone has just said that the dividend per annum is 6% of NAV at year end and yet you are implying that it is somehow related to the share price (the price the Market want to pay for it). The website tells us that the dividend is 6% of the year end NAV. So maybe the dividend is not what the Directors want it to be but I guess they set the rules and could change that parameter, although 6% of NAV seems quite generous and I imagine will require raiding the capital gains for the dividend payment in most years.

Dod

But that's the whole point of the dividend policy they've set. They aren't focused on high yielding stocks in order to pay the dividend. They're focused on "long-term capital growth through investment in quoted small and medium-sized companies in Europe". And then they "raid the capital gains" as you put it.

torata

That's fine if that is what the investor wants. I have no argument with that. My argument is that it is usually going to be robbing Peter to pay Paul. Habitually distributing capital is eating its seedcorn if you like and of course we can see that in the total return of EAT. It is not what I would want.

Dod

[richfool]

EAT dividend announcement:

 
To: RNS
From: European Assets Trust PLC ("the Company")
LEI: 213800N61H8P3Z4I8726
Date: 5 January 2023 
Dividend announcement

Highlights
· Continued policy of six per cent dividend on year-end net asset value per share for annual distribution to shareholders.
· Total dividends declared for 2023 will be 5.80 pence per share.
· Dividend to be paid in four equal instalments of 1.45 pence per share in January, April, July and October 2023.

Dividend for 2023

The Board confirms that the Company's stated and long-standing distribution policy of declaring, barring unforeseen circumstances, an annual dividend equivalent to six per cent of the net asset value per share at the end of the preceding year will be continued in 2023. 

With rising inflation expectations driving interest rates higher and war in Eastern Europe, 2022 has been a particularly challenging year for European smaller companies. As such, the net asset value per share decreased over the year which will result in a decrease in total dividends payable by the Company for 2023 to 5.80 pence per share (2022: 8.80 pence per share).

Shareholders will note the substantial reduction in the dividend announced. While this is undoubtedly disappointing it is worth highlighting the reasoning for the Company's distribution policy. The Company offers investors the opportunity of both growth and a high yield from an asset class that comprises some of Europe's most dynamic, entrepreneurial businesses that have significant long-term potential. While there will be some volatility in the dividend payment, through the market cycle, the combination of growth and income should be attractive in the long term.

The 2023 dividend will be paid in four equal instalments of 1.45 pence per share on 31 January, 28 April, 31 July and 31 October 2023.

The January dividend payment of 1.45 pence per share will be paid to shareholders on 31 January 2023, having an ex-dividend date of 12 January 2023 and a record date of 13 January 2023. 

Investment Performance and Review

The Company's net asset value total return (capital performance with dividends reinvested) per share was -28.2 per cent in Sterling (- 32.0 per cent in Euros) (unaudited) for the year ended 31 December 2022. Sterling share price total return for the year was -28.4 per cent (-32.3 per cent in Euros). This compares with the EMIX Smaller European Companies (ex UK) Index ("the Benchmark"), which produced a total return of -17.7 per cent in Sterling (-22.1 per cent in Euros). 

Following a couple of strong years, it is disappointing to report a much more challenging performance in 2022. Rising inflation, geopolitical tensions, the resulting energy crisis and continued COVID-19 related supply chain issues, all led to a year of poor returns with smaller companies bearing the brunt of this. The pricing of the Company's asset class has proved more volatile than comparable larger company funds, but historically it has yielded much better long-term returns.

Significant falls in prices have therefore provided a good long-term opportunity, and whilst the outlook is uncertain, the Board believes that taking advantage of better prices in an attractive area, composed of dynamic growth businesses, is the right thing to do. In terms of the Company's portfolio, the Investment Manager has done this by adding some stocks from its watch list which, until recently, have looked too expensive. The Board believes this will drive better returns in the future just as it did in 2020 when the Investment Manager followed a similar strategy.

The Company's performance relative to the Benchmark also fell below the standard that the Board would expect. The most significant reason for this has been the style rotation away from growth stocks towards the more value areas of the market, precipitated by higher interest rates. The Benchmark has been led by energy and value areas of the market and it has been traditional sectors of both stability and safety, such as healthcare, that have significantly underperformed. The Investment Manager recognises there has been some substantial changes in the market and has increased the portfolio's exposure to energy security, reshoring and automation.

Fundamentally, the Board believes the Company's portfolio of businesses with pricing power, long-term structural growth opportunities and run by superior, aligned management teams, will deliver returns that are ahead of the market through the cycle.

https://www.investegate.co.uk/european- ... 00067130L/

I hold EAT (and JEGI).

[AshleyW]

Linking dividend payouts to NAV is not ideal for IT income investors who usually benefit from ITs using reserves to smooth out dividend payouts. JEGI has fairly recently adopted a similar policy and is aiming for 4% of NAV.

[Itsallaguess]

Linking dividend payouts to NAV is not ideal for IT income investors who usually benefit from ITs using reserves to smooth out dividend payouts.

JEGI has fairly recently adopted a similar policy and is aiming for 4% of NAV.

There's not much that's ever 'ideal' in the investment world, but I actually broadly welcome the introduction of 'NAV-based' income-investments of this type, because it offers up exposure to more markets, sectors, and geographies than might normally be accessible by what we might see as more common 'Yield-based' collective income-investments.

I would agree that for income-investors who might be used to relying on the underlying income-reserves of yield-based Investment Trusts to help smooth the dividend-income delivered from their portfolios, exposure to these types of NAV-based income-IT's offer up some slightly different challenges in that particular area, but I still think being offered exposure to more 'growthy' markets whilst generally maintaining an underlying 'income strategy' approach with these types of NAV-based options is worth considering for those of us with fairly mature income-portfolios, who might be willing to personally manage any additional 'long-term smooth income' risk that such NAV-based income-investments might bring, if the benefit of doing so is to gain some broad exposure to those types of 'growthier' investment options that have previously been more difficult to manage in a collective way from a 'delivered income' perspective.

Of course, the 'not ideal' aspect of these types of NAV-based options might be starkly exposed by the type of dividend-cut RNS that EAT have released here, but as these types of NAV-based collective income-investment options are relatively new to the investment world, I'm willing to take a longer-term view on the underlying concept, to see how the 'good years' might deliver longer-term income-benefits, even when we might take these types of 'poor years' into account, in much the same way as we'd hopefully treat any of our income-investments, even the more commonly held 'yield-based' ones. Nothing goes up forever, and that fact needs personally managing somewhere, no matter what types of investments we might look to take on...

Regarding EAT, I don't currently own it but have taken a look in the past. Whilst I've stuck up a little for a 'NAV-based' approach in my post above, I don't personally have any desire to gain that type of exposure in such an EU-focussed way at this particular time, but I do recognise that it's largest exposure is towards areas like Sweden, Norway, Switzerland and Germany, which probably bodes well for the longer term, but perhaps things like it's 5% exposure to Italy might continue to be a drag on overall performance...

It's probably one that I'll keep an eye on for a good entry point at some stage, but not at the moment for me...

Cheers,

Itsallaguess

[Dod101]

Quite apart from the awful result produced for 2022, the high yield on NAV is almost certainly to be a drag on performance anyway. Remember also that a -32% return in Euros means that it has to have a near 50% increase in performance to get back to where is was at 31 December 2021.

A 6% yield on NAV is demanding and means that it most likely will need to draw on its capital at the best of times. As a long term income investor, I cannot see EAT ever being on my radar. The income can sometimes be attractive, but as I have said about one or two other trusts, it is dearly bought income and not what I am looking for.

Some clearly enjoy the yield on the share price though as it is a discount of only about 6%.

Dod

[monabri]

https://www.investegate.co.uk/announcem ... on/7974066

"Based on the unaudited net asset value of 98.3 pence per share for 31 December 2023, the total dividend declared for 2024 will be 5.9 pence per share, an increase from 5.8 pence paid in 2023.

· Dividend to be paid in four equal instalments of 1.475 pence per share in January, April, July and October 2024."


" The January dividend payment of 1.475 pence per share will be paid to shareholders on 31 January 2024, having an ex-dividend date of 11 January 2024 and a record date of 12 January 2024."


(TBH I was expecting a cut....again).

[Charlottesquare]

https://www.investegate.co.uk/announcement/rns/european-assets-trust--eat/dividend-declaration/7974066

"Based on the unaudited net asset value of 98.3 pence per share for 31 December 2023, the total dividend declared for 2024 will be 5.9 pence per share, an increase from 5.8 pence paid in 2023.

· Dividend to be paid in four equal instalments of 1.475 pence per share in January, April, July and October 2024."


" The January dividend payment of 1.475 pence per share will be paid to shareholders on 31 January 2024, having an ex-dividend date of 11 January 2024 and a record date of 12 January 2024."


(TBH I was expecting a cut....again).

Thanks for that.

I take slight encouragement that it appears the share price is lagging total return (in both sterling and Euros) and the total return was greater than the dividends to be paid throughout 2024, so perhaps investor sentiment is lagging performance. (If I was really brave I might buy some more as it is my only solely European IT)

"The Company's net asset value total return (capital performance with dividends reinvested) per share was +8.2 per cent in Sterling (+10.8 per cent in Euros) (unaudited) for the year ended 31 December 2023. Sterling share price total return for the year was 4.9 per cent (7.0 per cent in Euros). These compare with the Benchmark(1), which produced a total return of +9.8 per cent in Sterling (+12.4 per cent in Euros)."