Income Investment Trust comments on Covid-19

[DavidM13]

https://www.theaic.co.uk/companydata/0P ... 3A12/3211M

Henderson High Income

"it has not been immune to the recent dividend suspensions, postponements or cuts from its investee companies. However, over the last 9 years the Company has built up its revenue reserves to provide a suitable cushion where possible during economic downturns.

The Board acknowledges the difficulty of forecasting in these uncertain times and will continue to assess the impact of Covid-19 on its income. The Board also recognises the importance of the Company's dividend to our shareholders, therefore based on information to date, it is the Board's current intention to use its revenue reserves where necessary to maintain the quarterly dividend at the existing level of 2.475p for the remainder of this financial year."

[DavidM13]

Keystone
https://www.theaic.co.uk/companydata/0P ... 3A41/P9796

"It is expected that the total ordinary dividend for the financial year to 30 September 2020, excluding any special dividend, will be similar to, but not less than, last year’s ordinary dividend which was the equivalent of 11.2p per 10p ordinary share, using reserves if required"

[Alaric]

If ITs pay out more than 100% of their receipts from dividends as now seems likely, they are going to have to find some additional cash from somewhere given the normal practice that the "Income Reserve" would have been invested alongside the rest of the Trust's assets. This could either be borrowings or asset sales. In practice setting aside some extra cash from their regular investment trading activities should probably suffice.

[77ss]

......In practice setting aside some extra cash from their regular investment trading activities should probably suffice.

I wonder if you could clarify this for me Alaric.

Do you mean not investing some non-dividend receipts (proceeds from sales or issue of equity) or do you have something else in mind?

[Alaric]

Do you mean not investing some non-dividend receipts (proceeds from sales or issue of equity) or do you have something else in mind?

ITs don't necessarily issue new equity, I believe most don't.

What I meant was that if they are selling stock A to buy stock B with the proceeds, that they set aside enough in cash to help finance an upcoming dividend. Which is what you said.

[swill453]

I'm not sure I saw anyone report this announcement by JPMorgan Claverhouse Investment Trust (JCH) on 23rd April:

The Directors have declared that a first quarterly interim dividend of 6.50 pence per share for the year ending 31st December 2020 will be paid on 1st June 2020 to shareholders on the register at the close of business on 1st May 2020. The ex-dividend date will be 30th April 2020.

While the Board is conscious of the effect that the Coronavirus pandemic is having on dividends from its portfolio companies, it also recognises that the Company has the benefit of strong revenue reserves.

As announced in the Annual Report, the Board has decided to re-balance the Company's dividend payments and currently intends to increase the dividend payable in each of the first three quarters to 6.50 pence from the 6.25 pence paid in the previous period.

The Company has increased its total annual dividend for 47 consecutive years and the Board's dividend policy remains to seek to increase the dividend each year and, taking a run of years together, to pay dividends that at least match the rate of inflation.

https://www.theaic.co.uk/companydata/0P ... 3A01/6994K

Scott.

[mike]

Schroder Income Growth (SCF) have issued their half-year report today, and their comments are a lot more encouraging regarding use of their revenue reserve than previously.

Just to jog the memory, on 31 March, SCF stated

This dividend is unchanged from the first interim dividend at 2.50 pence per share. In maintaining the dividend at this level, the board is very aware of the current unique circumstances and uncertainties and will therefore be keeping the future level of dividends under close review.

Today, we have the following statements

The unique structure of a closed ended fund, where revenue reserves accumulated during good times can support payments to shareholders in less favourable market conditions is an advantage today. Your board appreciates this and the importance of reliable income for shareholders. We are also very aware that the status of your Company as a "dividend hero" relies on the sustainability of its dividend payout. We will be taking these points into account when considering future dividend policy.

Your board goes into this period with much the same attitude as it did in 2008-09, the last time investment income fell sharply. We treasure the Company's record of increasing its dividend every year since its launch, and want to extend that record if possible. We know that, as in 2008-09, the Manager is concentrating the portfolio in companies believed to be strongly managed and with sound finances. We also know, however, how novel the challenge of the COVID-19 lockdown is and that as I write many UK companies have come to a temporary standstill.

I found the commentaries reassuring, but not so starry eyed as to say everything is normal. A good read.

https://www.investegate.co.uk/schroder-inc-growth--scf-/rns/half-year-report/202005150700049720M/

[DavidM13]

https://www.theaic.co.uk/financial-advi ... 3A04/2700N

Aberdeen Standard Equity Income
Today we face not just a rainy day but a monsoon, and the Board's view is that these are the very conditions in which it is entirely appropriate to draw on the revenue reserves

[swill453]

Dividend declaration for Perpetual Income & Growth (PLI):

The Directors are pleased to declare a fourth interim dividend for the year ended 31 March 2020 of 4.8p per Ordinary Share. The dividend is payable on 30 June 2020 to Ordinary Shareholders on the register on 5 June 2020. The shares will be marked ex-dividend on 4 June 2020.

This gives a total dividend for the financial year of 15.0p per share, representing an increase of 3.4% on the previous year. This extends again the Company’s record of year-on-year ordinary dividend increases since 1999 and its continued status as an AIC “Dividend Hero”.

Forecasting dividend receipts for the current financial year is challenging as the underlying investee companies adapt to the consequences on their businesses following Covid-19. In addition, once appointed, the new investment manager is likely to make a number of portfolio changes. Therefore the Board is not in a position to set a target for dividends to be paid by the Company in the next financial year. The Board is mindful, however, that the Company has significant accumulated reserves and would be prepared to pay dividends from those reserves if it felt it appropriate to do so.

https://www.theaic.co.uk/companydata/0P ... 3A08/PF0AF

Scott.

[DavidM13]

https://www.theaic.co.uk/financial-advi ... 3A07/2937O

BMO UK High Income

Revenue reserves following the payment of the fourth quarterly interim dividend will be £4.9 million, approximately 5.7p per ordinary share, equivalent to 109% of the total annual dividend of 5.21p per ordinary share paid in respect of the year to 31 March 2020. These reserves can and, if required, will be used to supplement revenue earnings in future periods. Indeed, following the cancellation of previously declared dividends by several companies held in the portfolio just before your Company's year end, £436,000 of revenue reserve will be used to pay the above dividend.

[swill453]

BMO Capital & Income (BCI):

Although the crisis did not impact on companies and markets for the majority of our reporting period, the effect is still noticeable in our income (dividends received from our investee companies) and hence ultimately our revenue return per share. In order to preserve cash a number of companies have decided to cancel or defer dividend payments to their Shareholders. In some cases, such as banks, this has been advised by their regulators, in other instances, companies have needed to in order to maintain adequate liquidity and in yet others, the decision has been more precautionary in nature. Whatever the reason, the effect is the same; March is one of the busiest months for dividend announcements and ex-dividend dates, particularly from companies reporting results for calendar 2019 and the timing of this has been the main driver behind the fall in our revenue return per share of 9.5% when measured against the comparative period last year.

At the end of our first financial quarter there was no storm on the horizon and we announced an increase in the first quarter's dividend from 2.55 pence per share to 2.65 pence per share. With this set of results, we are announcing a dividend for the second quarter of 2.55 pence per share, unchanged from the comparative quarter last year, which will be paid on 30 June 2020 to Shareholders on the register on 12 June 2020 with an ex-dividend date of 11 June 2020. The aggregate dividends paid and payable therefore in respect of the half-year represent a 2.0% increase over the first half last year.

https://www.theaic.co.uk/companydata/0P ... 3A07/4482O

Would you consider this a cut? 2.65p would have been the expected dividend if they followed the same pattern as previous years.

Scott.

[DavidM13]

Its an interesting catch. I wouldn't consider it a cut because I think dividends should be looked at over the course of the companies financial year. It would be pretty harsh to accuse a company of cutting their dividend at the same time as over the course of the year receiving more income than you previously did!

[Dod101]

It may not be a cut but it surely indicates much more caution than some ITs though. An interesting development when they appear to have significant Revenue Reserves. They must surely have done some forecasts and not much liked what they saw.

I do not hold.

Dod

[swill453]

Its an interesting catch. I wouldn't consider it a cut because I think dividends should be looked at over the course of the companies financial year. It would be pretty harsh to accuse a company of cutting their dividend at the same time as over the course of the year receiving more income than you previously did!

I agree it's a bit harsh. But I bet it's the first time they've had to aggregate six months income in order to show an increase over the previous year!

Scott.

[nmdhqbc]

From LWI (Lowland) half year report yesterday...

Lowland has pursued a progressive quarterly dividend policy since 2013. I said in my last annual statement that we were committed to maintaining this policy, with each quarterly declaration being no less than the previous year's equivalent, barring really adverse circumstances. That we face really adverse circumstances is clear. As greater clarity emerges on the timing and degree of recovery, the Board will consider whether we are able to maintain this policy. Aside from very substantial capital reserves, Lowland's revenue reserve, before payment of last year's third interim and final dividends, amounted to £18.4m at the financial year end, equivalent to 68p per share. We have added over £11m to the reserve since we last paid an uncovered dividend in 2010, when earnings were still recovering from the financial crisis. Revenue reserves are there for a rainy day. At present, it feels more like a thunderstorm, and we will have to make a judgement on whether we can maintain the policy. We are cognisant of shareholders' desire for regular income and it is our firm intention to maintain the policy if possible.



We declared a first interim dividend of 15p in January (2019: 14.5p), and the Board has today declared an unchanged second interim of 15p, thus far maintaining our policy.

Seem to be preparing us for the worst here.

[swill453]

Bit of a pattern emerging. Q1 dividends were increased from last year as expected. Subsequent dividends held to last year's level, so they're able to show a (slight) year-on-year increase overall.

Scott.

[LittleDorrit]

Law Debenture confirm intention to maintain level of quarterly dividend through current financial year (4.9% on todays SP of 535).
Reiterate contribution made by fiduciary arm.

https://www.londonstockexchange.com/new ... n/14568300

p.s. anyone else dislike the new LSE site?

[PinkDalek]

p.s. anyone else dislike the new LSE site?

Probably off topic for this board (thus your ps) but see viewtopic.php?f=56&t=23706 which probably mentions some alternatives.

[DavidM13]

Law Debenture confirm intention to maintain level of quarterly dividend through current financial year (4.9% on todays SP of 535).
Reiterate contribution made by fiduciary arm.

https://www.londonstockexchange.com/new ... n/14568300

p.s. anyone else dislike the new LSE site?

I hate it!! There is a news plug in at the AIC which I use https://www.theaic.co.uk/aic/news/announcements but the problem is it has a 1 hour delay for licensing reasons so if I want it fast I need to use LSE I now cant easily find what I want.

Having said that i thought the same when the BBC site changed and when they got rid of teletext!

[monabri]

If I worked for the AIC...I could think of an article regarding the merits of managed IT income funds v passives.... just sayin'

viewtopic.php?p=314990#p314990

viewtopic.php?p=316400#p316400


p.s. I made a comment on LWDB's reserve level elsewhere. If THEY had cut the dividend it would not have augured well for other trusts (well, certainly the UK ones based on the FTSE100/250 divi cuts- see HYP Practical board).