Fund Research

Chelverton UK Dividend Trust

Last update 05 August 2019

This is independent research. The analyst who has prepared this research is not aware of Kepler Partners LLP having a relationship with the company covered in this research report and/or a conflict of interest which is likely to impair the objectivity of the research and this report should accordingly be viewed as independent.

Investment objective

The investment objective of the Company is to provide Ordinary shareholders with a high income and opportunity for capital growth...

As at:

30/07/2019

Group/Investment

Chelverton UK Dividend Trust

Ticker

SDV

Management Company

Chelverton Asset Management Ltd

Manager Name

David Horner; David Taylor;

Association of Investment Companies (AIC) Sector

UK Equity Income

12 Mo Yield

5.3%

Dividend Distribution Frequency

Quarterly

Latest Market Capitalisation

£35,549,250

Latest Net Gearing (Cum Fair)

59%

Latest Ongoing Charge Ex Perf Fee

1.98%

Turnover Ratio

21.2%

Shares Outstanding

20,850,000

(Discount)/ Premium (Cum Fair)

-14.3%

Daily Closing Price

170.5p

Chelverton UK Dividend Trust (SDV) is first and foremost an income fund offering quarterly dividends in excess of inflation over the medium to long term. The company also aims to provide investors with the opportunity for capital growth after providing a return that is sufficient to repay the zero-dividend preference (ZDP) shares.

At the helm of the portfolio are lead manager David Horner and co-manager David Taylor, who look for companies with a prospective dividend yield of at least 4% and sit outside the FTSE 100. The team specialises in the mid and small-cap income space and, according to Morningstar, have 70% of the portfolio in micro-cap stocks and a further 27.6% in small caps. The average company size in the portfolio sits at just £191m.

The trust currently yields 5.3%, considerably more than the weighted average in the UK Equity Income sector, which yields 3.9%. From this financial year (2020), dividends will be paid equally across quarterly interim payments, and the board anticipates paying a total of 9.6p for the current year. At the current share price, this equates to a yield of 5.5%. The board has also announced that once the trust’s revenue reserves are equal to double the historic dividend, the company will stop adding to reserves and distribute all further income as special dividends. As at of the end of financial year 2019, the trust had revenue reserves of 19.19p per share, 199% of the expected financial year 2020 annual dividend.

Alongside generating strong income, long-term performance figures for the trust have been exceptional. Over a ten-year period, the trust has delivered 375% in NAV total returns, considerably more than the MSCI UK Small Cap sector, at 256.5%, the AIC UK Equity Income sector, at 205.8%, and the IA UK Equity Income sector, at 149.3%. With this said, returns have been rocky over the medium and short term. Much of this is due to the trust being highly geared through ZDPs, which has meant that the corrections in 2016 and 2018 hit the trust particularly hard. Since the start of the year, the trust has generated a NAV total return of 5.7%, trailing the benchmark and peer group by some margin, which returned 16.8% and 14.6% respectively.

Currently the trust trades on a discount of 14.3% compared to the UK Equity Income sector weighted average of 4.6%

William Sobczak

This report has been issued by Kepler Partners LLP for communication only to eligible counterparties and professional clients as defined by the Financial Conduct Authority.  Its contents may not be suitable for and are not to be communicated to or be relied on by retail clients. It is not an indication as to the suitability or appropriateness of investing in the security or securities discussed.

Past performance is not a reliable indicator of future results. The value of investments can fall as well as rise and you may get back less than you invested when you decide to sell your investments.

The information provided on this website is not intended for distribution to, or use by, any person or entity in any jurisdiction or country where such distribution or use would be contrary to law or regulation or which would subject Kepler Partners LLP to any registration requirement within such jurisdiction or country. In particular, this website is exclusively for non-US Persons. Persons who access this information are required to inform themselves and to comply with any such restrictions.

The information contained in this website is not intended to constitute, and should not be construed as, investment advice. No representation or warranty, express or implied, is given by any person as to the accuracy or completeness of the information and no responsibility or liability is accepted for the accuracy or sufficiency of any of the information, for any errors, omissions or misstatements, negligent or otherwise. Any views and opinions, whilst given in good faith, are subject to change without notice.

This is not an official confirmation of terms and is not a recommendation, offer or solicitation to buy or sell or take any action in relation to any investment mentioned herein. Any prices or quotations contained herein are indicative only.  

Kepler Partners LLP (including its partners, employees and representatives) or a connected person may have positions in or options on the securities detailed in this report, and may buy, sell or offer to purchase or sell such securities from time to time, but will at all times be subject to restrictions imposed by the firm’s internal rules. A copy of the firm’s Conflict of Interest policy is available on request.

PLEASE SEE ALSO OUR TERMS AND CONDITIONS

Kepler Partners LLP is authorised and regulated by the Financial Conduct Authority (FRN 480590), registered in England and Wales at 9/10 Savile Row, London W1S 3PF with registered number OC334771.


More Research

Welcome to Kepler Trust Intelligence

Kepler Trust Intelligence is authorised in the UK by the Financial Conduct Authority.
Please enter a valid email address
{{item.msg}}
Please enter a valid password
{{item.msg}}
Please enter a valid email address
{{item.msg}}
Please check your email. If an account exists you'll be sent instructions on how to reset your password.
Kepler Trust Intelligence is authorised in the UK by the Financial Conduct Authority. To ensure that we are able to provide content which is appropriate for you, please tell us a little about yourself.
Please choose an option
{{item.msg}}
Please enter a company name
{{item.msg}}
Please enter a location name
{{item.msg}}
Please choose an option
{{item.msg}}
Please enter a platform
{{item.msg}}
Please choose an option
{{item.msg}}
Please select a range
{{item.msg}}
Please enter a trust
{{item.msg}}
?
The information contained herein is not for distribution and does not constitute an offer to sell or the solicitation of any offer to buy any securities in the United States to or for the benefit of any United States person (being residents of the United States or partnerships or corporations organised under the laws thereof). The investment funds referred to herein have not been registered in the United States under the Investment Company Act of 1940 and units or shares of such funds are not registered in the United States under the Securities Act of 1933.
Please confirm
{{item.msg}}
View an example
Please select an option
{{item.msg}}
See benefits
A free Kepler Trust Intelligence account allows you to access premium content including the ‘Kepler View’ – our verdict on the trusts we cover – and historical research so you can see how our view has changed over time. An account also unlocks useful facilities like the ‘follow’ button which lets you keep track of the trusts you’re interested in and as a logged in user you can also download PDFs of our research, and choose the layout of the page you’re reading to suit your preference. We will not share your details unless you give us permission to do so, and we won’t bombard you with emails – we only send one a week.
Please select an option
{{item.msg}}
Please enter your first name
{{item.msg}}
Please enter your last name
{{item.msg}}
Please enter a valid email address
An account already exists with this email - have you forgotten your password?
{{item.msg}}
Please enter a valid password
{{item.msg}}
Please enter a valid password
{{item.msg}}
Your answers help us to tailor our content to relevant investment trusts, and to ensure that the asset allocation and portfolio strategy research we produce is appropriate to our userbase. We do not share your personal information and your answers are not linked to your identity for marketing purposes.
Need help?

One more thing...

Did you know, you can 'follow' individual trusts on Kepler Trust Intelligence? Use the functions below to set up alerts and we'll send you research and updates on your chosen trusts.

Suggested trusts to follow

Browse all funds
Need help?
Current Site Kepler Trust Intelligence is produced by the investment companies team at Kepler Partners and is the UK’s premier source of detailed qualitative research on investment trusts. Absolute Hedge is a market leading UCITS research database providing proprietary research on funds, themes and strategies in the UCITS space. Kepler Liquid Strategies is a Dublin domiciled UCITS fund platform featuring a number of best-of-breed fund managers. Kepler Partners is a corporate advisory and asset raising boutique specialising in the regulated funds market in Europe and investment trusts in the UK.