Fund Research

Henderson Far East Income

Last update 19 February 2019

Henderson Far East Income (HFEL) aims to generate a rising dividend stream from equities in Asia, including Australasia but excluding Japan.

The trust currently yields 6.3%, significantly higher than all of its closed-ended rivals and higher than all but one open-ended equivalent trust. Using the ability of closed-ended trusts to hold back income in reserves, which open-ended funds don’t share, the trust has managed to increase its dividend in each of the past ten years. At the same time, it has increased its reserves to 63% of last year’s dividend payout.

The trust’s tilt to defensive, dividend-paying sectors helped it outperform in 2018, although it underperformed in the growth and cyclicals-led rally in 2016 and 2017. Manager Michael Kerley runs a portfolio which is differentiated from most Asia Pacific ex. Japan trusts in terms of its dividend focus, tendency to be underweight software and internet stocks, and willingness to buy state-owned enterprises in China, which helps boost the yield on the trust.

Thanks to its strong income track record, the company has traded on a premium for most of the past five years, and has therefore been issuing equity regularly. The premium has come down slightly in recent months to 1.6%.

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