Invesco Perpetual Enhanced Income Limited has announced its annual results for the 12-months ended 30 September 2015. During the period, the NAV per share fell 5.4% whilst its share price fell 6.2%. However, including income, the Company’s portfolio has generated a NAV total return of +1.5%. The company says that this compares to a total sterling hedged return for the European high yield market of 1.4%, for the sterling investment grade corporate bond market of 3.9%, and for the Gilt market of 8.6%.
The board says that, in the current low interest rate environment, they continue to believe that shareholders place great value on the Company’s dividend stream and they have “prioritised revenue generation through investment in relatively high-yielding and secure debt positions”. A fourth interim dividend of 1.25p per share was declared by your Board on 29 September 2015, giving total dividend for the year of 5p (2014: 5p). The Board intends that the Company will maintain an annual dividend of not less than 5p per share, paid equally and quarterly, in the absence of unforeseen circumstances. In terms of income generation, the portfolio provided revenue income of 4.9p per share and that this was only just short of the 5p dividend for the year. Accordingly, £173,000 has been used from retained revenue reserves. However, revenue reserves, retained after payment of the year’s dividend, represent the equivalent of just under two years of annual dividends.
The managers say that, in terms of positioning they remain defensive and the portfolios exposure is positioned towards higher quality, well established high yield issuers that they consider to be default remote. They also say they have levels of liquidity and that many of the holdings are in the financial sector, particularly subordinated bank capital where the largest exposure is to Additional Tier 1 bonds. The managers consider that the creditworthiness of the banking sector overall has improved significantly since the global financial crisis and they consider that these securities continue to provide a reasonable level of income for the risk.
In terms of outlook, the managers say that, after many years where value has been hard to find, recent market volatility has brought some yield back into the high yield bond market. They say they are closely monitoring the high yield market for opportunities although it is probably still too early to materially increase exposure. In some cases the higher yields the managers are now seeing are justified, in their view, particularly amongst those companies with direct commodity or emerging market exposure. The managers say that they are focusing their research efforts on companies outside of these groups where the balance of risk and reward has become more attractive. They say that security selection remains fundamental.
Invesco Perpetual Enhanced Income prioritising revenue generation whilst remaining defensively positioned : IPE