Henderson High Income outperforms in 2017 – Henderson High Income beat its benchmark (80% the All-Share and 20% a gilts index) by 2% in 2017. Unfortunately though, its discount widened and the return to shareholders was 8.7% against 11.4% for the benchmark. the trust expanded by £32m as it absorbed Threadneedle UK Select and also issued some shares. They increased the third dividend for the financial year ending 31 December 2017 to 2.375p and announced the fourth dividend at the same level, making a total of 9.40p per share for 2017, growth of 2.7% on the previous year.
Extract from the manager’s report
“Although the equity portfolio rose 11.5% during the year, it struggled to keep up with the strong return of the FTSE All-Share Index. Despite the portfolio benefitting from positions in financials and multinational companies, the performance of certain domestic cyclical stocks hindered returns. On the positive side, the Company’s holdings in Intermediate Capital, Jupiter Fund Management and Victrex aided performance. Intermediate Capital and Jupiter both reported strong inflows into their investment funds during the period, which helped deliver good profit growth. Victrex announced robust results and their intention to pay a 68p per share special dividend. The shares were also supported by a favourable change in the company’s tax rate, due to UK patent legislation which encourages UK research and development. Not all domestic stocks were weak in 2017, with those linked to the strong housing market, such as homebuilder Persimmon and building materials manufacturer Marshalls, performing well.
On the negative side, the Company’s positions in BT Group and ITV detracted from returns. BT discovered an accounting fraud in its Italian division while ITV experienced a slowdown in advertising spending. Within travel & leisure the Company’s holdings in Go-Ahead and Greene King were also detrimental to performance. Go-Ahead underperformed due to ongoing strike issues on its GTR rail franchise and weakness in its bus operations. Greene King also announced lacklustre trading, highlighting consumer weakness and price competition in the casual dining out market.
The fixed income portfolio had another strong year returning 13.4%, outperforming the 4.3% return from the ICE BofAML Sterling Non-Gilts Index. The portfolio benefitted from its exposure to high yield bonds given their outperformance over investment grade credit and government bonds in the period. The portfolio’s holdings in financial bonds, such as Nationwide Building Society and Barclays Bank, were also positive for performance as investors sought their attractive coupons.”
HHI : Henderson High Income outperforms in 2017