UK companies well positioned to weather uncertainty
David Smith, Portfolio Manager of Henderson High Income, discusses the Company’s impressive dividend record, UK equity market valuations and areas where he is finding performance, the comeback of bonds, and the outlook for UK dividends in a recessionary environment.
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24 Feb 2023
1 minute listen
1 minute listen
Key takeaways:
- Henderson High Income has increased its dividend for 10 consecutive years, making it one of the AIC’s Next Generation Dividend Heroes. This success is underpinned by good quality companies with strong business models and balance sheets, whilst effectively utilising the investment trust structure.
- Yields on high quality government and investment grade corporate bonds have repriced to levels not seen in decades. This has presented us with an opportunity to increase our bond exposure, notably through high quality US and UK investment grade credit.
- The dividend outlook for the UK remains encouraging. Companies are entering the recession in good financial health and have solid balance sheets which should help them to weather difficult times whilst continuing to pay and grow dividends
Related insights
These are the views of the author at the time of publication and may differ from the views of other individuals/teams at Janus Henderson Investors. Any securities, funds, sectors and indices mentioned within this article do not constitute or form part of any offer or solicitation to buy or sell them.
Past performance does not predict future returns. The value of an investment and the income from it can fall as well as rise and you may not get back the amount originally invested.
The information in this article does not qualify as an investment recommendation.
Marketing Communication.
Important information
Please read the following important information regarding funds related to this article.
Before investing in an investment trust referred to in this document, you should satisfy yourself as to its suitability and the risks involved, you may wish to consult a financial adviser. This is a marketing communication. Please refer to the AIFMD Disclosure document and Annual Report of the AIF before making any final investment decisions.
- If a Company's portfolio is concentrated towards a particular country or geographical region, the investment carries greater risk than a portfolio diversified across more countries.
- Some of the investments in this portfolio are in smaller companies shares. They may be more difficult to buy and sell and their share price may fluctuate more than that of larger companies.
- This Company is suitable to be used as one component in several in a diversified investment portfolio. Investors should consider carefully the proportion of their portfolio invested into this Company.
- Active management techniques that have worked well in normal market conditions could prove ineffective or detrimental at other times.
- The Company could lose money if a counterparty with which it trades becomes unwilling or unable to meet its obligations to the Company.
- Shares can lose value rapidly, and typically involve higher risks than bonds or money market instruments. The value of your investment may fall as a result.
- The return on your investment is directly related to the prevailing market price of the Company's shares, which will trade at a varying discount (or premium) relative to the value of the underlying assets of the Company. As a result losses (or gains) may be higher or lower than those of the Company's assets.
- The Company may use gearing as part of its investment strategy. If the Company utilises its ability to gear, the profits and losses incured by the Company can be greater than those of a Company that does not use gearing.
- All or part of the Company's management fee is taken from its capital. While this allows more income to be paid, it may also restrict capital growth or even result in capital erosion over time.
Specific risks
24 Feb 2023
1 minute listen
1 minute listen
Key takeaways:
- Henderson High Income has increased its dividend for 10 consecutive years, making it one of the AIC’s Next Generation Dividend Heroes. This success is underpinned by good quality companies with strong business models and balance sheets, whilst effectively utilising the investment trust structure.
- Yields on high quality government and investment grade corporate bonds have repriced to levels not seen in decades. This has presented us with an opportunity to increase our bond exposure, notably through high quality US and UK investment grade credit.
- The dividend outlook for the UK remains encouraging. Companies are entering the recession in good financial health and have solid balance sheets which should help them to weather difficult times whilst continuing to pay and grow dividends