How we buy for income – Henderson High Income Trust | Janus Henderson Investment Trusts

How we buy for income – Henderson High Income Trust

Ever wondered how Henderson High Income Trust buys to generate income? This article sheds light on the fund manager’s decision making and strategy.

Henderson High Income takes a distinct approach to generating income – combining equities and bonds into a single portfolio. We use our bond allocation to provide a reliable income stream. We then use our equities to provide potential income and capital growth.

So, how do we choose those equities?

We ask ourselves three core questions:

What are the company’s key attributes?
Is it in strong financial health?
What’s the company worth?

When we ask these questions, we’re looking for some specific answers.

In answer to question 1 – what are the company’s key attributes – typically we look for understandable business models and a defendable competitive position.

For question 2, we seek good cash generation and a strong balance sheet.

To determine what a company is worth, we assess various valuation metrics including its share price relative to its earnings (its P/E ratio) and its dividend yield.

Example: Reckitt Benckiser

Reckitt Benckiser has been part of the portfolio since Autumn 2024. The company meets a lot of our criteria.

The company owns recognisable brands such as Nurofen, Dettol and Vanish. Some of these brands are leaders in their categories, giving them a durable market position. The business model is clear and these products are those that typically don’t fall out of favour in challenging periods.

It also has a strong track record of generating cash and typically pays out a high proportion of this to shareholders – with a dividend yield of 4.1%.

Finally, in early 2024 the company went through a share price fall. Its valuation fell to a 14x P/E ratio, (its share price vs its earnings) significantly below its 20 year average of 18x. Having met management and analysed the stock closely, we were confident that there was no deterioration in its key attributes and financial health to justify its current low valuation. As a result, we invested.

Discrete year performance (%)	Share price (total return)	NAV (total return)
30/06/2024 to 30/06/2025	22.64	14.88
30/06/2023 to 30/06/2024	2.26	13.56
30/06/2022 to 30/06/2023	8.30	7.66
30/06/2021 to 30/06/2022	-2.21	0.16
30/06/2020 to 30/06/2021	28.79	21.42

All performance, cumulative growth and annual growth data is sourced from Morningstar.

Source: at 30/06/25. © 2025 Morningstar, Inc. All rights reserved. The information contained herein: (1) is proprietary to Morningstar and/or its content providers; (2) may not be copied or distributed; and (3) is not warranted to be accurate, complete, or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information. Past performance does not predict future returns.

Glossary

Balance sheet

A financial statement that summarises a company’s assets, liabilities and shareholders’ equity at a particular point in time. Each segment gives investors an idea as to what the company owns and owes, as well as the amount invested by shareholders. It is called a balance sheet because of the accounting equation: assets = liabilities + shareholders’ equity.

Bond

A debt security issued by a company or a government, used as a way of raising money. The investor buying the bond is effectively lending money to the issuer of the bond. Bonds offer a return to investors in the form of fixed periodic payments (a ‘coupon’), and the eventual return at maturity of the original amount invested – the par value. Because of their fixed periodic interest payments, they are also often called fixed income instruments.

Dividend

A variable discretionary payment made by a company to its shareholders.

Equity

A security representing ownership, typically listed on a stock exchange. ‘Equities’ as an asset class means investments in shares, as opposed to, for instance, bonds. To have ‘equity’ in a company means to hold shares in that company and therefore have part ownership.

Price-to-earnings (P/E) ratio

A popular ratio used to value a company’s shares, compared to other stocks, or a benchmark index. It is calculated by dividing the current share price by its earnings per share.

Portfolio

A grouping of financial assets such as equities, bonds, commodities, properties or cash. Also often called a ‘fund’.

Valuation metrics

Metrics used to gauge a company’s performance, financial health and expectations for future earnings, eg. price to earnings (P/E) ratio and return on equity (ROE).

Yield

The level of income on a security over a set period, typically expressed as a percentage rate. For equities, a common measure is the dividend yield, which divides recent dividend payments for each share by the share price. For a bond, this is calculated as the coupon payment divided by the current bond price. For investment trusts: Calculated by dividing the current financial year’s dividends per share (this will include prospective dividends) by the current price per share, then multiplying by 100 to arrive at a percentage figure.

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. References made to individual securities do not constitute a recommendation to buy, sell or hold any security, investment strategy or market sector, and should not be assumed to be profitable. Janus Henderson Investors, its affiliated advisor, or its employees, may have a position in the securities mentioned.

Before investing in an investment trust referred to in this article, you should satisfy yourself as to its suitability and the risks involved, you may wish to consult a financial adviser. Please refer to the AIFMD Disclosure document and Annual Report of the AIF before making any final investment decisions. Tax assumptions and reliefs depend upon an investor’s particular circumstances and may change if those circumstances or the law change.

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.

There is no guarantee that past trends will continue, or forecasts will be realised.

Marketing Communication.

Glossary

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.

Specific risks

If a Company's portfolio is concentrated towards a particular country or geographical region, the investment carries greater risk than a portfolio that is diversified across more countries.
Some of the investments in this portfolio are in smaller company shares. They may be more difficult to buy and sell, and their share prices may fluctuate more than those of larger companies.
This Company is suitable to be used as one component of several within a diversified investment portfolio. Investors should consider carefully the proportion of their portfolio invested in this Company.
Active management techniques that have worked well in normal market conditions could prove ineffective or negative for performance 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 (borrowing to invest) as part of its investment strategy. If the Company utilises its ability to gear, the profits and losses incurred 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.

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