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How European smaller company shares have outperformed over time


Henderson High Income Trust plc

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For high income, look beyond the headlines

The economic headlines may be filled with bad news, but from an investment perspective, the outlook is more positive. Here, we discuss three stocks Henderson High Income Trust is looking to for income this year...

You may have noticed that the UK officially entered a recession at the end of 2023. However, not all recessions are built the same. A ‘recession’ means that the economy recorded two three-month periods of negative growth. This, by its nature, is based on backward-looking data.

When it comes to investing though, markets look ahead, trying to predict what will happen next. And certain data available now is suggesting that this recession could be short lived. Inflation has gradually fallen from its peak in October 2022. This means that interest rates are widely forecast to be cut this year. Unemployment remains relatively low and wage growth is healthy.

This positive data influences our investment decisions. Rather than looking at recession-proof businesses, we are looking to companies that could do well in an economic recovery. Crucially for income investors, some of these pay attractive dividends already, which could see a further boost in good conditions.

Resurging recruitment: PageGroup

PageGroup is one of the world’s leading recruiters. It focuses on permanent placements in a range of roles and industries, including finance & accounting, technology, legal and sales & marketing.  A recovering economy should give businesses the confidence to start hiring again.

Given PageGroup’s strong brand and market position, it should be a direct beneficiary of this. The management team is also working to make the business more productive. This should potentially lead to higher margins as any economic recovery comes through.

The company has historically generated high cash levels. As a result, it already pays an attractive dividend, which is supplemented by extra payments in more buoyant times.

The makers’ maker: Vesuvius

Vesuvius manufactures production-related solutions for the steel and casting industries. An improving global economy should see a rise in steel demand, as industrial activity increases.

During the recent downturn, the company has been conserving costs. As such, rising demand could push a significant recovery in its margins and profits. The company pays a robust dividend, already well covered by its free cash flow.

Homing in on households: Dunelm

Dunelm is a market leading homewares retailer in the UK. The company has done well in tougher times, gaining market share due to its value offering.

However, it should potentially benefit as the economy and housing market improves as it has broadened its product offer to appeal to a wider range of customers. The company’s strong cash generation supports a healthy ordinary dividend, which is topped up with special dividends.

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

Economic cycle – The fluctuation of the economy between expansion (growth) and contraction (recession), commonly measured in terms of gross domestic product (GDP). It is influenced by many factors, including household, government and business spending, trade, technology and central bank policy. The economic cycle consists of four recognised stages. ‘Early cycle’ is when the economy transitions from recession to recovery; ‘mid-cycle’ is the subsequent period of positive (but more moderate) growth. In the ‘late cycle’, growth slows as the economy reaches its full potential, wages start to rise and inflation begins to pick up, leading to lower demand, falling corporate earnings and eventually the fourth stage – recession.

Free cash flow (FCF) – Cash that a company generates after allowing for day-to-day running expenses and capital expenditure. It can then use the cash to make purchases, pay dividends or reduce debt.


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.

Not for onward distribution. 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. 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. Tax assumptions and reliefs depend upon an investor’s particular circumstances and may change if those circumstances or the law change. Nothing in this document is intended to or should be construed as advice. This document is not a recommendation to sell or purchase any investment. It does not form part of any contract for the sale or purchase of any investment. We may record telephone calls for our mutual protection, to improve customer service and for regulatory record keeping purposes.

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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.
  • Where the Company invests in assets that are denominated in currencies other than the base currency, the currency exchange rate movements may cause the value of investments to fall as well as rise.
  • Most of the investments in this portfolio are in smaller companies 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.
  • Using derivatives exposes the Company to risks different from - and potentially greater than - the risks associated with investing directly in securities. It may therefore result in additional loss, which could be significantly greater than the cost of the derivative.
  • If the Company seeks to minimise risks (such as exchange rate movements), the measures designed to do so may be ineffective, unavailable or negative for performance.