abrdn Asian Income Fund says it will introduce an enhanced annual dividend policy of 6.25% of its average NAV (currently equating to a dividend yield of 7.1% based on the share price). In addition it will provide investors with a continuation vote every three years.

Under these proposals, the dividend for the fourth quarter of 2024 will be 6.78p, making a total of 14.43p for the year, an increase of 22.8%.

The board is keen to make the company’s shares even more attractive to a wider range of investors. This move recognises that investors appear to have a continued appetite for yield in the current interest rate environment. [The contrast between abrdn Asian Income’s discount of 12.5% ahead of the announcement and Henderson Far East Income’s premium of 3.3%, despite the abrdn fund’s vastly superior returns, seems proof of that. Over five years, the abrdn trust has made investors an average of 5.77% per year in NAV total return terms, whereas the Henderson trust has lost invetors an average of 1.03% per year.]

The dividend will be set at 1.5625% per quarter of the NAV on the last business day of the preceding financial quarter (i.e. the end of March, June, September and December). The first dividend payment to be made under the enhanced policy will be in May 2025, for the quarter ended 31 March 2025. Dividends will therefore be subject to market and performance fluctuations and will vary from quarter to quarter, in line with underlying earnings, currency movements and changes in the portfolio value. As is currently the case, in years when the net revenues fall below the level required for a fully covered dividend, dividends will be funded from a combination of revenue and capital reserves thus using one of the key benefits of the investment company structure.

There will be no change to the investment process nor to the company’s strategy as a result of the new policy. The statement says that the enhanced dividend policy reflects the board’s confidence in the long term robust opportunities in Asian markets, where dividend yields and growth have outpaced those of Europe and the US. It says that over 50% of total returns in Asian equities are now driven by dividends. Companies in the region are said to be demonstrating stronger balance sheets and increasing free cash flow coverage for dividends. Given this, it feels that the potential for rising payout ratios is compelling.

Continuation vote

The board is also introducing a continuation vote, the first of which will first be tabled at the annual general meeting in 2028, and every three years thereafter. Shareholders will be asked by simple majority vote if they wish the company to continue in its current form. In the event that the vote should fail, further proposals will be brought to shareholders regarding the future of the company.

AAIF : abrdn Asian Income announces enhanced dividend policy