Henderson Far East Income (HFEL) announced its annual report for the year ended 31 August 2024. The company delivered a NAV total return of 11.9%, trailing the benchmark MSCI AC Asia Pacific ex Japan High Dividend Yield Index which returned 17.4%. The share price total return was 16.6%, with shares trading at a premium of around 3% at the time of publishing. The underperformance was mainly due to the benchmark’s weighting in high yield state owned enterprise stocks in China such as the large-cap banks which outperformed the market. The re-positioning of the portfolio towards markets such as India and Taiwan and increased technology exposure whilst reducing China has had a positive impact on performance with the company’s bias to value and income ideas broadly keeping pace with more growth-oriented indices.

The company also maintained its 17-year track record of increasing dividends. A total dividend of 24.60p has been paid in respect of the year ended 31 August 2024, representing a 1.7% increase over the prior year for a current yield of over 10%. The company also noted that the dividend has been fully covered by portfolio revenues during the financial year.

Discussing the results and the outlook for the trust, chairman Ronald Gould commented:

“A key challenge for our region remains the lacklustre performance of the Chinese economy, burdened as well by geopolitical cross-currents that have made many Chinese companies univestable for some foreign investors. Our reduced China exposure has benefitted performance this year. Recent stimulus efforts by the Chinese government have been cautiously well-received by investors but it is unclear whether these measures will be enough to sustainably improve economic and corporate performance. We will monitor developments and do not rule out an increased China exposure in response to depressed valuations and high dividend yields.

“Outside of China the picture is much clearer in Asia. With strong macro-economic performance from countries like India and Indonesia, world class technology companies in Taiwan, widespread infrastructure build-out and high stable dividends from mature markets such as Australia and Singapore, the region continues to offer outstanding investment opportunities for growth and income. The region offers a compelling mix of growth and income for investors seeking high dividends with capital protection from quality companies with strong free cash flow and solid balance sheets alongside participation in attractive investment themes.

“Better performance in Asian markets combined with a weaker US dollar has recently improved sentiment towards the region among global investors. If we do indeed see a sustainable stimulus programme in China then the outlook will improve further. The attractive relative valuations of many Asia-Pacific markets along with their growth and income prospects are likely to attract global investors as we look ahead, especially given the exciting investment themes in technology, infrastructure, financial inclusion and corporate reform.”

HFEL : Henderson Far East Income capitalises on strong Asian returns