What is better than a high-yield income share? A high-yield share that keeps growing its dividend!
In recent years that has been an accurate description of one particular FTSE 250 investment trust.
History is not necessarily an indicator of what will happen in future. Still, could things perhaps keep going the way they have been?
Close to a double-digit yield
The share in question is Henderson Far East Income (LSE: HFEL).
It pretty much aims to do what it says on the tin, investing in companies operating in Asia Pacific with the aim of generating cash it can use to fund dividends.
Indeed, as the trust managers say, it “seeks to provide shareholders with a growing total annual dividend per share, as well as capital appreciation”.
Currently, the yield is 9.6%. That puts it among the ranks of high-yield shares in the FTSE 250.
A mixed long-term performance
Not only that, but the trust has been growing its annual dividend each year for well over a decade. It aims to keep doing so, though no share can ever guarantee that its dividend will keep going.
As an income share, then, this has been doing well. But capital gain or loss is also a factor investors need to consider, even when they are buying shares with income as their main focus.
Here, the picture is more mixed.
Over the past year, the Henderson Far East Income share price growth of 28% has outpaced the 20% growth in the wider FTSE 250.
But stepping back and taking a five-year view, we see that while the FTSE 250 has inched up 3% during that period, this particular share has fallen 22%.
A dividend share to consider
That long-term price fall has helped push the dividend yield up.
Still, less positively, the share now sells at a premium of 7% to its net asset value. So, is it still worth considering for an investor looking to grow their passive income streams?
I think the answer is yes.
In general I do not like paying a premium to net asset value.
However, over time, Henderson Far East Income has proven itself as a well-managed, diversified investment trust that has managed to convert growth in Asian economies into chunky dividends for its shareholders.
There are risks, such as the potential for weakening industrial demand in China as higher oil prices pinch.
But as the fund manager said last week specifically in the context of discussing the Middle Eastern war, “the growth drivers of our markets are broad based and have already demonstrated resilience in uncertain times”.
In the short- to medium-term that thesis may be tested. Over the long run, though, I remain upbeat about the share’s income potential.
