HL SELECT UK INCOME SHARES

Full Year Dividend

Managers' thoughts

Important information - The value of this fund can still fall so you could get back less than you invested, especially over the short term. The information shown is not personal advice and the information about individual companies represents our view as managers of the fund. It is not a personal recommendation to invest in a particular company. If you are at all unsure of the suitability of an investment for your circumstances please contact us for personal advice. The HL Select Funds are managed by our sister company HL Fund Managers Ltd.

Steve Clayton - Fund Manager

30 October 2017

The latest dividend for the HL Select UK Income Shares fund should be paid into investors’ accounts any day now, and we are on track to hit our target of paying 3.9p per unit in the first twelve months. So far, we’ve been paying 0.3p per unit per month, but this month’s payment will be 0.724p. Here’s why it’s bigger and how it all works.

Regular income and a potential bonus

Unlike most funds the HL Select UK Income Shares fund pays dividends monthly. While the level of income cannot be guaranteed we realise the value of a regular income stream so we aim to pay a level dividend for eleven months of each financial year. Then we pay a variable final* payment consisting of all the income received during the year, which has not already been paid to investors.

(*We call this the final dividend because the fund’s financial year ends in September. As our dividends are declared at the end of one month but paid at the end of the following month, the final dividend declared in September is paid in late October.)

So far, we have been paying regular dividends at a pace of 0.3p per month. This year’s variable, final dividend which you are about to receive, is 0.7240p per unit. That will ensure all the income received by the fund will have been paid to investors.

Will I always receive a large dividend at the end of October?

The fund’s income comes from dividends and any other sums paid by our companies. All dividends are variable and not guaranteed, and some companies also pay occasional special dividends. By their nature, these can be unpredictable, so we try to ignore them when we calculate the size of our regular monthly payments.

Hopefully, that means we will be able to pay a larger final dividend at the end of each October. But the size of this payment will vary.

I hold accumulation units - Where’s my dividend?

Please remember, if you chose to invest in the accumulation units, your dividends have been rolled back up into the units, which is why the price of accumulation units is higher than those of income units, which pay the dividends back to the investor.

On track for our income target

The fund launched in March this year and the overall income received has been quite strong. There have been big differences amongst our holdings in the pace of dividend growth they have announced. For those who haven’t had a chance to read Charlie’s blog, most have increased their payments, which has helped to make up for the one investment that cut its dividend.

When we launched the fund, we set a target dividend for the first twelve months of 3.9p per unit. Our intention is to continue declaring 0.3p per month from October (to be distributed in late November, and so on).

As a result in the first twelve months we expect to pay a total of just over 4p per unit, a little ahead of our initial target. Although, as always there are no guarantees.

Outlook

Looking forward, we are confident on the income prospects for the fund. The UK economy may be facing challenges, but much of the income earned by the companies in the fund comes from overseas. That means that whatever happens at home, the fund is protected to a degree by that overseas exposure.

View portfolio breakdown

More about HL Select UK Income

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for more information. Unless otherwise stated performance figures are from Bloomberg and estimates, including prospective yields, are a consensus of analyst forecasts from Bloomberg. They are not a reliable indicator of future performance. Yields are variable and not guaranteed.