New City High Yield - Results

NCYF had been a part of my SIPP/ISA portfolio for a number of years.

It invests in high-yield fixed-interest securities and has produced positive NAV total returns and increased dividends in each of the past six years. The trust has a widely diversified portfolio, including some high-yielding convertibles and equities, with useful exposure to floating-rate notes to guard against inflation.

They have today issued full year results to 30th June 2016(link via Investegate)

Building on previous years modest 1.0% uplift, the Company's net asset value has again seen a modest increase of 1.0% although the share price return has increased by 4.7%. Investment returns were muted due to a slowdown in China’s growth combined with Eurozone concerns around Brexit.

Dividends have been increased to 4.36p (2015 4.31p) giving a yield of  around 7.3% based on the current share price of 60p. The dividend is more than covered by earnings of 4.50p per share however revenue reserves have reduced to 98.3% (last yr 113.5%) - the equivalent of 12 months current dividends.

As in previous years, the trust continues to trade at a premium to net assets and the management have place new shares raising £3.4m.

Compare NCYF with City Merchants (click to enlarge)

Ongoing charges for the year have increased significantly from 0.95% to 1.25% which leaves me to ponder whether I wish to continue holding. With a great deal of turbulence hitting the equity markets in recent weeks following the Brexit decision, its reassuring to have the steadying effect of the fixed interest constituents in my portfolio. However, the charges are a full 1.0% more than my Lifestrategy fund.

If sterling starts to recover, making the LS option more attractive then I may well cash in my chips with this one.

As ever, slow and steady steps…

Fall in Sterling Prompts Decision to Top-Slice

Since the momentous decision to leave the EU on 23rd June, the value of the UK pound has been under pressure. On the night it stood at $1.50 and has now fallen to $1.22 at the time of posting - a reduction of almost 20%.

On the plus side, the value of my largest holding, Vanguard Lifestrategy has seen a corresponding rise in price as the underlying holdings are priced in US dollars.

Over the past 25 years, the exchange rate has fluctuated between highs of ~$2.00 and troughs around $1.40. The long term average value of sterling is around $1.60, so at some point, I am expecting the pound to recover and move back towards this average level - according to the principle of reversion to mean. The pound may have further to fall, of course but sooner or later, it will bounce back, either as a result in the dollar becoming weaker or the pound regaining support as the Brexit story unfolds.

GBP v USD (courtesy of fxtop.com)

As I am more than happy with the 20% return from my VLS fund over recent months, I have decided to take profits from a part of my holding and have sold 25% of the fund which will now remain in cash awaiting developments.

VLS 60 1 Yr Chart (click to enlarge)

I know this is trying to second guess the markets - equity, bonds and currencies - but it just feels like a prudent step to lock-in some of the unexpected gains and leave the remainder to run.

I hope it turns out OK.

Tritax Big Box REIT - New Purchase

Over the past few months there have been several disposals to my sipp and ISA portfolios - shares and investment trusts - which has resulted in the accumulation of cash. The markets have been  riding high and sterling has slumped to a 30 yr low against the USD which, for the time being rules out a top-up of my Vanguard Lifestrategy fund.

For a little while I have been thinking it may be a good idea to add one or more property trusts to my portfolio. I was therefore interested in a relative newcomer to the scene. Tritax Big Box is the only Real Estate Investment Trust dedicated to investing in and funding the pre-let development of very large logistics facilities in the UK. The company believes these properties, known as Big Boxes, are one of the most exciting and highest-performing asset classes in the UK real estate market.

Big Boxes offer tenants economies of scale and cost savings not available from smaller, older buildings. They are also crucial to the efficient and effective operation of retailers, and in particular the fulfilment of e-commerce orders. Because the nature of what the companies use these buildings for is so fundamental to their very existence, Tritax is unlikely to suffer from unexpected vacancies.

Big Box have sought to distinguish themselves through the quality of location and modernity of their real estate assets let to high calibre tenants, which provide long term income and attractive prospects for growth.

The group hold a portfolio of distribution assets which are located close to motorways and are let to tenants including some of the leading supermarkets - Sainsbury, Tesco, Morrisons as well as M&S and Next. Some other tenants are:

Amazon - the world’s largest electronic and e-commerce retailer

Argos -  the UK’s leading multi-channel retailer, offering more than 33,000 products both on-line and in-store.

Brake Bros -  the number one food service distribution company in the UK

Ocado -  the world’s largest dedicated online grocery retailer.

Wolseley - the world’s number one distributor of heating and plumbing products

The UK has been one of the fastest global adopters of online retail and continues to exhibit significant growth in the sector, driving new demand for logistics real estate including Big Box assets. Successful large-scale retailers (online and conventional) and logistics providers are increasingly relying on the Big Box asset and demand is evident from companies up-scaling to such facilities.

Company

Tritax Big Box was first listed at the end of 2013 at an initial floatation price of 100p. Earlier this year it raised £200m (substantially over-subscribed) at 124p per share to secure further sites and at the current price of ~135p it is capitalised at £1.2bn.

The company now plan to raise an additional £150m to further expand the operation via a share offer at 132p per share.

The recent interim results for the half yr to end June showed an increase in profits of 62% with adjusted earnings per share up 16% at 3.2p.

Building on payouts for the previous two years of 4.15p in 2014 and 6.0p in 2015, the forecast dividend for the full year 2016 is 6.2p rising to 6.5p in the following year. At the placing price this provides a yield of 4.7%. The company are proposing quarterly dividend payments and will pay an interim dividend of 1.55p on 27th October . The Group's dividends are fully covered by adjusted earnings, which are underpinned by strong rental stream and low cost base.

The company aim for a total return of over 9% p.a. over the medium term. Current average annualised return for the past 3 yrs is 14.4% so well ahead of target.

3 Yr Price Chart (click to enlarge)

Purchase

I like what I have researched so far and I believe the model offered by Big Box which is basically tapping into a part of the online revolution, has potential for growth as well as a fairly secure dividend underpinned by the long leases and upward only rent reviews.

The view of Hargreaves Lansdown (11/8/16) - 'We view Tritax as a "get rich, slowly" scheme. It is not trying to shoot the lights out, simply to deliver a steadily increasing dividend. The prospective 5% yield on the stock is very attractive, compared to gilts or bank deposits currently. The attractions of Tritax are that it has modest leverage and high quality tenants, who occupy strategic assets on long lease terms. Tritax Big Box is one of our 5 Shares to Watch in 2016 for precisely those reasons'.

I have therefore placed my order to purchase some shares at the offer price of 132p and these will be included in my collectives income portfolio when next updated.

This article is a record of my personal investment thoughts/decisions and is not a recommendation - as always, please DYOR

Movember (Spread the Word!)

I regularly tune in to R4s PM and recently heard the BBC media correspondent, Steve Hewlett talking to Eddie Mair about his recent diagnosis with cancer of the oesophagus. It is rare to hear men talking candidly about such personal issues.

Some of you may have wondered why men suddenly start to grow silly moustaches at the end of the year. So I thought I would post this short article, provide an early heads-up and raise some awareness about the Movember charity and the work they do.

It started just over 20 years ago in Australia to raise awareness of prostrate cancer. It has grown quickly into a global movement funding over 1,200 projects.

Gender is one of the strongest and most consistent predictors of health and life expectancy - not good news for us men! On average, across the world, men die 6 years earlier than women.

Prostate cancer is the second most common cancer in men worldwide and the number of cases expected to almost double to 1.7 million cases by 2030.

The Movember Foundation is now helping projects which address not only prostate cancer but also testicular cancer, mental health and suicide prevention. They are the only charity doing this on a global scale.

Testicular cancer is the most common cancer in men under the age of 40. However, with an early detection, it has one of the highest cure rates - on average 95% of men survive where the cancer has not spread to other parts of the body.

Suicide affects men more than women: three quarters of suicides are by men. The World Health Organisation estimates that 510,000 men die from suicide globally each year. That’s one every minute.

For those who want to know more, here are links to the main areas of work:

Prostrate Cancer https://uk.movember.com/programs/prostate-cancer

Testicular Cancer  https://uk.movember.com/programs/testicular-cancer

Depression and Mental health  https://uk.movember.com/programs/mental-health

So, if you think it’s a worthwhile cause, there are lots of ways to get involved - spread the word, sign up for an event in your local area, make a donation, men grow a moustaches (and tell everyone why!).

Our fathers, partners, brothers and friends face a health crisis that isn’t being talked about. Men are dying too young. We can’t afford to stay silent.

Collectives Income Portfolio - Q3 Update

This is a brief portfolio update at the end of Q3 and following the amalgamation of my shares portfolio earlier in the year.

The starting capital for the shares portfolio was £36,000 and the starting capital for this portfolio was £28,000 - a combined total therefore of £64,000.

Although this is demonstration income portfolio, it largely mirrors my own holdings..


Performance & Disposals

My demonstration portfolio has now been running for almost 4 years. Many of the investment trusts have been there from the start - City of London, Aberforth, Edinburgh etc.

In August, I decided to slim down my holding in UK income trusts which resulted in the sale of Murray Income. In early September after a stellar run and gaining almost 50% since the start of this year, I decided to off-load the remainder of my holding in Murray International.

The portfolio has therefore made a little progress since 1st January. The value of the combined portfolios at the start of 2016 was £75,554 compared to the current value of £83,760 - a rise of £8,206 and total return of 10.8%.

The slight drag on performance has been the remaining individual shares which are collectively showing a total return of just 0.5% (Next -30%, L&G -13% and Berkeley -24%).

Since the last update a couple more shares have been sold - Tesco and BHP Billiton. I fully anticipate the remaining 5 shares will be sold at some point over the coming few months.

The total return for the FTSE All Share index year to date is 12.4%.

The various proceeds of sale remain in cash as I am struggling to find areas of value, particularly with regard to the fall of sterling and the rising level of the UK and US equity markets.

Income

Income from my portfolio rolls in fairly predictably, particularly from my investment trusts. I receive no natural income however from my largest holding Vanguard Lifestrategy and operate a method of selling units from the growth to provide ‘income’. This year I have sold 8% of my fund to cover enough income for this year and next.

I have put in place a cash buffer equivalent to 10% of the value of my VLS fund to cover bear market periods when returns are flat or negative. The cash is held in my Coventry BS account which has recently seen a reduction in interest to 1.15%.

Increased Broker Charges

For several years I have used AJ Bell Youinvest for my S&S ISA as they did not charge a platform fee for individual shares and investment trusts/ETFs. However, that all changes from 1st October and I now pay 0.25% of the value of my investments but capped at £30 p.a. This works out at around 0.06% extra on a portfolio value of £50K.

The charges for my Vanguard UK Equity Income fund have increased from 0.20% to 0.25% - an additional £5 p.a. So long as the cap on charges remains in place, I will carry on with AJ Bell for my trusts.

My Vanguard LS 60 fund remains with Halifax Share Dealing which has a flat fee annual charge of £12.50 and works out at 0.05% of my investment for platform fees.

Here is the portfolio

(click to enlarge)

As always, feel free to comment on the performance of your portfolio below…