Henderson Far East Income Ltd (LON:HFEL) seeks to blend the superior growth prospects of investing in Asia with a focus on generating a high income. With a current dividend yield of 6.9%, it is comfortably the highest yielding of its close peer group, and manager Michael Kerley also sees potential for double-digit dividend growth in the portfolio over the next 12 months. Capital performance has been more muted in a period of volatility as investors have focused on the risks arising from a slowdown in China, but NAV total returns in the half-year ended 29 February 2016 were positive in absolute terms and ahead of the FTSE Asia Pacific Ex Japan benchmark. Having traded at an average premium to NAV of 0.6% since launch in 2007, the fund currently stands at a small discount.
Investment strategy: High income with income growth
HFEL is managed by Michael Kerley of Henderson Global Investors (based in London), supported by a team in Singapore. To arrive at a focused portfolio of 40-60 stocks chosen for total return potential, the manager sifts the universe using quant screens, macro analysis, company meetings and industry intelligence. Candidate stocks are analysed using a proprietary discounted cash flow model focusing on quality and sustainability of earnings, as well as valuation. Kerley seeks a balance between high-yielding stocks and those with high dividend growth potential, and the portfolio is unconstrained by index sector or geographical weightings.
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