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Dividend hero Value & Income jumps on founder Oakeshott’s property push

13 November 2020

Shares in the unusual 6.5% yielding UK equity and property portfolio have shot up 28% in the past week after the ‘dividend hero’ confirmed plans to increase its focus on real estate and re-build the strength of its payouts.

The depressed shares of Value & Income (VIN ), an unusual UK equity and property portfolio yielding 6.5%, have shot up 28% in the past week after the ‘dividend hero’ confirmed plans to increase its focus on real estate and re-build income support for its quarterly payouts.

Last week the board of the £85m trust said it had received notice from OLIM Ltd, the manager of its equity income portfolio, that it was being wound down by its parent Albion Capital and was giving notice to terminate its investment management contract on 31 January.

Half-year results two days later saw the company conclude the strategic review begun in September when Matthew Oakeshott (pictured below), VIN’s co-founder, chair of its property fund manager and leading shareholder, returned to the board.

VIN chairman James Ferguson said in the short term the company would ‘make modest use’ of its big capital reserves to maintain its dividend, but would subsequently aim to rebuild its earnings to increase dividend cover.

This would be partly achieved by refinancing its expensive 11% long-term debenture loan on a lower interest rate of 3.17%.

While a new fund manager for the equity portfolio would be found, Ferguson said the improvement in dividend cover would ’mainly be achieved by an increase in the property portfolio which is producing a high and reliable yield ... with 96% of rents collected over the past six months, 100% over the past quarter, and a robust capital performance’.

VIN, which has increased shareholder payouts for 33 years, is currently due to pay three quarterly dividends of 2.9p per share in the current financial year before declaring a fourth and final dividend in April.

In the six months to 30 September its net asset value (NAV) fell 3.8%, with its debt valued at par, but the shares rose 5.2%, just behind the 5.6% recovery in the FTSE All-Share index, as the trust’s previously wide 33% discount - or gap - between the share price and NAV started to narrow.

After a rally from 149p on 3 November the shares today at 191.9p, up 2.35% today, a rise of 28%, although they remain 29% below their January starting point and are down 3% over five years, even with dividends included in the total return.

At the end of September, VIN had 52% of its assets in equities, 41% in property, and 7% in cash.

Albion Capital, which bought OLIM Ltd from Close Brothers in 2016, blamed the closure of the subsidiary on its out-of-favour value investing style of investing.

‘OLIM has been a top quartile investor in mid to large-cap UK businesses for most of the past 30 years,’ it said.

‘However, many investors within this sector have faced unprecedented challenges in the current environment and the investment outlook for UK equities, as well as the value investing style that OLIM employs, led us to believe it is in the best interests of the clients to seek alternative investment management arrangements.’

Oakeshott, a former Lib Dem peer who is the trust’s largest shareholder with a 24.4% stake, is believed to be looking for properties with ‘long leases and good covenants’.

Numis analyst Priyesh Parmar said the NAV performance has been ‘disappointing’ this year and has failed to outperform its FTSE All Share benchmark with the equity portfolio ‘significantly underperforming in the Covid-19 sell-off given a value style and focus on high-yielding shares’.



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