Fidelity Asian Values announces ‘step-change’ in payouts 

A reassessment of FAS’s fee allocation has powered a 41% uplift in its dividend.

Fidelity Asian Values (FAS ) has proposed a significant uplift to its next payout after reviewing how it allocates management and finance costs between capital and revenue accounts. 

In full year results to the end of July, the trust proposed a final dividend of 20.5p per share, up 41.4% on last year. 

The figure is subject to approval by shareholders at the annual general meeting next month and if approved, will be paid out 11 December. 

Historically, 100% of management and finance costs were charged to the revenue account, but given that the trust’s investment strategy focuses primarily on long-term capital growth, directors concluded that a 75:25 split between capital and revenue was ‘more appropriate’.

Since transitioning, the board said it has seen a ‘step-change in the level of dividends proposed’.

The results detailed that the trust’s dividend has more than doubled over the past four years, with the managers’ value-oriented approach tending to favour unleveraged, cash-generative businesses, which has naturally helped to grow portfolio income.

However, they also stressed that income is not the trust’s primary objective.

‘We would remind shareholders that portfolio dividend income continues to be an output rather than an aim of the investment process, and accordingly the level of future dividends for the company’s shareholders may vary.’ 

The reallocation brings FAS into line with other Asia Pacific smaller companies funds and was prompted by a review of both shareholder feedback and peer activity. 

Dividends aside, the trust performed strongly over the 12 months, delivering a net asset value (NAV) total return of 12.4%, landing it comfortably ahead of the 7.1% gain from its MSCI All Countries Asia ex Japan Small Cap benchmark.

The share price total return was even better at 17%, reflecting a narrowing of the discount. 

Managers Nitin Bajaj and Ajinkya Dhavale are value-driven investors, focusing on high-quality, well-managed businesses trading below intrinsic value. Their portfolio differs from the index in its overweight to China and India, as well as a tendency to keep Taiwan and India below benchmark levels. 

Alongside TSMC, top performers over the period included De Grey Mining, an Australian gold developer acquired by Northern Star Resources at a premium over the period, and Crystal International, a Hong Kong-listed apparel maker for brands including UNIQLO, Levi’s and Gap, which continued its steady performance after being bought on a low multiple of around six times earnings.

Since Bajaj took charge in 2015, shares in the trust have risen 163.2% versus 105% for its benchmark.

As of yesterday, they trade on a 6.7% discount to NAV.