‘Record’ dividend payout puts TwentyFour Income on 10% yield
TwentyFour Income (TFIF ) is set to deliver a record dividend following a period of ‘exceptionally high’ issuance in the asset-backed securities (ABS) market.
The £826m investment trust, which invests significantly in debt linked to mortgages in the UK and Europe, operates a full payout model, meaning substantially all income is paid out to shareholders.
The final dividend payment for its financial year, ending in March, was announced yesterday as 5.07p per share. That has pushed the annual dividend up to 11.07p, the highest level since trust listed in 2013 and up from 9.96p in the prior year.
The figure represents a 10% yield based on the current share price and is well ahead of the 8p target, which increased from 6p in 2023.
Ash Nandi, an analyst at Deutsche Numis, which is TFIF’s corporate broker, noted the fund had exceeded its dividend target in every year since launch, even with interest rates falling in the UK over the last year from 5.25% to 4.5%.
‘We believe that TFIF is an attractive fund for income investors that has demonstrated its credentials as a floating rate fund since inception. We expect yield to continue to dominate returns, and we expect this will remain high, even if we see some further rate cuts,’ she added.
A strong year for ABS
TwentyFour Income, a FTSE 250 constituent, invests in less liquid asset-backed securities in the UK and Europe, with most of its portfolio allocated to residential mortgage-backed securities (RMBS) and collateralised loan obligations (CLOs).
Over the past year, its managers have taken advantage of intense activity in the sector to derisk and diversify the portfolio.
Manager Aza Teeuwen, who co-heads ABS at TwentyFour Income alongside Douglas Charleston, said the ABS market had ‘performed strongly over the past 12 months, with exceptionally high levels of issuance contributing to a substantial increase in market size’, particularly in CLOs and ‘significant risk transfer’ transactions where banks can reduce their credit risk.
‘This has allowed us to increase our exposure to both higher quality and a more diversified pool of assets’, said Teeuwen.
‘At the same time, market volatility is creating some excellent opportunities that we’re able to take advantage of as a result of our strategy of maintaining both liquidity and flexibility in the portfolio. Coupled with elevated interest rates, we are optimistic that we will continue to deliver future income for shareholders.’
Including dividends, the underlying portfolio delivered a 16.9% net asset value (NAV) total return in 2024, and 1.8% from the start of this year to 4 April.
The shares closed yesterday on an estimated 0.6% discount, according to Deutsche Numis.
