Few investors have suffered more from the impact of coronavirus on the stock market than income seekers. Three quarters of companies cut or cancelled payouts in the second quarter of the year and for 2020 as a whole divis will fall by about 39pc, according to the Link dividend monitor.
This column took action in the spring to shed firms that had cancelled their dividends or seemed likely to and now has a spread of assets that are all pulling their weight when it comes to income generation. They have proved resilient so far and, although we will keep tabs on them all, we can take comfort that there have been no upsets since we made our changes.
If we can trust our Income Portfolio to do its job without further modifications and less week-to-week scrutiny, we will have more time to devote to the other Questor portfolio to have a specific goal: our Inheritance Tax Portfolio, which is designed to save readers’ families from an eventual IHT bill by holding Aim-quoted shares that qualify for “business relief” and hence exemption from death duties.
Expect to see more updates on those stocks from now on, although we will certainly not neglect the Income Portfolio. On that score we are still looking for a new source of data and hope to restart publication of the performance table on the first Friday of every month soon.
Update: IHT Portfolio performance
In the same vein we will shortly publish our full performance table for the IHT Portfolio. This is a much simpler affair because we do not attempt to track dividends as well as capital growth. For now we will briefly summarise how the portfolio is faring.
The average gain of our Aim stocks since the date they were tipped is 12pc. This sounds fairly modest, although the FTSE 100 index has declined by about 25pc on the same basis. Our gain comes in spite of a total loss on our Conviviality tip in 2018 and an 85pc loss on Gama Aviation, finally sold last month. Much of the overall rise in value is down to the four holdings that have doubled or more: Volex (a 193pc gain; see update below), Gamma Communications (171pc), Team17 (153pc) and (almost) Tristel (96pc).
This wide variation in returns in a portfolio of just 30 past and current stocks brings home the importance of diversification in the highly risky environment of London’s junior market.
Just last month we reported that shares in Volex, the cable assemblies maker, had risen strongly since our tip two years previously because profits had done the same. Well, the firm seems to be making a habit of this: it has just said it expects this year’s interim profits to be higher than previous forecasts and the shares have again responded.
Last month we pointed out that at the time of our original tip the forecast for operating profits for the year to April 2020 was $20m (in the end Volex made $31.6m). It now expects to make $20m (£15m) in just the first half of the current financial year.
The company said all its manufacturing facilities remained fully operational following adaptations made earlier in response to the pandemic and that its performance “has continued to improve since the group last updated the market” in July.
Nat Rothschild, the executive chairman, said: “We enter the final quarter of calendar 2020 in a healthy position. Our geographic and customer diversification continues to provide the business with a high degree of visibility at this time while ongoing demand for consumer electronics remains strong and the global shift to electric vehicles gathers pace.
“Absent another widespread global lockdown, given the robust performance in the first half of the year, coupled with our strong forward order book, the board expects to see a strong performance for the year as a whole that will be above current market expectations.” We will hold on.
Questor says: hold
Share price at close: 242p
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