I have been thinking about buying shares for my SIPP in May.
The old adage says, “sell in May and go away”. But as an investor with a long-term approach, I would be happy to buy shares at the right price in any month and then hold them for years to come.
Down 12% in a year
The share I am eyeing is Henderson Far East Income (LSE: HFEL).
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Over the past year, the share price has fallen 12%. Meanwhile, the five-year decline is a painful 38%.
So, what is it about this share that has grabbed my attention?
The long-term trend has been downwards, but the share has increased in value by 12% since an October low. The investment trust has a focus on East Asia, as its name suggests.
In recent months, there have been a number of indicators that key economies in this region are in better shape than some investors had feared.
This year, the Nikkei index (broadly speaking, Japan’s equivalent to the FTSE 100) hit a new all-time high, finally passing a point it had last reached in the 1980s, when Japan was the big economic story globally.
High-yield investment trust
While Henderson Far East Income has not rewarded shareholders in recent years with price gains, it has certainly delivered on the income front. The trust does what it says on the tin.
At the current share price, the dividend yield is 10.6%. It pays out quarterly and has a track record of annual dividend increases in recent years. Indeed, its stated objective is, “to provide shareholders with a growing total annual dividend per share, as well as capital appreciation”.
That is all well and good – but dividends are never guaranteed from any share. Whether or not Henderson Far East Income continues to pay them, let alone increase them annually, depends on its financial performance.
Exposure to key Asian markets
Japan is not even among the 10 biggest markets for the trust at the moment. China accounts for only 14% of its portfolio.
Its top three markets are South Korea, Australia, and Taiwan. Together, they account for almost half of the trust’s portfolio.
The biggest holding is Taiwan Semiconductor Manufacturing, a chipmaker whose shares have more than tripled in the past five years. The second biggest is Samsung Electronics, up 69% in the past five years.
I like the fact that if I bought some Henderson Far East Income shares, my SIPP would gain exposure to large, proven businesses like this that I think look well-positioned for long-term commercial success.
Should I buy?
There are risks, though.
Even with their global exposure, such firms could see profits fall if Asian economies slow down, on top of the wider global risk.
Almost a third of the portfolio is in financial services shares, which could mean that a recession in key Asian economies could hurt performance badly.
Still, I find the Asian exposure and double-digit yield attractive for my SIPP. If I have spare cash to invest in May, I plan to buy.
