UK Edition
When we explained here three weeks ago why we continued to hold bonds in our Income Portfolio even though inflation eroded their value, we pointed out that “fixed-income” investments were just that: the income you receive from a bond does not rise. We weren’t exactly wrong but an opportunity has now arisen to increase the income from one of our bonds by 24pc. Readers will need to act quickly, however.
The opportunity results from an offer from the issuer of one of our existing bonds to swap them for new ones that will pay a higher rate of interest. We currently own Lendinvest’s 2022 bonds, which are due to mature on Aug 10 and pay interest at 5.25pc a year. But the issuer has offered to swap them for new five-year bonds that will pay 6.5pc.
This is 24pc more than the current rate. As we have decided to keep a portion of the portfolio in bonds it makes sense to take advantage of this offer. Readers who want to swap into the new bonds must tell their broker; Lendinvest needs to know by next Wednesday but brokers may have earlier deadlines, so don’t delay.
The new bonds are also available to those who don’t have the old bonds to swap, or who want to increase their holding.
Interest on the new bonds will be paid on Feb 8 and Aug 8 each year. The first payment will be made on Feb 8 next year.
Questor says: swap existing bonds
Tickers: n/a
Bond price at issue: £100
Update: Gore Street Energy Storage/National Grid
At first sight it appears that our decision to sell National Grid in November 2020 and replace it with Gore Street Energy Storage was misconceived: shares in the latter have done well enough – a 14pc gain – but Grid’s have done even better and have risen by 26pc, although their ride has been bumpier.
Grid’s dividend has also been rising, from 49.16p last year to the 50.97p announced in March, while Gore Street’s has been constant at 7p a share since 2020; it confirmed that figure for the year to March when it published its annual results on Tuesday.
But there is a lot going on under the surface at Gore Street, which invests in battery storage that can supply power to the grid when generators can’t keep up. It is a new fund – it listed in May 2018 – and is fast growing. The crucial point is that many of its assets are still being developed so they are not yet supplying energy or generating revenues. When they do, we can expect more income and higher dividends.
In fact, a smaller proportion of the fund’s portfolio was operational at the end of March, 37pc, than a year previously (55pc). This reflects the pace at which the fund has invested in new development projects with the money raised from various share sales. It has raised another £150m in the current financial year.
Although the proportion of the portfolio in operation shrank as a result of the investment in projects in development, the total power capacity of the fund’s operational assets rose by 10.5pc compared with a year previously (since the end of the financial year it has risen further).
Net asset value per share rose by 6pc from 100.9p to 107.1p. The trust is also becoming more diversified and now has projects in Britain, Ireland, Germany and America. Australia may soon be added to the list.
We therefore expect plenty of growth in net asset value, the share price and the dividend over the coming years. Meanwhile we can bank a 6.6pc yield relative to our purchase price of 106p. National Grid, by contrast, is a mature business hemmed in by regulators. We’re happy with the decision we made. Hold.
Questor says: hold
Ticker: GSF
Share price at close: 121p
Update: Residential Secure Income
We have tipped this trust several times, not least for the “uncapped” inflation-linked rents on many of its properties.
Specifically, there is no cap on the inflation-linking of rents on its shared-ownership properties, while increases in rents on its retirement homes are capped at 6pc – a cap that is, of course, brought into play now that inflation is almost 10pc.
The trust said this week that it would therefore seek to tilt its portfolio more in favour of shared ownership, although it would do so by growing that area rather than attempting to sell retirement properties. It said its NAV had risen by 2pc in the three months to June and rent collection of more than 99pc had been maintained. Hold.
Questor says: hold
Ticker: RESI
Share price at close: 109.75p
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