Income from new dividend policy at F&C Private Equity Trust

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2012 was an interesting year for F&C Private Equity Trust (FPEO). In May they announced a new dividend policy and in August they announced a fully diluted net asset value (NAV) of £2.53, a 4.5% rise for the half year and back to 2008 levels. The share price was up some 7% over the same period.

Monthly chart of FPEO.

In May 2012 FPEO decided to reward shareholders with a predictable dividend payments funded from a combination of the Company’s revenue and realised capital profits. Under the new policy, the Company aims to pay semi-annual dividends with an annual yield equivalent to not less than 4 per cent of the average of the published NAV over the past 4 Qtrs. Accordingly, in October, a dividend of 4.96p was paid.

Today FPEO’s share price is £1.88, so if the NAV stands still the dividend would be just over 5% but there’s also the possibility that the NAV will rise. There’s also a strong possibility that as confidence grows the discount to NAV will close. That is to say, the price will rise towards the published net asset value.

I wrote this short piece just prior to the start of 2013 but it seemed prudent to wait for the fiscal cliff ‘farce’ to unravel. Now that we have some breathing space, I’m back to looking for safe havens for cash, where safe is defined by limited visible price downside and some guaranteed income.

The risks are simple enough: if we return to recession NAV will inevitably be challenged and, as ever, we must rely a published NAV which may not be correct. That aside, I think there are worse places to put a bit of cash for 2013.

Disclosure: at the time of writing the author holds FPEO

Susan Marmor has been trading her ISA and SIPP full time for 7 years. She has made money every year, including 2008. She believes that making money is about picking the right shares at the right time and using sound money management techniques to manage risk.

For her trading she uses a combination of sound fundamental data and technical analysis (which involves using price charts and some of the fancy bits and pieces that go with them). She runs the occasional seminar to show people what she does and how she does it.

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