Income progress

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Mitchell Fraser-Jones 5 December 2016 Est. reading: 6 min read

Following up on our recent article in which we explained how Neil slowly evolves his portfolios over time in the pursuit for attractive investment opportunities, we now look at the effect recent activity may have on the fund’s future income.

As we highlighted, Neil has reduced the portfolio’s exposure to mature blue-chip companies in response to a changing opportunity set within the market. However, the majority of the fund’s assets remain invested in dividend-paying securities with sustainable long-term prospects. This means the fund is on track to deliver more than 4p of income for 2016, which will represent modest growth on the income delivered in 2015, in aggregate terms.

Throughout his investment career, Neil has focused on delivering attractively positive long-term total returns through a combination of income and capital growth. There is much more to an investment decision than just yield considerations and this is why our focus is on delivering a particular level of income per share, rather than a specific yield.

Let us illustrate this by considering the fund’s performance since it launched in June 2014. The income per share that the portfolio will deliver in 2016 would equate to a yield of more than 4% based on the 100p price per share launch price. However, as a result of the positive capital performance that the fund has enjoyed since inception, the yield now is lower. But although the yield is lower, the income per share is not.

The income you receive from an investment will only fall if the number of shares you hold reduces (i.e. if you sell part of the investment) or if the pence per share income / dividend reduces – we have no control over the former, but the latter is what we are aiming to avoid.

Illustrating the inverse relationship between price and yield

Move the slider to see how changes in price affect the yield – but not the income.

Number of shares
Price (p)
Income per share (p)
Investment income
Investment value
Yield (%)
Number of shares
Price (p)
Income per share (p)
Investment income £
Investment value £
Yield (%)
-25% 25% Price decrease Price change Price increase

Slide to change the finishing price

The gradual changes to the portfolio that we have implemented over the last couple of years have been designed to safeguard and enhance the fund’s long-term income growth prospects, and indeed the fund’s total return prospects. In this challenging economic environment, growth is very hard to come by and we’ve already seen this year widespread dividend cuts across the broader UK stock market. Some of the biggest dividend payers in the UK market remain burdened by unsustainable dividends, in our view, and we continue to avoid these companies. Consequently, we are cautious on the outlook for dividends from the wider UK stock market which, in aggregate, may struggle to grow at all over the next few years.

Nevertheless, we are confident that the CF Woodford Equity Income Fund is well-positioned to deliver a sustainable, growing income stream over the medium-to-long term. Growth rates, quarter-by-quarter, and even year-by-year, will naturally vary but, on a three-to-five-year view, we would expect the fund to be delivering low-to-mid single-digit annualised income growth. This income growth will, we believe, continue to form a vital part of the attractive total return that we aim to deliver.

What are the risks?

  • The value of the fund and any income from it may go down as well as up, so you may get back less than you invested
  • Past performance cannot be relied upon as a guide to future performance
  • The ongoing charges figure is charged to capital, so the income of the fund may be higher but capital growth may be restricted or capital may be eroded
  • The fund may invest in other transferable securities, money market instruments, warrants, collective investment schemes and deposits – some of these security types could increase the fund′s volatility and increase the level of indirect charges to which the fund is exposed
  • The fund may invest in overseas securities and be exposed to currencies other than pound sterling – as a result, exchange rate movements may cause the sterling value of investments to decrease or increase
  • The fund may invest in unquoted securities, which may be less liquid and more difficult to value, because they are generally not publicly traded – the lack of an open market may also make it more difficult to establish fair value

Important information

Before investing, you should read the Key Investor Information Document (KIID) for the fund, and the Prospectus which, along with our terms and conditions, can be obtained from the downloads page or from our registered office. If you have a financial adviser, you should seek their advice before investing. Woodford Investment Management Ltd is not authorised to provide investment advice.

The Woodford Funds (Ireland) ICAV (the “Fund”) has appointed as Swiss Representative Oligo Swiss Fund Services SA, Av. Villamont 17, 1005 Lausanne, Switzerland. The Fund′s Swiss paying agent is Neue Helvetische Bank AG. All fund documentation including, Prospectus, Key Investor Information Documents, Instrument of Incorporation and financial reports may be obtained free of charge from the Swiss Representative in Lausanne. The place of performance and jurisdiction for all shares distributed in or from Switzerland is at the registered office of the Swiss Representative. Fund prices can be found at

Woodford Investment Management Ltd is authorised and regulated by the Financial Conduct Authority (firm reference number 745433). Incorporated in England and Wales, company number 10118169. Registered address 9400 Garsington Road, Oxford OX4 2HN.

Woodford Patient Capital Trust plc is incorporated in England and Wales, company number 09405653. Registered as an investment company under section 833 of the Companies Act 2006. Registered address Beaufort House, 51 New North Road, Exeter, EX4 4EP.

© 2019 Woodford Investment Management Ltd.
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