Invesco High Income Trust II, and Invesco Senior Income Trust Declare Dividends
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Insights
The declaration of dividends by Invesco High Income Trust II and Invesco Senior Income Trust represents a strategic move to maintain investor interest and potentially narrow the gap between market price and net asset value (NAV). The consistency of the dividend payments, as per the Managed Distribution Plan, may appeal to income-focused investors seeking regular cash flows. However, investors should be aware that these dividends may include a return of capital, which is not derived from the fund's earnings but rather from the invested capital itself.
This can be a double-edged sword; on one hand, it sustains the dividend yield, but on the other hand, it may erode the fund's capital base over time if not offset by adequate fund performance. The effectiveness of the Plans in narrowing the NAV discount should be monitored, as it is not guaranteed. A persistent discount could signal market concerns about the underlying asset quality or the sustainability of distributions.
Investors often view closed-end funds (CEFs) like VLT and VVR as barometers for the fixed income market, particularly when it comes to yield-seeking behavior. The decision to maintain or increase dividend distributions can be a reflection of the fund management's confidence in their asset portfolio and future income generation. However, an increase in distribution through a Managed Distribution Plan does not necessarily correlate with improved fund performance.
It's important for stakeholders to differentiate between distribution increases driven by actual performance gains and those facilitated by strategic payout policies. The latter could potentially mask underlying performance issues, which is why transparency in the composition of these dividends is crucial. The market will likely react to these declarations based on the perceived sustainability of the dividends and the health of the underlying investments.
From a regulatory standpoint, the disclosure regarding the composition of the dividends is significant. The Section 19 notice is a regulatory requirement that ensures investors are informed when a portion of the distribution exceeds the fund's income and realized gains. This transparency is crucial for investors to understand the tax implications and the true nature of the returns they are receiving.
While return of capital is not inherently negative, it can have different tax treatments compared to dividends derived from income or capital gains. Investors should consult with tax professionals to understand the implications. Moreover, the adherence to the Managed Distribution Plan should be in line with the fund's prospectus and regulatory guidelines to avoid any legal pitfalls.
EX-DATE | RECORD DATE | REINVEST DATE | PAYABLE DATE |
3/14/2024 | 3/15/2024 | 3/28/2024 | 3/28/2024 |
Name of Closed-End |
Ticker | Monthly | Change | % Change |
Invesco High Income Trust II | VLT | - | - | |
Invesco Senior Income Trust | VVR | - | - |
1 A portion of this distribution is estimated to be from a return of principal rather than net income. The Section 19 notice referenced below provides more information and can be found on the Invesco website at www.invesco.com. |
The Board of Trustees (the "Board") of Invesco Senior Income Trust (NYSE: VVR) (the "Fund") approved an increase in the monthly distribution amount payable to common shareholders pursuant to the Fund's Managed Distribution Plan (the "Plan"). Effective October 1, 2023, the Fund will pay its monthly dividend to common shareholders at a stated fixed monthly distribution amount of
Effective August 1, 2018, the Board of Invesco High Income Trust II (NYSE: VLT) approved a Managed Distribution Plan (the "VLT Plan") for the Fund, whereby the Fund increased its monthly dividend to common shareholders to a stated fixed monthly distribution amount based on a distribution rate of 8.5 percent of the closing market price per share as of August 1, 2018, the date the VLT Plan became effective. The VVR Plan and the VLT Plan are collectively referred to herein as the "Plans."
The Plans are intended to provide shareholders with a consistent, but not guaranteed, periodic cash payment from each Fund, regardless of when or whether income is earned, or capital gains are realized. The Plans may have the effect of narrowing the discount between each Fund's market price and the net asset value ("NAV") of each Fund's common shares, but there is no assurance that the Plans will be effective in this regard.
If a Fund's investment income is not sufficient to cover the Fund's intended monthly distribution, the Fund will distribute long-term capital gains and/or return of capital in order to maintain its managed distribution level under its Plan. A Fund may at times distribute more than its income and net realized gains; therefore, a portion of the distribution may result in a return of capital. A return of capital may occur, for example, when some or all of the money that shareholders invested in a Fund is paid back to them. A return of capital distribution does not necessarily reflect a Fund's investment performance and should not be confused with "yield" or "income." No conclusions should be drawn about a Fund's investment performance from the amount of the Fund's distributions or from the terms of its Plan.
In order to comply with the requirements of Section 19 of the Investment Company Act of 1940 and an exemptive order granted to the Funds by the Securities and Exchange Commission, each Fund will provide its shareholders of record on each distribution date with a 19(a) Notice and issue an accompanying press release disclosing the sources of its dividend payment when a distribution includes anything other than net investment income.
The amounts and sources of distributions reported in 19(a) Notices are only estimates and are not being provided for tax reporting purposes. The actual amounts and sources of the amounts for tax reporting purposes will depend upon each Fund's investment experience during the remainder of its full fiscal year and may be subject to changes based on tax regulations. Each Fund will send shareholders a Form 1099-DIV for the calendar year that will tell them how to report these distributions for federal income tax purposes. Information on the Funds' 19(a) Notices can be found at www.invesco.com.
The final determination of the source and tax characteristics of all distributions in 2024 will be made after the end of the year.
The Plans will be subject to periodic review by each Fund's Board, and a Fund's Board may terminate or amend the terms of its Plan at any time without prior notice to the Fund's shareholders. The amendment or termination of a Fund's Plan could have an adverse effect on the market price of such Fund's common shares.
The amount of dividends paid by each fund may vary from time to time. Past amounts of dividends are no guarantee of future dividend payment amounts.
Investing involves risk and it is possible to lose money on any investment in the funds.
For additional information, shareholders of the closed end fund may contact
Beverly Khoo, 332-323-8029 beverly.khoo@invesco.com
About Invesco Ltd.
Invesco Ltd. is a global independent investment management firm dedicated to delivering an investment experience that helps people get more out of life. Our distinctive investment teams deliver a comprehensive range of active, passive, and alternative investment capabilities. With offices in more than 20 countries, Invesco managed
Invesco Distributors, Inc. is the
Note: There is no assurance that a closed-end fund will achieve its investment objective. Common shares are bought on the secondary market and may trade at a discount or premium to NAV. Regular brokerage commissions apply.
NOT A DEPOSIT l NOT FDIC INSURED l NOT GUARANTEED BY THE BANK | MAY LOSE VALUE | NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY
CONTACT: Closed-End Funds 800-341-2929
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SOURCE Invesco Ltd.
FAQ
What dividends were declared by Invesco High Income Trust II and Invesco Senior Income Trust for March 2024?
What change was made to the monthly distribution amount by Invesco Senior Income Trust?
What are the Managed Distribution Plans for Invesco High Income Trust II and Invesco Senior Income Trust?
How do the Funds maintain their managed distribution level under the Plans?
What should investors know about return of capital distributions?
