Invesco High Income Trust II, and Invesco Senior Income Trust Declare Dividends
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Insights
The announcement of dividend distributions by Invesco High Income Trust II and Invesco Senior Income Trust is a critical piece of information for investors and analysts monitoring the performance and health of income-generating investment vehicles. The declaration of consistent dividends indicates a stable cash flow to investors, which is particularly attractive for those seeking regular income from their investments. The increase in the monthly distribution amount by Invesco Senior Income Trust is noteworthy as it reflects the Fund's operational decisions and potential confidence in its ability to generate sufficient income to cover the new distribution rate.
However, the mention of a return of capital as part of the distribution is a double-edged sword. While it provides immediate liquidity to shareholders, it also signifies that some of the distributions are not sourced from the Fund's earnings but from the invested capital. This could suggest that the Fund's earnings are not enough to cover the distributions entirely, which might be a red flag for long-term sustainability. Investors should scrutinize the Fund's earnings reports and the sustainability of its distributions, especially considering the long-term implications of capital returns on the Fund's net asset value (NAV).
Invesco's Managed Distribution Plans (MDPs) are strategic tools used to potentially narrow the gap between market price and net asset value (NAV) of the Funds' shares. By providing a consistent distribution, the Funds aim to attract investors seeking reliable income streams, which can increase demand for the shares and potentially reduce the market price discount to NAV. This strategy, if successful, can enhance the attractiveness of the Funds in the closed-end fund marketplace.
However, the effectiveness of MDPs in consistently narrowing the discount to NAV is not guaranteed and varies depending on overall market conditions and investor sentiment. It's important for investors to consider the total return of their investment, not just the distribution yield and to be mindful of the tax implications of distributions that include a return of capital. Moreover, a persistent return of capital may lead to a depletion of the Fund's assets over time, which could impact the Fund's ability to maintain its distribution level and might result in a reduction of the Fund's share price.
The broader economic context in which these dividend distributions are occurring must be considered. In a low-interest-rate environment, high-yield investment products like Invesco's closed-end funds are particularly appealing to income-focused investors. However, in a rising interest-rate environment, the cost of borrowing for these funds could increase, potentially affecting their net income and ability to sustain high distribution rates. Additionally, the economic cycle can influence the underlying assets' performance within the Funds, which in turn affects the income generated and the sustainability of distributions.
Investors should be aware of the economic indicators and trends that could impact the performance of high-income and senior income trusts. These include, but are not limited to, changes in interest rates, inflation rates and the overall health of the credit markets. A thorough understanding of these factors can provide insight into the potential future performance of the Funds and the likelihood of continued or altered distribution strategies.
EX-DATE 1/16/24 | RECORD DATE | REINVEST DATE | PAYABLE DATE | |||
Name of Closed-End |
Ticker | Monthly Dividend | Change From | |||
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 19(a) 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 the Funds 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 Trust.
For additional information, shareholders of the closed end fund may contact Jeaneen Terrio at 212-278-9205, Jeaneen.Terrio@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 US distributor for Invesco Ltd. It is an indirect, wholly owned, subsidiary of Invesco Ltd.
Note: There is no assurance that a closed-end fund will achieve its investment objective. 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 l MAY LOSE VALUE l NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY
—Invesco—
CONTACT: Closed-End Funds 800-341-2929
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SOURCE Invesco Ltd.
FAQ
What are the dividend amounts declared by Invesco High Income Trust II and Invesco Senior Income Trust?
What is the purpose of the Managed Distribution Plans implemented by the Funds?
What happens if a Fund's investment income is not sufficient to cover the intended monthly distribution?
Where can the 19(a) Notice referenced in the press release be found?
