Invesco High Income Trust II, and Invesco Senior Income Trust Declare Dividends
- None.
- The Plans may not effectively narrow the discount between market price and net asset value, and distributions may include return of capital, which does not necessarily reflect investment performance.
Insights
The announcement of dividend distributions by Invesco High Income Trust II and Invesco Senior Income Trust represents a critical juncture for investors, particularly those focused on income-generating investments. The declaration of consistent dividends can signal stability and a commitment to returning value to shareholders. Notably, Invesco Senior Income Trust's increase in monthly distribution from $0.0390 to $0.0430 per share reflects a positive adjustment in the Fund's distribution strategy, potentially indicative of an improved financial position or a strategic initiative to attract and retain investors.
However, while the increase in dividend payout and the implementation of Managed Distribution Plans (MDPs) can be attractive, they also warrant a closer look at the underlying financial health of the Funds. The MDPs aim to provide a steady cash flow to shareholders, but they also include the distribution of long-term capital gains and/or return of capital when investment income is insufficient. This practice could erode the Fund's capital base over time if not managed carefully, especially if the distributions consistently exceed the Fund's actual income and net realized gains.
It is crucial for investors to understand the implications of return of capital distributions, as these are not derived from the Fund's earnings but rather from the invested capital, potentially diminishing the value of their investment over time. The impact on the Fund's net asset value (NAV) is also an important consideration, as consistent return of capital distributions can lead to a reduction in NAV, affecting the long-term sustainability of the dividend payouts.
From a market perspective, the Managed Distribution Plans adopted by Invesco's Funds are part of a broader trend among closed-end funds to manage market price discounts relative to their NAV. While these Plans can help narrow the gap between market price and NAV, their effectiveness is not guaranteed. Market reaction to such dividend announcements and Plans typically includes a short-term positive sentiment, as investors may perceive the increased or stable dividends as a sign of confidence from the Fund's management.
However, the long-term market implications are more nuanced. If the Funds are unable to generate sufficient investment income and must frequently resort to paying distributions from capital, investor confidence could be undermined, potentially leading to a wider discount to NAV and increased volatility in the Fund's share price. Thus, while the immediate announcement may be received positively, the sustained ability of the Funds to meet their distribution commitments without eroding capital will be closely monitored by the market.
Investors often look at distribution rates in relation to the Fund's performance and the overall sector's yield averages. An 8.5 percent distribution rate, as mentioned for Invesco High Income Trust II, is relatively high and may attract income-focused investors, but it also raises questions about the sustainability of such payouts in various market conditions. Analysts and investors will likely compare this rate to peers and industry benchmarks to assess its viability.
From a regulatory standpoint, the communication and implementation of Managed Distribution Plans must adhere to strict disclosure standards. The Funds' approach to informing shareholders of the nature of their distributions, particularly with regard to the potential for return of capital, is crucial in maintaining compliance with securities laws. The U.S. Securities and Exchange Commission (SEC) requires transparent reporting of the sources of distribution payments, ensuring that investors are not misled about the nature of the payouts they receive.
Furthermore, the Funds must continuously evaluate the Plans' conformity with their stated investment objectives and policies, as well as their impact on the Fund's overall financial situation. Any deviation from the Plans or changes in distribution rates must be communicated promptly to shareholders. The legal implications of failing to adequately disclose the components of distributions, such as return of capital, could lead to regulatory scrutiny and potential penalties.
It is also important to note that while Managed Distribution Plans can provide benefits, they should not be misconstrued as guarantees of income or capital preservation. The legal language surrounding these Plans often includes disclaimers that distributions are not assured and may vary depending on the Fund's performance, which must be clearly understood by investors to avoid future disputes or claims of misrepresentation.
EX-DATE | RECORD DATE | REINVEST DATE | PAYABLE DATE |
2/15/2024 | 2/16/2024 | 2/29/2024 | 2/29/2024 |
Name of Closed-End | Ticker | Monthly | Change | % Change |
Invesco High Income Trust II | VLT | - | - | |
Invesco Senior Income Trust | VVR | - | - |
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 are the monthly dividend amounts per share for Invesco High Income Trust II and Invesco Senior Income Trust?
What is the ticker symbol for Invesco High Income Trust II and Invesco Senior Income Trust?
What is the Managed Distribution Plan for Invesco Senior Income Trust?
What is the purpose of the Managed Distribution Plans for both funds?
What may happen if a Fund's investment income is not sufficient to cover the intended monthly distribution?
