Aberdeen Asian Income (AAIF)

Aberdeen Asian Income Fund (LON:AAIF) invests in emerging Asia and Australasia. The objective is to generate a high, and growing income and the strategy is to focus on high quality, cash generative businesses which pay dividends.

AAIF yields 4% on a historic basis. The board has been able to use revenue reserves to support the dividend through the pandemic and actually raised the FY 2020 dividend despite a fall in dividends received from the trust’s portfolio. As we discuss in the Dividend section, the portfolio revenues seem to have seen a good recovery in FY 2021 so far.

Unlike some of its peers, AAIF pays a dividend from natural income rather than from capital (although the board has that power in reserve). This means that all its holdings are expected to contribute to the yield and dividend growth requirements. As a result, AAIF has had little in the e-commerce space and more in traditional value sectors such as financials and materials. This has led the performance to be disappointing relative to peers in recent years, but to have been very good over the past year as the environment has changed (see Performance section).

While the discount narrowed at the start of 2021 during the reflationary rally, as Asian markets have sold off this year, it has widened again and stands at 12.7% at the time of writing.