What is HDIV.L's Intrinsic value?

Henderson Diversified Income Trust PLC (HDIV.L) Intrinsic Value Analysis

Executive Summary

As of May 24, 2025, Henderson Diversified Income Trust PLC's estimated intrinsic value ranges from $25.10 to $25.10 per share, depending on the valuation methodology applied.

Valuation Method Fair Value (USD) Implied Upside/Downside
Earnings Power Value $25.10 -62.4%

Is Henderson Diversified Income Trust PLC (HDIV.L) undervalued or overvalued?

With the current market price at $66.70, the stock appears to be significantly overvalued.

Understanding Intrinsic Value

Intrinsic value represents the "true" worth of a company based on its fundamentals rather than market sentiment. We've employed multiple methodologies to triangulate Henderson Diversified Income Trust PLC's intrinsic value, including:

  1. Earnings Power Value (EPV): Values the company based on its current earnings power, assuming no growth

Weighted Average Cost of Capital (WACC)

The cost of capital is a critical factor in valuation models, representing the required return for investors.

WACC Component Low High
Long-term bond rate 4.0% 4.5%
Equity market risk premium 6.0% 7.0%
Adjusted beta 0.63 0.82
Cost of equity 7.7% 10.7%
Cost of debt 4.0% 7.0%
Tax rate 0.1% 0.1%
Debt/Equity ratio 0.25 0.25
After-tax WACC 7.0% 10.0%

Valuation Methods

3. Earnings Power Value (EPV)

EPV assesses a company's value based on its current normalized earnings power, assuming no growth.

EPV Component Value
Normalized Earnings $5M
Discount Rate (WACC) 10.0% - 7.0%
Enterprise Value $51M - $73M
Net Debt $15M
Equity Value $36M - $58M
Outstanding Shares 2M
Fair Value $19 - $31
Selected Fair Value $25.10

Key Financial Metrics

Metric Value
Market Capitalization $124M
Enterprise Value $140M
Trailing P/E 0.00
Forward P/E 0.00
Trailing EV/EBITDA 6.30
Current Dividend Yield 659.95%
Dividend Growth Rate (5Y) 6.19%
Debt-to-Equity Ratio 0.25

Investment Decision Framework

To determine the most reliable intrinsic value estimate, we weigh each valuation method based on:

  1. Forecast Certainty: DCF methods rely on long-term projections, while earnings power value focuses on current normalized earnings
  2. Business Model Alignment: Dividend models are more appropriate for mature companies with established dividend policies
  3. Historical Accuracy: How well each method has predicted fair value historically

Valuation Weight Matrix

Valuation Method Weight Weighted Value
Earnings Power Value 100% $2.51
Weighted Average 100% $25.10

Investment Conclusion

Based on our comprehensive valuation analysis, Henderson Diversified Income Trust PLC's weighted average intrinsic value is $25.10, which is approximately 62.4% below the current market price of $66.70.

Key investment considerations:

  • Strong projected earnings growth (114% to -2021% margin)
  • Consistent cash flow generation
  • Conservative capital structure (Debt/Equity of 0.25)
  • Historical dividend growth of 6.19%

Given these factors, we believe Henderson Diversified Income Trust PLC is currently significantly overvalued with the potential for long-term appreciation based on the company's growth trajectory and financial strength.