Neil Woodford's attempt to recover from a torrid year has suffered another blow as the value of his investment in AA Group has dived 25 per cent this morning (21 February).
In a trading update to the market this morning (21 February), AA Group stated its debt level requires it to pay lower dividends in the coming years.
The company stated the dividend will be 5p per share for 2018, then fall to 2p per share for an indefinite number of years after that.
The AA dividend in 2017 was 9.3p.
The company also reported profits in 2019 would be less than those declared in 2018.
Mr Woodford has been a long-term investor in AA shares.
He has 0.8 per cent of the capital of his £7.1bn Woodford Equity Income fund held in the stock, an investment of around £60m.
The Woodford Income Focus fund has an investment of 1.02 per cent in AA shares.
AA shares have lost more than two-thirds of their value over the past 12 months to 21 February.
The £7.1bn Woodford Equity Income fund is now the worst performing fund from 83 in the IA UK Equity Income sector over the past year, having lost 9 per cent, compared with a gain of just over 3 per cent for the average fund in the sector in that time period.
Mr Woodford has seen investors such as Jupiter, Aviva and Architas withdraw cash from his funds in the past year, and his investments in companies such as Provident Financial have also taken a tumble.
Darius McDermott, managing director of Chelsea Financial Services, said Mr Woodford has had periods of under performance in the past, most notably in the tech boom, and then in 2009 to 2010.
He noted Mr Woodford has always been a contrarian investor and he remains a contrarian today.
Mr McDermott said: "He thinks the UK domestic stocks are as unloved today as they have ever been, as unloved as the old economy stocks were during the tech boom.
"We are sticking with Neil, but if you buy the fund you have to know what you are buying.
"If you are worried about Brexit Britain or Corbyn Britain this probably isn't the one to own."
david.thorpe@ft.com
