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Harley

High Yield Portfolio (HYP)

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Thought I'd start a thread focusing on candidates for inclusion in a high yield portfolio (HYP) and the candidate selection criteria to use.

Particularity relevant for those looking to live off some investment income (e.g. past the growth stage of their investment life and moving into drawdown).

A HYP is a portfolio of individual shares aiming to achieve a high dividend return, typically above say the FTSE100 average.

It could be for a particular market (e.g. FTSE100), country (All FTSE), or international.

Candidates are usually subject to a chosen set of criteria (e.g. dividend cover) to exclude companies about to go bust, companies with unsustainable dividends, too much debt, etc.

Typically not a fund, trust or ETF (i.e. for people who want more control and/or reduce fees and/or institutional risk) but some coverage of these might be interesting, especially for hard to invest in areas.

Suffice to say not everyone buys into the HYP concept so nice if we would could avoid pointless discussion on the concept (if you disagree, just move on!) and focus on the practicalities for those who do.

Clearly, nothing mentioned here should be construed as investment advice - purely for amateur investor educational purposes only.

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Posted (edited)

My main HYP is currently limited to the FTSE, although I would like to broaden it out to international shares.

I use the following source as my start point, and then do deep dives on those above or close to the FTSE average yield:

https://www.dividenddata.co.uk/dividendyield.py?market=ftse100

Anyone use other sources, especially for other markets (e.g. international)?

Edited by Harley

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These are not recommendations, but any thoughts on the following higher yielding shares (I may or may not hold these):

. Essential Insurance:  Admiral and/or Royal Sun Alliance

. Life Insurance: Aviva and/or Legal & General

. Resources: BP and/or Shell and/or RIO

. Sin: BATS and/or Imperial

. Commercial Property: British Land and/or Land Securities

. Essential Retail: GSK and/or Unilever

. Telecoms: BT and/or Vodafone

. Financial Services: HSBC and/or IG

. Business Services: ITV and/or WPP and/or Royal Mail

. Utilities: Centrica and/or National Grid and/or Severn Trent and/or SSE

. Transports: Go Ahead and/or Stagecoach

. Renewables: Renewables Infrastructure Group and/or Greencoat UK Wind

Plus inclusions and/or exclusions on what to be considering?

The "not investment advice" proviso accepted!

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When I read "In for a Penny" by Peter Hargreaves (of Hargreaves and Lansdown) I thought I might get some insight on running successful funds.

There was no revelation (well in my mind) in the book, only about fax machines/photocopiers (I can't even remember the advice), and the differentiation between the two types of fund they offered, one for income and and one for capital growth.

It was incredibly simple, both funds were the same. For those that wanted income, the dividends would be paid out from the fund. For those that wanted capital growth, they would simple roll over the income and add it to the capital! 

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36 minutes ago, 201p said:

When I read "In for a Penny" by Peter Hargreaves (of Hargreaves and Lansdown) I thought I might get some insight on running successful funds.

There was no revelation (well in my mind) in the book, only about fax machines/photocopiers (I can't even remember the advice), and the differentiation between the two types of fund they offered, one for income and and one for capital growth.

It was incredibly simple, both funds were the same. For those that wanted income, the dividends would be paid out from the fund. For those that wanted capital growth, they would simple roll over the income and add it to the capital! 

 

2 hours ago, Harley said:

Suffice to say not everyone buys into the HYP concept so nice if we would could avoid pointless discussion on the concept (if you disagree, just move on!) and focus on the practicalities for those who do.

I did ask.  Oh well, thanks for nothing.  I won't p*ss on your parade in return though.

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Posted (edited)
19 minutes ago, 201p said:

I don't disagree with it, in fact it can be an incredibly simple strategy.

I was hoping to create a practical thread, not a series of one liners of nought use to anyone!

We all have pure opinions.  Without being rude, but from a pure practical basis, so what?

That's why some here in "the basement" are giving up and/or losing the will to make the effort in the face of such disproportionately empty responses.

Lemonfool actually split their HYP threads into two - practical and strategy - maybe so as not to mix the two and maintain focus.

But worst of all, I know by your history of data based posts that you're a lot lot better than that!!!!!

PS: My HYP is just one portfolio I run.  For example, I have growth and trading portfolios.  I separate them to maintain focus on each specific objective and to more effectively allocate capital.

Edited by Harley

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Vodafone

Results and dividend cut announced today....

Vodafone announces results for the year ended 31 March 2019
Financial highlights
• Group revenues of €43.7 billion. The loss for the financial year of €7.6 billion was primarily due to a loss on disposal of Vodafone India (following the completion of the merger with Idea Cellular) and impairments, as announced in November
• Organic service revenue (excluding handset financing and settlements in Germany, IAS 18 basis) up 0.3%** (Q4 -0.6%**), as good performance in most markets offset increased competition in Spain and Italy and headwinds in South Africa
• Organic adjusted EBITDA up 3.1%** (excluding handset financing and prior year settlements, IAS 18 basis), meeting guidance for ‘around 3%’ growth. This was supported by an operating expense decline of €0.4 billion in Europe and common functions
• Free cash flow pre-spectrum of €5.5 billion (guidance basis), with sustained capital additions of €7.2 billion (16.0% of revenue)
• Dividend per share rebased to 9.00 eurocents (15.07 eurocents in FY18), implying a final dividend of 4.16 eurocents; progressive future dividend policy
• 2020 financial guidance (IFRS15/16 basis): Adjusted EBITDA of €13.8 billion - €14.2 billion, implying low single digit organic growth. Free cash flow pre-spectrum of at least €5.4 billion

The cut was widely expected.  The yield has now fallen to a more healthy 5.92%, which is still above the FTSE100 average.  Question is, will this be the only cut?

Regarding the financials, I like losses which are actually due to investment disposals.  It sounds bad enough to drive down the share price but says nothing about trading performance.

I'm not writing them off yet.  I may wait to see how things stabilise and study the fundamentals a bit more.  Might average in later! 

FWIW, the share price is up nicely today and the technicals look like it might be bottoming (a buy signal in March but a bit of a retracement since then).

 

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On 13/05/2019 at 09:36, Harley said:

My main HYP is currently limited to the FTSE, although I would like to broaden it out to international shares.

I use the following source as my start point, and then do deep dives on those above or close to the FTSE average yield:

https://www.dividenddata.co.uk/dividendyield.py?market=ftse100

Anyone use other sources, especially for other markets (e.g. international)?

RIT started a HYP a few years back, links to the companies he decided to purchase here

His latest update here

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I hold BLND and LAND for their divs and, given the news this morning, waiting for a hosing.

Nothing so far.  Maybe, given the price decline since April, this was already well signaled (who would think the media are behind the curve!).

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On 14/05/2019 at 17:05, Democorruptcy said:

RIT started a HYP a few years back, links to the companies he decided to purchase here

His latest update here

Thanks.  That excellent website was a major source/help when I first started and I bought the (good) book in thanks.

I was looking at Cyprus but fear I might be too late.  He could do a good line as a relocation consultant!

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6 hours ago, Harley said:

Thanks.  That excellent website was a major source/help when I first started and I bought the (good) book in thanks.

I was looking at Cyprus but fear I might be too late.  He could do a good line as a relocation consultant!

He hasn't done an update for ages. I doubt he's still in Cyprus. My money would be on he's back working in the UK.

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2 hours ago, Democorruptcy said:

He hasn't done an update for ages. I doubt he's still in Cyprus. My money would be on he's back working in the UK.

But he said he had settled in Cyprus in December 2018.  Only 5 months ago.  Good to know, lessons either way.

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45 minutes ago, Harley said:

But he said he had settled in Cyprus in December 2018.  Only 5 months ago.  Good to know, lessons either way.

I could be tempted by an offer of 10/1 he's back working in the UK, if you think it's very unlikely.

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Posted (edited)
On 21/05/2019 at 20:24, Democorruptcy said:

I could be tempted by an offer of 10/1 he's back working in the UK, if you think it's very unlikely.

I'd love to know more as I'm looking to do something (moving overseas) similar.

Maybe an update will be forthcoming in due course.

I wish him all the best.

Edited by Harley

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OK, just to make sure I understand this, a few questions about HYP

1. Their purpose is not only capital gain but primarily to provide a regular (& reliable?) stream of dividends in retirement (like an annuity?).

2. If 1. is correct why can it not be done with a low cost FTSE100/DOW physical distribution tracker, as these are likely to contain the major companies (in the major %) that you would be buying anyway?

3. Finally, are IT doing the same thing as a HYP but obviously charging you a premium for the leg work?

Thanks for the answers, still (always) learning and want to make sure I have understood it correctly.

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Posted (edited)
56 minutes ago, MrXxx said:

OK, just to make sure I understand this, a few questions about HYP

1. Their purpose is not only capital gain but primarily to provide a regular (& reliable?) stream of dividends in retirement (like an annuity?).

2. If 1. is correct why can it not be done with a low cost FTSE100/DOW physical distribution tracker, as these are likely to contain the major companies (in the major %) that you would be buying anyway?

3. Finally, are IT doing the same thing as a HYP but obviously charging you a premium for the leg work?

Thanks for the answers, still (always) learning and want to make sure I have understood it correctly.

The key questions.  Fair to say HYP is not favoured by some.  I walk a middle line by having a HYP portfolio but other types too to match to my retirement objectives.

In answer:

1.  Their primary objective is income above an index (e.g FTSE) average.  As far as gains, the main focus is to not lose value rather than gain.  So yes, like an annuity but clearly not as the risk is different and arguably higher.

2.  Quite likely. People do it for a number of reasons such as achieving more than the FTSE average yield and to have better control.  Also some funds like the IUKD ETF just buy the highest yielders, some of which are high for bad reasons.  I have owned this one and felt I was buying yield at the expense of my capital.   Other funds have other selection criteria so are "better" in that respect.

3.  ITs for me are great to have because they can access markets I can't.  It is also said that they hold reserves so can smooth out their dividend flows in down periods.  Fees can be high but so can the yields.  DYOR.

So, a bit of this and a bit of that for me.  I hold several virtual portfolios, each with a different objective (HYP, trading, etc), to spread risk, match risk and returns to my retirement needs (see the floor v upside concept), and to give me clarity and focus when managing them.

So all a personal choice so please DYOR and make your own decision to match your own requirements, getting professional advice as necessary.

PS:  lemonfool.co.uk provides an active discussion on the merits, demerits, etc.

Edited by Harley

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9 hours ago, MrXxx said:

OK, just to make sure I understand this, a few questions about HYP

1. Their purpose is not only capital gain but primarily to provide a regular (& reliable?) stream of dividends in retirement (like an annuity?).

2. If 1. is correct why can it not be done with a low cost FTSE100/DOW physical distribution tracker, as these are likely to contain the major companies (in the major %) that you would be buying anyway?

3. Finally, are IT doing the same thing as a HYP but obviously charging you a premium for the leg work?

Thanks for the answers, still (always) learning and want to make sure I have understood it correctly.

This and the links it provides, might be of interest

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2 hours ago, Democorruptcy said:

This and the links it provides, might be of interest

Hi Democorruptcy,

yes, that's what I have been reading...just wanted to make sure I had understood it correctly....

...and as for DYOR Harley, I always do and don't consider anything I read on here (or any posts I make) to be financial advice...we should all be making our own financial decisions here or we shouldn't be here in the first place!

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Thought this might be useful for those interested in HYP

https://www.ukvalueinvestor.com/performance/

What is interesting is the breakdown/report. He shows that over a period of 8 years his HYP has outperformed a FTSE All share tracker by an extra 0.3%. So for a £50k portfolio he has made an additional £7149. Now, consider that he estimates a half day a month (4hrs?) maintenance, then the 'additional work' over and above a passive investor approach means that he has 'worked' for £18.62 ph (or £893.63 p/yr). Highlights the difference between a passive vs active approach as I mentioned/questioned above. Now whether this is worth it depends on a) if you consider it work and/or enjoy the challenge, and b) if by going via a fully Investment Trust approach (very crude cost say is £50k x 1.5% = £6k costs) would produce the greater Alpha than either the passive (£90,396) or the active (£97,545)...comments/thoughts?

Site also has some useful free tools as well.

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Thought this might be useful for those interested in HYP

https://www.ukvalueinvestor.com/performance/

What is interesting is the breakdown/report. He shows that over a period of 8 years his HYP has outperformed a FTSE All share tracker by an extra 0.3%. So for a £50k portfolio he has made an additional £7149. Now, consider that he estimates a half day a month (4hrs?) maintenance, then the 'additional work' over and above a passive investor approach means that he has 'worked' for £18.62 ph (or £893.63 p/yr). Highlights the difference between a passive vs active approach as I mentioned/questioned above. Now whether this is worth it depends on a) if you consider it work and/or enjoy the challenge, and b) if by going via a fully Investment Trust approach (very crude cost say is £50k x 1.5% = £6k costs) would produce the greater Alpha than either the passive (£90,396) or the active (£97,545)...comments/thoughts?

Site also has some useful free tools as well.

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