Pearson Trading Statement

[Itsallaguess]

Thanks Terry, that's some great information.

So, over about 14.5 years, you've had 17 shares cut their dividend completely. I don't think you've got anything other than what most of us would describe as a 'Generalist HYP', so hopefully that's a fair reflection of what many of us could have seen over that period.

It can't really be that, because all else being equal, someone who held a 30-share HYP over that period could expect about twice as many full-on cutters as someone who held a 15-share HYP over that period. So Terry's experience can be a fair reflection of one or the other, or neither, but not of both...

Or in other words, the measure needs to be normalised to the size of the HYP. There are various ways of doing that - one that I would suggest is the percentage of income lost to full-on cuts, averaged over the years. I.e. each year, add up the previous year's income of all shares that cut their income (the income lost to full-on cuts), and divide by the total previous year's income for all shares (to turn it into a percentage). Then take the average of those percentages over all the years in the period.

Gengulphus

Yes, what I had meant to say also was that it would have perhaps been a fair reflection that many of us could have seen over that period given a similar number of holdings, so thanks for raising that omission, as we'd clearly need to compare such figures against numbers of holdings / weightings etc.

You're quite right that it probably could do with some deeper analysis, but I'm happy that as a 'finger-in-the-air' study, and given the number of holdings in Terry's HYP (although it would be nice to know the number of holdings for each of the years reported?), and also given that 11 of those 17 full-on-cutters came during a single year of the financial-crash (2008, where such an idea regarding selling full-on-cutters might be best re-visited if there's wider market-anomalies to consider....), then it still looks and feels to me that having such a rule (ex huge cross-market crashes..) as selling full-on-cutters at an appropriate time and moving the capital into dividend-paying equities (shares or investment-trusts, which would be my preferred choice for this particular idea, to spread subsequent risk of other cuts..) doesn't on the face of it seem like an onerous idea in terms of leaving one exposed to being regarded as any sort of 'constant tinkerer'...

Cheers,

Itsallaguess

[tjh290633]

You're quite right that it probably could do with some deeper analysis, but I'm happy that as a 'finger-in-the-air' study, and given the number of holdings in Terry's HYP (although it would be nice to know the number of holdings for each of the years reported?), and also given that 11 of those 17 full-on-cutters came during a single year of the financial-crash (2008, where such an idea regarding selling full-on-cutters might be best re-visited if there's wider market-anomalies to consider....), then it still looks and feels to me that having such a rule (ex huge cross-market crashes..) as selling full-on-cutters at an appropriate time and moving the capital into dividend-paying equities (shares or investment-trusts, which would be my preferred choice for this particular idea, to spread subsequent risk of other cuts..) doesn't on the face of it seem like an onerous idea in terms of leaving one exposed to being regarded as any sort of 'constant tinkerer'...

Cheers,

Itsallaguess

Number of Holdings?

2002 - 26
2008 - 35
2009 - 36
2010 - 35
2013 - 34
2015 - 37

TJH

[Itsallaguess]

Number of Holdings?

2002 - 26
2008 - 35
2009 - 36
2010 - 35
2013 - 34
2015 - 37

TJH

Thanks Terry, I didn't realise you'd settled since 2008 on that number of holdings, but even in 2002 you had nearly 30 anyway.

So 17 full-on cutters over nearly 15 years in a, let's say, 32-share 'Generalist' HYP, with 11 of those incidents specifically occurring in 2008, when we had one of the biggest market crashes of a generation.

I could certainly live with a 'sell on a full-cut, once a pricing-opportunity arises' type-rule given those circumstances, although I'd have probably looked at 2008 as being a special-case warranting serious consideration in terms of whether I'd take a blanket-approach to such a rule, given the level of market turbulence.

I don't think there'd be too much in it from a financial point of view (although I'd probably sit on the side of the fence that would prefer to see dividends re-instated quicker from an alternative destination for any capital sitting in full-on-cutters..), but it's in the 'emotional cost' side of things where I think there'd be a real advantage for me personally, as I'd simply prefer to see my capital working for me in these types of cases.

I'm happy to ride-out the vast majority of incidents where companies will continue to pay a lower-level of dividend, and have done exactly that many times over the years and am currently doing so on a small number of my holdings, so I'm certainly no 'knee-jerk-charlie', but I think a full-on-cut deserves special attention, and I'm happy to see that such a rule on your own holdings wouldn't have led to a set of 'over-trading' circumstances.

Thanks again for digging out the numbers Terry, much appreciated.

Cheers,

Itsallaguess

[Dod1010]

What seems like many moons ago this thread would have been brought to heel. (Am I thinking of TMF?) We are a long way from the Pearson Trading Statement. Why bother with topics if anything goes?

Is there no 'Report this post' button?

Dod

[Arborbridge]

Is there no 'Report this post' button?

Dod,

Click the exclamation mark near the top right of the post - I think that does it - then it'll be up to the Mods to decide.

No doubt you will report this post as being OT

Arb.

[Dod1010]

Thanks Arb but I'll just leave it and mind my own business!

Dod

Moderator Message:
This topic has wandered way off topic. Any further deviation and I will lock the topic. I don't mind some deviation but we are now way off. Raptor

[JohnnyCyclops]

Back on topic, I hope. We hold PSON in our HYP. First bought in 2013, with a 30% top-up in 2015 and a tiddly top-up a month ago with reinvested dividends at quarter-end.

I did see the share price drop last week, but it took me until the weekend to catch up with the news as to why. I think this is why HYP suits me, it's quite slow-paced, with no immediate need for action. As I've seen with previous cutters the shareprice does invariably come back over time (on a very small sample size, I admit!) and selling immediately on bad-news isn't necessarily the smart option.

For now we'll continue to hold, but no further top-ups I think. As others have said, depending where the dividend knife falls there may still be an above market yield, although capital will be reduced (for at least a while).

Regarding selling off the FT or Economist, I think I'll plump for SI. I.e. trust that a reasonably sized company will turn itself around and get back to winning ways. And if the current management can't or won't do it, then get rid of them and hire some new ones.

I do feel that many fellow Lemons are very familiar with the brands of the FT or Economist and therefore more keenly felt the 'loss' of their sale by PSON. To my view, with a 30-50 year HYP time horizon, print will dwindle as a mass market media. True, print titles like those two may survive online. I am more hopeful of a longer term move towards electronic-based learning, learning that's always available (i.e. not tied to a school, uni or employer), and also learning/information/facts that one can trust. With the modern fad for 'post-truth', knowing there is a reliable consistent source of learning materials will be key. Pearson, I hope and believe, should be well positioned for this.

[idpickering]

This item from our previous gaff may be of interest here.

I predicted Pearson plc’s dividend cut with these simple rules

"Pearson (LSE: PSON) has paid or maintained its dividend every year for over two decades, so next year’s ‘rebasing’ (read that as ‘cut’) may come as a surprise to some long-term shareholders. It really shouldn’t, though.

Investors paying attention should have seen the potential cut a long time ago. I warned investors to steer clear of Pearson’s dividend in this article only a month ago. Since then, the shares are 28% down with no sign of recovery.

The following rules helped me dodge Pearson and they could help you avoid the next dividend disappointment."

Full item here;

http://www.fool.co.uk/investing/2017/01 ... ple-rules/

disc - No position.

[Dod1010]

And they are now compounding the uncertainty by selling off Penguin, their last print company I think. What they seem to be doing is heading for a break up of the entire business. Would you invest in this business today?

I have never held.

Dod

[Arborbridge]

I predicted Pearson plc’s dividend cut with these simple rules

The trouble with these things is they are really based on bias and not thoroughly tested. How many times has the same person made predictions with similar criteria and which have not come true - and did he boast about them?

As will all these things - such as cash flow which is mentioend in the article - they are all very sensible, but do not necessarily predict anything at all. While obviously a company cannot pay out a dividend for ever without it being covered by cash, that is a long way from saying that it will not be sustained while cover is being rebuilt.

Not every company which falls foul of a few simple rules will collapse: the skill is to know which ones will, and which will go on to greater things.

One example of someone being right, does not prove the process.

[idpickering]

And they are now compounding the uncertainty by selling off Penguin, their last print company I think. What they seem to be doing is heading for a break up of the entire business. Would you invest in this business today?

I have never held.

Dod

Not one for me Dod, although I confess to having held them before. I sold them on 22 Sep 2014 @ 1230p. The graph seems downwards since so I was lucky.

Regards,

Ian.

[bluedonkey]

Ian,

What made you sell back then? Very prescient. Is there anything that the rest of us can learn from that? Pearson hadn't talked of a cut or "review" back then I don't think.

[Arborbridge]

I sold them on 22 Sep 2014 @ 1230p. The graph seems downwards since so I was lucky.

Interesting, for only a few days ago you wrote that you had decided that

I've mentioned on this board before, I've taken a more 'hands off' stance to my HYPing.This is a policy I intend to continue going forward, ie being hands off.

Luckily you weren't "hands off" at that time

[NeilW]

Binned my PSON in July and bought Sky.

I'd like to say it was skill, but I just got lucky.