20 shares

[petronius]

Could somebody please point me to a balanced portfolio of 20 UK HY shares that satisfy the usual requirements of differentiation, size, solidity, dividend cover, etc. I am looking for a "HY consensus portfolio", if there is such a thing, not anything too smart.

[moorfield]

My own feeble attempt is described here.

[petronius]

Thanks Moorfield, this looks like a nicely spread portfolio. Are you nervous about yields above 6%?

[robbelg]

If you go to HYP Practical and look for threads titled Top up or similar you will find a lot of portfolios of the type you are looking for. If you select those shares that are common to most of them you should end up with a pretty good portfolio. ( but watch out for "legacy shares " such as Lloyds and RBS )

[Raptor]

Could somebody please point me to a balanced portfolio of 20 UK HY shares that satisfy the usual requirements of differentiation, size, solidity, dividend cover, etc. I am looking for a "HY consensus portfolio", if there is such a thing, not anything too smart.

Have you thought of any numbers for your criteria? A good start would be to look at Stepone FTSE350 spreadsheet you can then narrow it down with your criteria. If you let me know what you feel comfortable with then I would be willing to grab a list for you.

Raptor.

[moorfield]

Thanks Moorfield, this looks like a nicely spread portfolio. Are you nervous about yields above 6%?

4 of those 5 yields above 6% are from preference shares - so no, I'm not nervous at all. I've deliberately held off topping up CLLN until the results came in last week, and I haven't quoted VCT yields as their dividends tend to be more irregular.

[petronius]

Hi Raptor,

Thanks for the Stepone spreadsheet, it is a great resource!

I have not decided yet on a specific set of criteria, part of my question was indirectly about what filters people use to exclude shares that are deemed to be too risky.

I understand that a while ago Pyad proposed some criteria in terms of size, dividend history, cover etc, but that some of these have been modified by the HY community?

[Raptor]

Hi Raptor,

Thanks for the Stepone spreadsheet, it is a great resource!

I have not decided yet on a specific set of criteria, part of my question was indirectly about what filters people use to exclude shares that are deemed to be too risky.

I understand that a while ago Pyad proposed some criteria in terms of size, dividend history, cover etc, but that some of these have been modified by the HY community?

True, but as you say people have made their own decisions that they are comfortable with. It also depends on where you are in the process and whether you are looking to buy all at one time or drip them. My criteria is Mkt cap bigger than £100M, rising 5 year divi (field N to Y), forecast divi bigger than FTSe All share, FTSE All Share P/E+2. Which doesn't give a lot. But I do not stick rigidly to it (or didn't) and now only top-up and base that on HYPTUSS plus a lot of my own "coding".

Raptor

[Breelander]

I understand that a while ago Pyad proposed some criteria in terms of size, dividend history, cover etc, but that some of these have been modified by the HY community?

No two HYPs are alike, we are all free to interpret the guidelines in our own way. Pyad's introductory articles laid down the guiding principles:
Retirement Pays Dividends
Retirement Pays Dividends -- 2

They were spelt out in more detail a year later.

After the report last week on the first year of my High Yield Portfolio (HYP) I felt it might be an appropriate time to revisit the kind of assumptions that in my view should be used in the construction of an HYP. Bear in mind that these are only my views of course. This is an art, not rocket science, so that others could well come up with an alternative set of construction tools.

High Yield Selection Rules

[tjh290633]

Could somebody please point me to a balanced portfolio of 20 UK HY shares that satisfy the usual requirements of differentiation, size, solidity, dividend cover, etc. I am looking for a "HY consensus portfolio", if there is such a thing, not anything too smart.

I think the nearest thing is Gengulphus's demonstration HYP portfolio.

Many of us have been at the HYPing game for a long time, and so we hold what you might term "legacy shares", which are still held but would not be a choice if starting afresh. Also, if you have 30-odd shares, there will be sector duplication not present in a 20 share list. My Top 20 of 37, ranked by yield illustrates that:

Rank   EPIC   Yield
   1   CLLN   8.10%
   2   PSON   7.67%
   3   MKS    6.87%
   4   BP.    6.71%*
   5   RDSB   6.56%*
   6   TW.    6.30%
   7   ADM    5.99%*
   8   SSE    5.90%
   9   VOD    5.81%
  10   LGEN   5.73%*
  11   MARS   5.44%
  12   GSK    4.79%*
  13   BLND   4.69%
  14   WMH    4.64%
  15   AZN    4.59%*
  16   LLOY   4.45%
  17   NG.    4.44%
  18   BT.A   4.28%*
  19   AV.    4.20%*
  20   RIO    4.06%

You can see two oils, two pharma and three insurers in that list, marked with asterisks.

TJH

[petronius]

Thanks everyone, more food for thought!

A friend mentioned that a low-cost alternative to individually picking HY shares is the Vanguard FTSE U.K. Equity Income Index Fund.

They select HY shares in FTSE350 according to certain automatic criteria (that I am not entirely clear about).

Any thoughts on this?

[tjh290633]

I am not sure whether they use this index or another specially calculated, but look at this fact sheet:

http://www.ftse.com/Analytics/FactSheet ... 643c3b.pdf

There is a comprehensive list of UK indices at http://www.ftse.com/products/indices/uk

TJH

[petronius]

Thanks, the FTSE UK Dividend+ Index sounds similar to the one Vanguard may use for their UK income fund, but I am not sure if it is the one or not...

In any case this index is interesting. The fact that the weightings of the the index are determined by their dividend yield rather than market capitalisation should make this index rather different from FTSE350. This is confirmed by the comparison graph.

Dividend yield around 5% is rather attractive.