Wizard wrote:Don't most people look for an HYP selection to have a history of a growing dividend. This is not for the sake of the historical fact itself, but rather as an indicator of a likelihood of future dividend growth. As HSBC has explicitly stated the dividend will not increase for the foreseeable future I would not have thought HSBA qualifies as an HYP pick for new money (new share or top up). Only really a share for discussion by those with existing holdings from now on IMHO.
I cannot speak for “most people”, nor indeed anyone else but me, but in my opinion HYP as a Strategy is not so automated as you suggest above. Yes, the Strategy offers various criteria (Recent History of Rising Dividend, Low Indebtedness, Large Market Capitalisation ..etc..) for assisting in the selection of a candidate but, to my mind at least, the only two absolutes are the avoidance of over-concentration in any one Holding / Business Sector / Industry, and that the share be high yield at the time of purchase.
In my case I will normally take the highest yield available that cannot be rejected by reference to either, the projected portfolio weighting of the Holding / Business Sector / Industry, or one of those HYP criteria. But how much weighting I may put on those criteria and therefore whether I reject any particular high yield or not, will vary, maybe markedly, from other HYPers faced with the same dilemma.
With specific reference to HSBC Group Holdings (HSBA) I first purchased this share for my HYP in April 2012. At the time the dividend had grown in the previous two years, I believe, but there had been a fairly recent Dividend Cut (2008 / 2009) and some would have said that a HYPer should wait until a rising trend was better established (5 years). Others however, would not even have waited as long as I did.
All I can say is that for me, it offered the highest yield not rejected as noted above and I believed that, even though the rising dividend trend was very recent and even tentative, it was a risk worth taking for the medium and long term income prospects. Since my original purchase, the dividend did increase in real terms for a couple more years but since then it has been held and all subsequent increases / reductions have been the result of currency fluctuations.
Would I top-up HSBA now?
No. But that is because at present there are higher dividend yields available, not because HSBA is being rejected per se. If I were faced with that decision, whether to reject HSBA or Top-Up, I would not reject HSBA at present.
Would I select HSBA for a one-shot HYP being purchased right now?
Yes. Assuming, the risk of over-weighting and other HYP Criteria would reject sufficient of the highest current yields available such that HSBA would be under consideration, I would not reject HSBA at present.
I would think the same as I did six years ago - a risk worth taking for the medium and long term income prospects.
Ian