Sainsbury Finals

[StepOne]

Sainsbury continues to be a serial cutter. From my point of view, looking at calendar years, it looks like it will almost certainly cut the dividend for the third year in a row. 2015 was down 24% on 2014, 2016 down a further 8%, and it's looking like roughly a 16% drop this year, depending on the next interim divi amount. Cumulatively 2017 will be about 40% below 2014 in income terms.

This makes Sainsbury my worst performing dividend payer. Worse than BLT, which at least had the good grace to cut it all in one go, and then recover strongly this year. Sainsbury just seems to keep trimming. Hopefully 2018 will be the year that changes this! I'm not going to sell as this is a non-tinkering HYP.

StepOne

[Bouleversee]

I agree that most portfolios will be able to absorb this cut but 15% is a big cut. Funny how holders see it all very differently from others and when it is unheralded and just quietly announced it is accepted philosophically. If say SSE cut its dividend by 15% there would be blood all over the carpet.

Not what I want and it simply reinforces my view that I can do without the retail sector thank you. It is just too volatile and unreliable.

Dod

Please tell me which sectors aren't and can be guaranteed not to be so in the future? Silly me, I bought into the supermarkets because I thought they were a safe, albeit dull, bet as we all had to eat and clean but along came Lidl and Aldi and that was that. And look at Next's record, till I bought. (However, WH Smith and Greggs have done very well for me). Sillier me, I bought several miners because they had done well, till I bought. Will IMB continue to do well, as fewer and fewer people smoke? Will SSE (and other utilities) continue to increase their dividends once capping has had an effect on profits or will they find a way round that? Will Persimmon's profits and s.p. continue to rise (I have a large paper profit on those as well)? I gather house prices are down on the year to April to 2.6% (or it may have been 2.8%; can't remember). Who knows? Service companies such as Interserve have done very well in the past, but we are not rubbing our hands now, are we? What is going to happen to the oil price? Oil companies, once gushing with profits, have not been brilliant in recent years, have they? Pharmaceuticals? What happens when drugs don't work and the govt. finally comes to grips with challenging drug prices? Can't pay, won't pay. Let's face it, there is no certainty in any sector and we can only hope to get lucky occasionally imho which possibly means wider diversification (all that ghastly record keeping multiplies). Or we might be able to spot where the next growth industry is going to be (gene editing, anyone?) but possibly not live long enough to see it bear fruit.

So, all in all, albeit a bit disappointed, I am not fazed (correct spelling unless you are really wired up) or particularly surprised by Sainsbury's results and cut. Hopefully the Argos business will continue to do well but I am not too confident about the clothes section. As I find it difficult to get to other shops, I have bought a few garments in my local store and although they initially looked nice, the quality is not very good and they don't last very long. Some have had to be returned. I have no idea how well they will do in future but I would much rather they only paid a well covered dividend than paid out more than they could really afford like some companies have been doing. At least they haven't found it necessary to axe It like some of my holdings. In the absence of crystal balls, where is that monkey with its pin?

[Dod1010]

In general of course Bouleversee is right. No-one can possibly know the 'safe' sectors never mind 'safe' companies within those sectors. All we can do is listen to the management/directors and get a feel for the company. How much can their words be trusted? And try to divine trends. Strategic Ignorance is just Strategic Laziness in my book.

I have faith in Unilever, HSBC, Legal & General, Schroders and the tobaccos. Pharmas and the utilities so far are just about holding their own as is Shell. It is only doing so though because of its formidable financial strength. It looks as though it might just about get through without a cut.

Of the others, the zombie life companies are fine, Admiral is a bit of a step down (that may just be prejudice on my part because their record has been good) and my other income shares are somewhat also rans but I need them for some modest diversification.

Dod

[Arborbridge]

I have faith in Unilever, HSBC, Legal & General, Schroders and the tobaccos. Pharmas and the utilities so far are just about holding their own as is Shell. It is only doing so though because of its formidable financial strength.

About a 12 share HYP, then. All good stalwarts, but it's a shame you have never published any figures showing progress - I think that's a loss to all of us. If, when you first started posting, you had kept some unitised prices and income per unit, it would be so much more convincing

Some people give us chapter and verse and show results for better or worse. ASAIK, all we've had from you are observations rather than hard fact. I give you the benefit of whatever slight doubt* there might be, but I'd really like to see tangible results to back up your ideas.

*the doubt is not concerned with honesty: only that unless one measures, one cannot be sure.

Arb.

[idpickering]

The lack of a market move on a dividend cut is regrettable. The lack of proposals to dismiss the board members responsible even more so.

The SP is down 5.6% as I type. I agree with your sentiment regarding board members. I wonder, is anyone bothering to buy this share amongst our gaggle here today? Not me for one.

Ian.

[Arborbridge]

I wonder, is anyone bothering to buy this share amongst our gaggle here today?

Not in my case. It's nowhere near the top up HYPTUSS due to the yield, so fortunately, I don't even have to consider it

[idpickering]

I wonder, is anyone bothering to buy this share amongst our gaggle here today?

Not in my case. It's nowhere near the top up HYPTUSS due to the yield, so fortunately, I don't even have to consider it

Have a virtual rec Arb. You made me smile, on a down day...

Ian.

[idpickering]

I hold, along with Galliford Try! So all in all its not been a good couple of days in the HYP. All this validates my recent moves to get more passive index trackers in my portfolio.

With respect, I'd be looking much further than just a couple of days sp movements. I'm committed to looking towards the horizon time wise, and am thinking more in terms of 10 years away. I realise I have now control of sps, so I don't waste my time fretting about them. Good luck with your tactic though, but not much income with a tracker.

Regards,

Ian.

[MDW1954]

fazed (correct spelling)

Thank you, Bouleversee! Like Vodaphone, it's one of those mis-spellings that grates.

MDW1954

[Arborbridge]

I hold, along with Galliford Try! So all in all its not been a good couple of days in the HYP. All this validates my recent moves to get more passive index trackers in my portfolio.

I really can't see how. A couple of days' disappointments? Have you made comparisons with your HYPing over, say, three or five years? Have you compared the income streams or the capital behaviour? Or if you have not invested for long enough, why not take TJH's figures as an example of what your HYP may do.


Arb.

[kempiejon]

We do all know that shares go up and down. Coming on here everyday and chatting about those moves is a pleasant distraction but I don't think should drive investing decisions and HYPers really shouldn't care unless it tolls dividend cut. I doubt Sainsbury's cut is a surprise to many investors and for me they have not been a buy for ages but holders may as well hold firm and take the dividend offered, as we have a diversified portfolio hopefully we mitigate risks. I've got a pretty big portfolio especially compared to the 15 share pyad initial suggestion and as I'm adding I can direct new money away from any cutters looking for those high yielders with worthwhile safety factors and a prospect of growth in dividend. I'll get it wrong and right on that metric - hopefully less wrong than right and my portfolio income will do the job I hope for it - a sustainable and growing income over the longer term. I am lucky that with a safety margin and cash reserves I can afford to ride out even income hiccups. While working I can even improve my position and benefit from drops in price.

[Dod1010]

Arb

I have posted my HYP quite recently. I do not unitise for which sorry, I cannot be bothered. I will post it again shortly. I am not claiming any magic just a common sense HYP and it is more than a dozen or so shares, but includes some ITs. I see no harm in that and they provide some diversification (or diworsification depending on your point of view)

I am in the middle of replacing London &St Lawrence with something else following its liquidation for which I am truly sorry, but it wisnae me as they say.

Dod

[77ss]

I have faith in Unilever, HSBC, Legal & General, Schroders and the tobaccos. Pharmas and the utilities so far are just about holding their own as is Shell. It is only doing so though because of its formidable financial strength.

About a 12 share HYP, then. All good stalwarts, but it's a shame you have never published any figures showing progress - I think that's a loss to all of us. If, when you first started posting, you had kept some unitised prices and income per unit, it would be so much more convincing

Some people give us chapter and verse and show results for better or worse. ASAIK, all we've had from you are observations rather than hard fact. I give you the benefit of whatever slight doubt* there might be, but I'd really like to see tangible results to back up your ideas.

*the doubt is not concerned with honesty: only that unless one measures, one cannot be sure.

Arb.

You really can't expect people to unitise just to be 'convincing'. If one wants to unitise, fine; if one thinks it isn't worth the candle, fine. Personal choice.

[77ss]

I hold, along with Galliford Try! So all in all its not been a good couple of days in the HYP. All this validates my recent moves to get more passive index trackers in my portfolio.

One day's share price movement validates nothing - except that if it really concerns you, then you are wise to move into trackers/ITs/ETFS etc. Peace of mind has a very real value (if difficult to quantify).

I hold Galliford Try. First bought at under £10, so a fall to £13 is rather immaterial to me. Indeed - I have taken the gamble of adding to my holding today. We shall see - falling knife or buying opportunity?

By the way, I am not in any way criticising trackers. I have an FT250 tracker, as well as my normal HYP shares, and have been pretty happy with its performance. The yield of 2.35% isn't that dusty either, for a tracker.

[tramrider]

Year Ending   EPS      Div      EPS/Div Ratio 
2015-03-14    26.40p   13.20p   2.000
2016-03-12    24.20p   12.10p   2.000
2017-03-31    21.8p    10.2p    2.137

Previous years from Digitallook:
http://www.digitallook.com/equity/Sainsbury_J

This year's Preliminary Results:
http://www.digitallook.com/cgi-bin/dlmedia/rns.cgi?action=news&rns=1&view=full&story_id=25882025

Underlying basic earnings per share of 21.8 pence and full year dividend per share of 10.2 pence, reflecting dilution due to new shares issued to Home Retail Group plc shareholders.

Dividend
Our final dividend is 6.6 pence per share, bringing our full year dividend to 10.2 pence per share, reflecting our affordable dividend policy of 2.0x cover.

Is this year’s Sainsbury dividend actually an extra cut to their promised dividend policy of 2.0x cover?


Tramrider

[Dod1010]

So at least in the short term the purchase of Home Retail Group has not been earnings accretive. Do they say anywhere when it might/will be?

Dod

[Arborbridge]

Is this year’s Sainsbury dividend actually an extra cut to their promised dividend policy of 2.0x cover?

Well, tramrider, that's an interesting point. One would imagine that dividing by two was something Mike Coupe could do in his head. So why have they allowed the cover to go over 2x? Is this some extra layer of prudence, - or something related to the extra shares issued, perhaps a timing issue? There will be some unhappy shareholders unless it is explained before the AGM, although the answer may be simple and obvious to those well versed in these matters.

Maybe this is something Gengulphus could explain for us?


Arb.

[monabri]

Perhaps his bonus is determined by other financial measures such as "no reduction in ROCE"?

[idpickering]

You really can't expect people to unitise just to be 'convincing'. If one wants to unitise, fine; if one thinks it isn't worth the candle, fine. Personal choice.

I do agree with you 77ss. I can't be bothered to unitise my HYP, but I'm not going to put up real values of my holdings either. With respect to posters here, you don't know who's reading our chat.

Regards,

Ian.

[Gengulphus]

You really can't expect people to unitise just to be 'convincing'. If one wants to unitise, fine; if one thinks it isn't worth the candle, fine. Personal choice.

Agreed - but I can expect people who try to persuade me to make a decent effort to be 'convincing'! People do of course have the personal choice to ignore that expectation and try to persuade me without making that effort, but equally I have the personal choice to point out that doing so wastes everyone's time and it would be better either to make that effort or to give up the attempt to persuade me...

Gengulphus