Renationalising utilities

[Dod101]

Having reduced my holding in SSE in January, I only hold about 3.7% of my total portfolio in utilities and no doubt they contribute slightly more than that in dividends and I will continue to hold for the time being as I rather like the income and this doom and gloom can be overdone. I hold some National Grid as well as SSE. However I will keep a close watch on them.

It is far from a foregone conclusion that Labour will be the next government.

Dod

[Darka]

It is far from a foregone conclusion that Labour will be the next government.
Dod

Completely agree and suspect they won't (but you never know), I'll keep my other utility shares, Pennon and National Grid.

I wasn't happy with UU's dividends being stable, so wanted out for a little while but procrastinated long enough to drop from 50% capital gain, down to 32% - lesson learned.

[Lootman]

If the government lasts until 2022, 'younger voters' will be those under about 50 in terms of having meaningful memories of the 70s.

More than that. To have remembered the last full year of socialism (1978) as an adult (18 plus) you would have had to have been born in 1960 or earlier. Someone born in 1960 will be 62 in 2022. So you basically have to be a baby boomer or pensioner to recall the true horrors of Corbyn-type policies.

I don't think Corbyn can win except as part of a coalition. But I won't wait to find out, especially since we may have an election sooner. I don't trust the average voter to support protecting wealth - they are more likely to envy it.

So I have been selling off my utilities and they have joined my "do not touch" list along with banks and "support services".

A bigger worry to HY investors may be the fact that McDonnell seems to regard dividends as some kind of confiscation from the people rather than an equitable reward for taking risk to invest in infrastructure.

[idpickering]

It's been a while but with all this nationalisation talk, I logged in this morning to see what my Utes were up to.

UU - down
NG - down - but they paid a big dividend & consolidated recently didn't they?
SSE - Marginally down (for the first time for as long as I can remember!)

RMG - Surprisingly.... 20% UP (having been well down last time I checked). So I flogged 'em. I've never really been happy with them. Maybe they're too new for a HYP share.

I do get where you’re coming from regarding RMG. I hold and had just about give up on them until recently. I shallleave them be for now though I think.

Ian.

[Bouleversee]

Snorvey said:

"SSE - Marginally down (for the first time for as long as I can remember!)"

I take it you mean that it's the first time they were only marginally down for as long as you can remember? They were £16.40 in Nov. 2016, £11.83 at the moment, quite a drop. TLF and various other "experts" are recommending them. One had it near the top of his best 10 tips for 2018. I'm trying to persuade myself that they are now oversold.

[Bouleversee]

I happened to look at the recent deals in SSE in the early evening yesterday and was surprised at the number of buys listed at times after close, including one at 16.35 for 830,744 shares @ 1182p (£9,819,394) and some at higher prices.* I wonder who was buying those and, for that matter, who was selling them. I have no idea how after hours trading works. Is it only between market makers, in which case what makes It a buy rather than a sell? Is it any guide to next day's prices? It will be interesting to see what the s.p. does today.

*I see from this morning's paper that that was in fact yesterday's closing price.

[Gengulphus]

Forget going to a bookies to have a gamble on the outcome of the next election, just buy Utes at these prices.

Or short them... Depends on whether one wants to gamble on the outcome to hedge against a bad outcome or to exploit a good outcome more thoroughly, and on one's political opinions about which outcomes are good and which are bad.

And since such political opinions are IMHO thoroughly off-topic here and liable to generate heated political debate, I won't be voicing mine in any detail here. That doesn't mean they're totally irrelevant here - but so many things can be relevant to practical decisions about running a HYP in practice that if the moderators want to accept that as enough reason to regard something as on-topic, they might as well rename the board "Anything At All You Want to Discuss" and give themselves a much easier job deciding whether something is on-topic!

That does leave a bit of a quandary about things that are relevant to practical decisions about running one's HYP but not on-topic. The only reasonable solution I've seen to that is basically "Quick mentions of off-topic matters are fine when made in connection with an actual practical HYP decision. Deep-diving discussion of them should be taken to a board where they're on-topic, as should discussion of them as general issues not connected with an actual practical HYP decision." Not saying that's a perfect solution - it has sufficiently grey edges that it can't be! - but it's IMHO a reasonable one.

And when posting about such matters, I think we all have the job of helping the moderators keep the board reasonably on-topic. That means taking care about what we say about off-topic matters, especially when they're issues on which people have widely-varying, strongly-held opinions such as politics that are liable to trigger heated debates... Not by any means the only such issue, two others being religion and ethics - for instance, I have pretty strongly-held views on tobacco, but all that's actually relevant to my practical HYP decisions is whether I'll buy holdings in tobacco shares and so that's all I actually say in my posts here. (Specifically, the answer is that I won't in my main HYP, but will in the demo HYPs I run. The latter is the outcome of a to-me-acceptable compromise that I've managed to find between two of my ethical principles that conflict in the particular case of the demo HYPs.)

Finally, I should add that I'm by no means claiming to be perfect on such matters! For instance, I have a tendency to deep-dive on taxation issues, leading to me posting replies that would probably have been better posted to the Taxes board and crossposted about here...

Gengulphus

[Lootman]

since such political opinions are IMHO thoroughly off-topic here

An opinion about politics is off topic here.

But an opinion about elevated risk levels to a market sector that typically features in HYPs is well within topic here. In that context whether the risk is due to politics or some other topic isn't really important. It's the risk that is relevant to discuss here and, in this case, the cause of that risk is McDonnell's stated intention and the probability of him ever being able to implement it. That is a very practical consideration in my opinion - so much so that I have in fact sold most of my utilities as a result!

Other political issues that I would deem relevant here might be, say, proposed changes to the way dividends are taxed or increased regulation of a particular sector like banking, healthcare, energy or tobacco, again because they all typically feature in HY portfolios.

These topics could all be discussed on other boards as well, of course. But insofar as they are more relevant to high-yielding sectors, then they might be better discussed here.

[absolutezero]

I've always been one for Strategic Ignorance but a 100% loss on Carillion has made me reconsider and I've been doing a bit of 'tidying up' of my so-called HYP. So-called because I'm tinkering.

Contrary to the no-tinker rule I've sold any small holdings and anything making over a 20% loss.
I'm now looking at getting rid of anything with too big a political risk. I.e. My utility shares.

Here's how things currently stand:

SHARE | CAPITAL GAIN | TOTAL RETURN
NG | 0% | 32%
SSE | -17% | 1%
SVT | 23% | 52%
UU | -13% | 4%

The 'total return' is change in capital value + dividends received.
I suppose my question is, am I kidding myself by looking at things this way? Trying to convince myself I've not lost money?

Problem is, I'm kind of attached to these shares because they pay out about 20% of my dividends but the idea of them being 'Nationalised' and potentially losing them all is a bit much to bear.

[idpickering]

I've always been one for Strategic Ignorance but a 100% loss on Carillion has made me reconsider and I've been doing a bit of 'tidying up' of my so-called HYP. So-called because I'm tinkering.

Contrary to the no-tinker rule I've sold any small holdings and anything making over a 20% loss.
I'm now looking at getting rid of anything with too big a political risk. I.e. My utility shares.

Here's how things currently stand:

SHARE | CAPITAL GAIN | TOTAL RETURN
NG | 0% | 32%
SSE | -17% | 1%
SVT | 23% | 52%
UU | -13% | 4%

The 'total return' is change in capital value + dividends received.
I suppose my question is, am I kidding myself by looking at things this way? Trying to convince myself I've not lost money?

Problem is, I'm kind of attached to these shares because they pay out about 20% of my dividends but the idea of them being 'Nationalised' and potentially losing them all is a bit much to bear.

To be honest, I’d stick with them for now, until things become clearer regarding who’s going to win thelection. Don’t panic. And IMHO you are losing money if you make paper losses a reality. It’s up to you. Peace of mind is important too.

Ian.

[Arborbridge]

I've always been one for Strategic Ignorance but a 100% loss on Carillion has made me reconsider and I've been doing a bit of 'tidying up' of my so-called HYP. So-called because I'm tinkering.

Contrary to the no-tinker rule I've sold any small holdings and anything making over a 20% loss.
I'm now looking at getting rid of anything with too big a political risk. I.e. My utility shares.

Here's how things currently stand:

SHARE | CAPITAL GAIN | TOTAL RETURN
NG | 0% | 32%
SSE | -17% | 1%
SVT | 23% | 52%
UU | -13% | 4%

The 'total return' is change in capital value + dividends received.
I suppose my question is, am I kidding myself by looking at things this way? Trying to convince myself I've not lost money?

Problem is, I'm kind of attached to these shares because they pay out about 20% of my dividends but the idea of them being 'Nationalised' and potentially losing them all is a bit much to bear.

Loads of points here! - but I'll just pick one or two. "So called" HYP? It's still a HYP if you tinker - just not a classic Dorisian go to sleep type HYP.
If your dividends received, plus the realisable value is greater than the cost, then you've haven't lost money and you are not fooling yourself. Whether you have made a gain over inflation is another matter - depends on the time value.

My feeling about selling out is that it's a bit early to panic sell. None of us know what the realities will be - even if Labour gets it, which is by no means certain. There's some way to go yet. However, as itsallaguess would point out, there are occasions when it is worth doing something just for peace of mind. Why not give it a couple of weeks and think about it rather than doing something precipitous and immediate? Apart from anything else, you might like to ponder slowly on what you would choose to produce a similar income, thus replacing that 20% with instruments you might feel are safer for you.

Arb.

[Arborbridge]

BTW, last Saturday's Telegraph had a feature concerning a number of star pick sure fire income producers for its readers.
I was surprised to note that one was NG - so is this lack of care, lack of research, or are have they made a judgement that there is genuinely little risk from the politics of the situation?

Arb.

[absolutezero]

I've always been one for Strategic Ignorance but a 100% loss on Carillion has made me reconsider and I've been doing a bit of 'tidying up' of my so-called HYP. So-called because I'm tinkering.

Contrary to the no-tinker rule I've sold any small holdings and anything making over a 20% loss.
I'm now looking at getting rid of anything with too big a political risk. I.e. My utility shares.

Here's how things currently stand:

SHARE | CAPITAL GAIN | TOTAL RETURN
NG | 0% | 32%
SSE | -17% | 1%
SVT | 23% | 52%
UU | -13% | 4%

The 'total return' is change in capital value + dividends received.
I suppose my question is, am I kidding myself by looking at things this way? Trying to convince myself I've not lost money?

Problem is, I'm kind of attached to these shares because they pay out about 20% of my dividends but the idea of them being 'Nationalised' and potentially losing them all is a bit much to bear.

Loads of points here! - but I'll just pick one or two. "So called" HYP? It's still a HYP if you tinker - just not a classic Dorisian go to sleep type HYP.
If your dividends received, plus the realisable value is greater than the cost, then you've haven't lost money and you are not fooling yourself. Whether you have made a gain over inflation is another matter - depends on the time value.

My feeling about selling out is that it's a bit early to panic sell. None of us know what the realities will be - even if Labour gets it, which is by no means certain. There's some way to go yet. However, as itsallaguess would point out, there are occasions when it is worth doing something just for peace of mind. Why not give it a couple of weeks and think about it rather than doing something precipitous and immediate? Apart from anything else, you might like to ponder slowly on what you would choose to produce a similar income, thus replacing that 20% with instruments you might feel are safer for you.

Arb.

Thanks, Ian.
I've lurked here for some time. You strike me very much an SI kind of guy along the lines Stephen Bland advocates. After my losses with CLLN, I'm once bitten, twice shy and I don't trust an incoming Labour government not to mess about. I'm not sure about the Tories either as public opinion seems to be in favour of utilities being 'publicly owned' (a phrase I always take issue with as the public own nothing, the State does).

Arb
I've bought the shares in tranches between 2010 and 2017 so probably in profit post inflation on NG and SVT but taking losses on SSE and UU.
I've been mulling this over for a while, even moving the certificated versions (yes, paper!) into my personal CREST account to allow me to sell quickly if the SHTF.
Also, the trend of these is definitely downwards. I'm no chartist but it's where the momentum seems to be taking them.

My portfolio currently contains 38 different shares and I suppose is getting unwieldly to manage so I'd probably recycle the cash into LAND/PHP, RSA/AV., BT.A and RIO. As these are my smallest holdings that are currently yielding a sufficiently high amount.

[johnhemming]

Correctly assessing sovereign risk is important, but difficult.

[idpickering]

Thanks, Ian.
I've lurked here for some time. You strike me very much an SI kind of guy along the lines Stephen Bland advocates. After my losses with CLLN, I'm once bitten, twice shy and I don't trust an incoming Labour government not to mess about. I'm not sure about the Tories either as public opinion seems to be in favour of utilities being 'publicly owned' (a phrase I always take issue with as the public own nothing, the State does).

Hi absolutezero. I do try to be as much of the SI ilk, and would rather keep my hands off my HYP and let it do its' thing. Two reasons I guess, it's the way of less work ,and cheaper (charges), and I'm not very good at jumping to and fro, into and out of shares. It's more like SI was aimed at people like me.

Ian.

[TUK020]

I've always been one for Strategic Ignorance but a 100% loss on Carillion has made me reconsider and I've been doing a bit of 'tidying up' of my so-called HYP. So-called because I'm tinkering.

Contrary to the no-tinker rule I've sold any small holdings and anything making over a 20% loss.
I'm now looking at getting rid of anything with too big a political risk. I.e. My utility shares.

Here's how things currently stand:

SHARE | CAPITAL GAIN | TOTAL RETURN
NG | 0% | 32%
SSE | -17% | 1%
SVT | 23% | 52%
UU | -13% | 4%

The 'total return' is change in capital value + dividends received.
I suppose my question is, am I kidding myself by looking at things this way? Trying to convince myself I've not lost money?

Problem is, I'm kind of attached to these shares because they pay out about 20% of my dividends but the idea of them being 'Nationalised' and potentially losing them all is a bit much to bear.

Absolutezero,
while I agree with the other posters on the "don't panic" message, I would say that in the longer term you might want to reconsider having 20% dependancy on utilities - some diversification might prove safer.
If you start a new post giving your total portfolio, you might get some suggestions from other posters on what sectors to consider
tuk020

[absolutezero]

I've always been one for Strategic Ignorance but a 100% loss on Carillion has made me reconsider and I've been doing a bit of 'tidying up' of my so-called HYP. So-called because I'm tinkering.

Contrary to the no-tinker rule I've sold any small holdings and anything making over a 20% loss.
I'm now looking at getting rid of anything with too big a political risk. I.e. My utility shares.

Here's how things currently stand:

SHARE | CAPITAL GAIN | TOTAL RETURN
NG | 0% | 32%
SSE | -17% | 1%
SVT | 23% | 52%
UU | -13% | 4%

The 'total return' is change in capital value + dividends received.
I suppose my question is, am I kidding myself by looking at things this way? Trying to convince myself I've not lost money?

Problem is, I'm kind of attached to these shares because they pay out about 20% of my dividends but the idea of them being 'Nationalised' and potentially losing them all is a bit much to bear.

Absolutezero,
while I agree with the other posters on the "don't panic" message, I would say that in the longer term you might want to reconsider having 20% dependancy on utilities - some diversification might prove safer.
If you start a new post giving your total portfolio, you might get some suggestions from other posters on what sectors to consider
tuk020

I have just sold the SSE and UU.
Further falls today and I figured I might as well get out:
1 I have still made a few quid from them overall and
2 the diversification of moving out of utility shares and into something else.

Now the age old problem of what to buy instead??

[Dod101]

I have just sold the SSE and UU.
Further falls today and I figured I might as well get out:
1 I have still made a few quid from them overall and
2 the diversification of moving out of utility shares and into something else.

Now the age old problem of what to buy instead??

I sold about 2/3rds of a large holding I had in SSE on 22 January at £12.94 and have no intention of selling any more. It was not so much the threat of nationalisation that was bothering me but rather whether they might not 'rebase' their dividend this year. Their finances are a bit stretched.

I will miss their dividend as it stands though, and moving out of utilities is hardly going to give you diversification.

For the purists I am sure I now have too much in the financial sector but I find it difficult to know what else to buy although some property companies are looking OK. Not any with contracting in them though because I do not think Galliford Try will be last to be hit.

Dod

[idpickering]

I have just sold the SSE and UU.
Further falls today and I figured I might as well get out:
1 I have still made a few quid from them overall and
2 the diversification of moving out of utility shares and into something else.

Now the age old problem of what to buy instead??

Good luck Abosolutezero. Let us know where you put the monies released. I figure others may follow your lead.

Ian.

[monabri]

The hedgies haven't concurred... yet.

.

That's a good point. Even if the next election is years away, you'd think that the hedgies would have been on this, shorting the utes down. Maybe they're working at a sub 0.5% visible shorting level, walking the prices down, replacing the shares and then shorting again?