Tinker away Segro PLC (SGRO)
Posted: June 4th, 2018, 1:57 pm
Strict HYPers look away now. And please don’t point those crucifixes at me!
Yes, I am thinking of tinkering away one of my most successful holdings - Segro PLC (SGRO) - and re-investing the proceeds into a new holding – New River Retail (NRR). The reason of course is to increase the yield and hopefully over time, the actual income received.
SGRO has been a magnificent share for my HYP. Capital Value up 165% since purchase in 2012 and an ever increasing dividend. I am even fairly comfortable that the dividend is set to increase again this year but, thanks to the remarkable price increase, the historic dividend yield is now barely over 2.5%. My portfolio’s overall historic dividend yield is just over 5% and there are many HYP candidates that have much better dividend yields, even in excess of 6%, presenting many tempting opportunities to re-deploy the capital currently tied up in SGRO and gain an immediate boost to the portfolio’s forecast income
I am not by nature a tinkerer and in general I agree whole-heartedly with the recommendation that trading within an HYP should be kept to a minimum, even to only that forced upon us by corporate events. However, I am coming to the realisation that some sort of re-deployment of capital, from low to higher yield, on an occasional basis, may be beneficial to the overall performance of my HYP, especially during this pre-retirement phase. Yes, there are risks in selling a great share like SGRO without knowing whether the replacement will match up. But as I am still adding fairly substantial funds to my portfolio on an annual basis, I feel I am in a position to take that risk.
So to the replacement share, New River Retail (NRR)
Chosen because of its yield obviously (7.2%+) but also because it will maintain my diversification and a holding in the Property Sector, rather than over concentrate in other Sectors or Industries. Not a major issue with my portfolio, only Oil and Gas is over limit, but why not diversify as much as possible.
Downsides:
UK-centred – SGRO is Europe-wide
Retail-centred – NRR owns and manages shopping centres and various leisure-style properties – leasing out to Shops, Pubs, Clubs and Restaurants etc. SGRO on the other hand, is into light industrial and warehousing properties. More boring for sure, but probably safer, especially at this time when our whole shopping habit is apparently changing thanks to online possibilities and what I believe is a greater demand for value for money.
Debt level in NRR is higher than within SGRO, but appears manageable to me. I am going to investigate further this evening
Market Capitalisation – NRR is £865 Million while SGRO, in the FTSE 100, is £6.6 Billion
Upsides:
Yield, obviously. NRR’s forecast dividends will, if realised, increase the income on this slice of capital more than 2.5 times.
Going forward, I am probably going to keep a keener eye on the low yielders with a view to possibly taking action. I am not yet sold on an automatic disposal or top slice a la TJH. Although I am impressed with his HYP results and do feel that some of that success must come from his “updating” of the portfolio from time to time.
Anyway, all thought welcome
Ian
Yes, I am thinking of tinkering away one of my most successful holdings - Segro PLC (SGRO) - and re-investing the proceeds into a new holding – New River Retail (NRR). The reason of course is to increase the yield and hopefully over time, the actual income received.
SGRO has been a magnificent share for my HYP. Capital Value up 165% since purchase in 2012 and an ever increasing dividend. I am even fairly comfortable that the dividend is set to increase again this year but, thanks to the remarkable price increase, the historic dividend yield is now barely over 2.5%. My portfolio’s overall historic dividend yield is just over 5% and there are many HYP candidates that have much better dividend yields, even in excess of 6%, presenting many tempting opportunities to re-deploy the capital currently tied up in SGRO and gain an immediate boost to the portfolio’s forecast income
I am not by nature a tinkerer and in general I agree whole-heartedly with the recommendation that trading within an HYP should be kept to a minimum, even to only that forced upon us by corporate events. However, I am coming to the realisation that some sort of re-deployment of capital, from low to higher yield, on an occasional basis, may be beneficial to the overall performance of my HYP, especially during this pre-retirement phase. Yes, there are risks in selling a great share like SGRO without knowing whether the replacement will match up. But as I am still adding fairly substantial funds to my portfolio on an annual basis, I feel I am in a position to take that risk.
So to the replacement share, New River Retail (NRR)
Chosen because of its yield obviously (7.2%+) but also because it will maintain my diversification and a holding in the Property Sector, rather than over concentrate in other Sectors or Industries. Not a major issue with my portfolio, only Oil and Gas is over limit, but why not diversify as much as possible.
Downsides:
UK-centred – SGRO is Europe-wide
Retail-centred – NRR owns and manages shopping centres and various leisure-style properties – leasing out to Shops, Pubs, Clubs and Restaurants etc. SGRO on the other hand, is into light industrial and warehousing properties. More boring for sure, but probably safer, especially at this time when our whole shopping habit is apparently changing thanks to online possibilities and what I believe is a greater demand for value for money.
Debt level in NRR is higher than within SGRO, but appears manageable to me. I am going to investigate further this evening
Market Capitalisation – NRR is £865 Million while SGRO, in the FTSE 100, is £6.6 Billion
Upsides:
Yield, obviously. NRR’s forecast dividends will, if realised, increase the income on this slice of capital more than 2.5 times.
Going forward, I am probably going to keep a keener eye on the low yielders with a view to possibly taking action. I am not yet sold on an automatic disposal or top slice a la TJH. Although I am impressed with his HYP results and do feel that some of that success must come from his “updating” of the portfolio from time to time.
Anyway, all thought welcome
Ian