New HYP shares

[Wizard]

I just ran a screen on Digitallook:

market Cap > £1Bn
Yield > 5%
Div growth >2% over last 4 years
Cover > 1.5

It threw up a few new ones besides MicroFocus:

Crest Nicholson (builder) 8.4% (yield)
Playtech (software) 6%
Dunelm ( home furnishings) 5%
Polymetal International (precious metal mining) 5%

All are rather low-cap, and I do not profess to know much about them, but some new names at least.

Playtech is one I've had my eye on for a little while now. Looks like it's recovering a touch from its recent lows. It's a new sector for me, and I've struggled to get comfortable enough to pull the trigger on mainly due to my lack of understanding around the barriers to entry and potential regulatory risks. That been said I suspect there is some decent growth potential on top of the current yield with new European markets etc. Will have another look at it, just not convinced it's a LTBH and keep your eyes closed, maybe more of a value bet

Is there not a reasonable chance of a cut in the dividend given the issues in Asia?

Terry.

[idpickering]

It isn't a precise science, and we all need to apply our personal priorities and do our own research to satisfy ourselves that we are happy to invest in each company - and never accept that somebody else's opinion is any better than our own. Some people may be well informed and pass on useful information and advice, but the ultimate decision is our own. The only reason I suggested that we needn't look much further than the usual subjects is that it helps reduce the risk associated with investing in smaller companies but, if you are happy that the risk in adding one or two of those to your portfolio is acceptably low, then I'm certainly not saying it's wrong or you shouldn't - I have!

Good luck.

CP (a very average private investor)

Another great post CP, and I humbly rec it. Your comment above is spot on.

Regards,

Ian (another very average private investor).

[Walrus]

I just ran a screen on Digitallook:

market Cap > £1Bn
Yield > 5%
Div growth >2% over last 4 years
Cover > 1.5

It threw up a few new ones besides MicroFocus:

Crest Nicholson (builder) 8.4% (yield)
Playtech (software) 6%
Dunelm ( home furnishings) 5%
Polymetal International (precious metal mining) 5%

All are rather low-cap, and I do not profess to know much about them, but some new names at least.

Playtech is one I've had my eye on for a little while now. Looks like it's recovering a touch from its recent lows. It's a new sector for me, and I've struggled to get comfortable enough to pull the trigger on mainly due to my lack of understanding around the barriers to entry and potential regulatory risks. That been said I suspect there is some decent growth potential on top of the current yield with new European markets etc. Will have another look at it, just not convinced it's a LTBH and keep your eyes closed, maybe more of a value bet

Is there not a reasonable chance of a cut in the dividend given the issues in Asia?

Terry.

I think the cash generation is strong enough to retain the dividend with the cash reserves held unless they decide to buy something else. It's more the barrier to entry question that worries me, that they are losing market share in Asia due to aggressive competition, as I stated above I'm not convinced it's a LTBH and go to sleep even though it fits the HYP criteria.

[UncleEbenezer]

Dunelm ( home furnishings) 5%

Being aware of them as a retailer, I took a brief look. The share price has been drifting downwards over the past five years, which would account for the higher yield if they had been maintaining or increasing their dividend.

According to Hargreaves, five years ago the dividend yield was 1.7%
https://www.hl.co.uk/shares/shares-sear ... /dividends

Today's price is 518, five years ago it was over 1000.

FWIW, back in TMF days and probably a little over five years ago, Dunelm featured as a growth (GARP) pick from one of David Kuo's fund-manager interviewees.

Seems it's grown right into high-yield territory.

[Arborbridge]

As regards Dunelm: I would only ask "does one need it?" It seems perfectly possible to create a good HYP with the usual large suspects, so I wonder if straying downwards and further into retail is necessary.

It's not necessarily a bad move - it could be rewarding - but why bother? In addition, one has the feeling that Dunelm might be at the dead end of the woods.

Arb.

[idpickering]

As regards Dunelm: I would only ask "does one need it?" It seems perfectly possible to create a good HYP with the usual large suspects, so I wonder if straying downwards and further into retail is necessary.

It's not necessarily a bad move - it could be rewarding - but why bother? In addition, one has the feeling that Dunelm might be at the dead end of the woods.

Arb.

Wise words indeed once more Arb. Each to their own, but why take the risk?

Ian.

[Walrus]

As regards Dunelm: I would only ask "does one need it?" It seems perfectly possible to create a good HYP with the usual large suspects, so I wonder if straying downwards and further into retail is necessary.

It's not necessarily a bad move - it could be rewarding - but why bother? In addition, one has the feeling that Dunelm might be at the dead end of the woods.

Arb.

I must admit I personally think fishing in these waters for long term buy and hold is a dangerous game. They strike me as being the type of share to steal a phrase, you would need to watch like a hawk.

[idpickering]

I must admit I personally think fishing in these waters for long term buy and hold is a dangerous game. They strike me as being the type of share to steal a phrase, you would need to watch like a hawk.

Very well put Walrus. Enough said IMHO.

Ian.

[floyd3592]

You should follow the normal procedure. That is to say, you list them in descending order of yield. Starting at the top you pick them in succession, avoiding duplicating a sector as long as you can.

You should look at all the recent market information for each share, to see if anything nasty is in the woodshed, like a forthcoming merger or demerger, or a significant sale or acquisition. For example, you might wish to avoid SSE until after the retail side has been spun off.

It would be normal to exclude any shares whose yield is currently lower than the market average, but watch out for any occasion if they come into range, probably by moving down when the market moves up.

Initially you buy equal monetary amounts of each share. If you later add another share, do so at the then median or average holding value. If you start duplicating sectors, avoid the temptation to overdo it.

That's about it. There is always the question of smell, and if a share doesn't smell right to you, avoid it.

TJH

Many thanks for your detailed response TJH. I think I'll avoid SSE for another share in that sector. Think I'll choose Barratt over Persimmon too, any idea why it's yield is so high?

Regards
Floyd

[floyd3592]

Hi floyd

I was only trying to illustrate that it is possible to create (at least most of, if you are restricted by ethical concerns or a narrower view of sectors than some) a well diversified HYP without having to look beyond a fairly well established group of large caps from the FTSE 100. I am hesitant about recommending or advising against any of the shares for several reasons:

1) I no longer tend to research them in any depth as my "HYP" has been pretty complete for some time

2) I have no more investing skill than the next man/woman

3) The list was pretty much off the top of my head and others may disagree with some choices and think other companies should be included (in retrospect, I think I do myself!)

4) Ultimately, you need to buy shares that YOU feel comfortable holding

I think TJH has given a pretty good summary of how to go about it. I would start by looking at the whole of the FTSE 100 rather than just those listed - the following site summarises the yields:

https://www.dividenddata.co.uk/dividend ... et=ftse100

As TJH implies, it is important not to assume the dividends will continue at the same levels and you should investigate any companies that make your short list further before choosing them (this is where you have to choose your own "safety" criteria such as dividend cover, years of rising dividend, debt, whatever makes you comfortable - as well as the market news and "smell" that TJH speaks of).

FWIW, looking at the above list, this is how I personally would start off:

Firstly, as the FTSE 100 average yield is currently about 4%, I would disregard AZN, DGE, ULVR, RB., BA., ADM, SBRY and NXT.

That would leave the following shares as the highest yielders in their sectors (as I see sectors, you may feel differently), with the next highest, where applicable, in brackets:

HSBA 5.54% (LLOY 5.04)
RDSB 5.73% (BP 5.67)
IMB 5.97% (BATS 4.70)
GSK 5.11%
RIO 6.32% (AAL 4.84)
VOD 7.38%
SSE 7.45% (NG. 5.61)
BT.A 6.85%
LGEN 5.91% (AV. 5.67)
DLG 6.39%
UU. 5.38% (SVT 4.38)
BLND 4.71%
RMG 5.15%
PSN 9.50% (BDEV 4.75)
WPP 4.86% (ITV 4.67)
MKS 6.18%

So, on the face of it, the "usual suspects" (as scratched together fairly haphazardly by me) are offering quite a juicy HYP spanning 16 sectors at the moment! Of course, it isn't quite as simple as that and more work should go into deciding a final selection. Would BATS be a better pick than IMB, given their histories and market news? Would NG. be a safer bet than SSE now for the reason TJH gave? Are BT. in a position to maintain that dividend? PSN's yield is 9.5% - that surely needs investigating - and so on...

It isn't a precise science, and we all need to apply our personal priorities and do our own research to satisfy ourselves that we are happy to invest in each company - and never accept that somebody else's opinion is any better than our own. Some people may be well informed and pass on useful information and advice, but the ultimate decision is our own. The only reason I suggested that we needn't look much further than the usual subjects is that it helps reduce the risk associated with investing in smaller companies but, if you are happy that the risk in adding one or two of those to your portfolio is acceptably low, then I'm certainly not saying it's wrong or you shouldn't - I have!

Good luck.

CP (a very average private investor)

Many thanks CP

I've actually used your suggestions to compare against my shortlist and will investigate further.

Out of interest, I know there's been some other candidates mentioned on this thread but regarding your item 3 above which are the other companies which you think could / should be included?

Regards
Floyd

[CryptoPlankton]

3) The list was pretty much off the top of my head and others may disagree with some choices and think other companies should be included (in retrospect, I think I do myself!)

Many thanks CP

I've actually used your suggestions to compare against my shortlist and will investigate further.

Out of interest, I know there's been some other candidates mentioned on this thread but regarding your item 3 above which are the other companies which you think could / should be included?

Regards
Floyd

Hi again, Floyd.

I've got to be honest and say that I'm not sure how useful my idea of what to include in a list of "usual suspects" would or should be, but, for what it's worth, other FTSE 100 shares that I think have been considered fairly regularly over recent years also include:

RSA and PSON - both on too low a yield to be considered at the moment

LAND - has had its moments and is on 4.92% now so a possible rival to BLND as a candidate

CNA - currently on 8.09%, but share price down 60% over past five years and there has been a lot of doubt about sustainability of the dividend.

SLA - 6.71% and talked about a fair bit recently (I think Standard Life were regularly mentioned before the merger, but never on my radar)

And that's about it, but please remember the list was really only drawn up to make a point and nothing more - I am sure there are several more very good HYP candidates out there (but please don't ask me what they are!)

All the best, CP

[idpickering]

CNA - currently on 8.09%, but share price down 60% over past five years and there has been a lot of doubt about sustainability of the dividend.

Tread with care. That yield is in the 'if it looks to good to be true territory' IMHO.

Ian.

[TUK020]

two points to add

a) if you have run out of sectors listed above, then you could consider pubs/breweries e.g. Marstons.

b) One area where I do take account of other peoples opinions: since the Carillion saga, I keep an eye on the short seller tables, and avoid anything over an arbitrary limit of 5%. This rules out most of the retail sector.
https://shorttracker.co.uk/companies/?sort=2&d=desc

[CryptoPlankton]

CNA - currently on 8.09%, but share price down 60% over past five years and there has been a lot of doubt about sustainability of the dividend.

Tread with care. That yield is in the 'if it looks to good to be true territory' IMHO.

Ian.

Absolutely, Ian! Can't stress enough that it was just a general list of large cap shares that have been brought up for consideration at various times over the years (hence "usual suspects") - that does NOT mean they are always good candidates. Not so sure it was a good idea at all now...

[idpickering]

Absolutely, Ian! Can't stress enough that it was just a general list of large cap shares that have been brought up for consideration at various times over the years (hence "usual suspects") - that does NOT mean they are always good candidates. Not so sure it was a good idea at all now...

Cheers for that CP. I admit to having held Centrica in the past, but no more. I always found them a less than dependable share to hold as a dividend investor. The very high yield on offer currently is a screaming red flag to me. Buyer beware!!

Ian.

[kempiejon]

CNA - currently on 8.09%, but share price down 60% over past five years and there has been a lot of doubt about sustainability of the dividend.

Tread with care. That yield is in the 'if it looks to good to be true territory' IMHO.

Ian.

Absolutely, Ian! Can't stress enough that it was just a general list of large cap shares that have been brought up for consideration at various times over the years (hence "usual suspects") - that does NOT mean they are always good candidates. Not so sure it was a good idea at all now...

CNA cut in ye 2013 and 2014 and have been static since and Pearson cut 70% in 2016, not a good history for HYPers

[miner1000]

Cheers for that CP. I admit to having held Centrica in the past, but no more. I always found them a less than dependable share to hold as a dividend investor. The very high yield on offer currently is a screaming red flag to me. Buyer beware!!

Hi Ian,

It may or may not be buyer beware, but you can hardly say Centrica has not performed fairly well as a dividend share. 'Less than dependable' is hardly a fair description of Centrica as a dividend share.

I bought Centrica in 2009 since when it has repaid 63% of my capital outlay at a healthy yield. Yes, there have been a few stutters (and so far very minor stutters) along the way and yes, perhaps there is a dividend cut around the corner. But not if you listen to Ian Conn and his management.

We are in this HYP lark for the long haul and personally, I am LTBH. This one has yet to disappoint. Unlike Tesco, Carillion and one or two others.

Regards, Miner

[idpickering]

Fair play miner. I’m all for each to their own. Good luck with your holding, but they’re not for me.

Ian.

[Arborbridge]

Fair play miner. I’m all for each to their own. Good luck with your holding, but they’re not for me.

Ian.

I have CNA, Ian, and like you I'm a bit wary. It's refreshing to have a more positive view from someone - in this case Miner - and perhaps one day I will give way to the fact the it regularly comes top of my list and buy more.
Maybe I should have the courage to do so.
I must say, I'm not too worried about the business - it's more the political risk which throws a shadow over it. But that is also true of several other shares, so I'm either caught by a form of stasis, or should just ignore the additional risk and carry on as normal.


How things change - a few years back Centrica was one of the private investor's favourite shares and was almost a "must" for inclusion in any income portfolio.

Arb.

[idpickering]

Fair play miner. I’m all for each to their own. Good luck with your holding, but they’re not for me.

Ian.

I have CNA, Ian, and like you I'm a bit wary. It's refreshing to have a more positive view from someone - in this case Miner - and perhaps one day I will give way to the fact the it regularly comes top of my list and buy more.
Maybe I should have the courage to do so.
I must say, I'm not too worried about the business - it's more the political risk which throws a shadow over it. But that is also true of several other shares, so I'm either caught by a form of stasis, or should just ignore the additional risk and carry on as normal.


How things change - a few years back Centrica was one of the private investor's favourite shares and was almost a "must" for inclusion in any income portfolio.

Arb.

Thanks Arb. I agree regarding the political risk. I've been toying with topping up my SSE holdings, but something puts me off. lol

Ian.