thebarns wrote:
IGG follows a long line of HYP shares, reasonably widely held and tipped by some, not all, with poor, putting it mildly, recent performance.
IGG, Lloyds, Morrisons, Cobham, Tesco, Centrica, Pearson, Sainsburys, Carillion, Amec Foster, BLT - many cutting dividends or look likely in the future, all reducing capital (I know that does not matter in HYP) but it is normally reflective of a concern over an ability to generate future profits, similar or rising dividends. Many of those companies were pretty widely tipped to hold as part of a broad HYP portfolio.
I'd be interested to know a little bit more regarding the purchase history of the HYP shares you've listed above, if you've got it to hand or are able to do some work to compile it.
I only ask because early on when I first began constructing my HYP, I seemed to find myself in similar circumstances, with a tendency to look back at a number of purchases and think that I really couldn't have bought some of my HYP shares at a worst time.
When I looked back at my purchase history, and looked at some of my notes that led to those purchases, I found a relatively similar pattern in quite a lot of my HYP purchases that resulted in the sorts of situation you've highlighted with your HYP shares above.
Those particular purchases tended to have followed along this route -
1. Run my filters to find suitable candidates for buying into my HYP.
2. Spot an abnormally high yield in a sector that I didn't own.
3. Take a look at the figures and recent news regarding the share, and whilst noting that there were some concerns going forward in some areas, they were generally regarded as 'solid' FTSE shares and so looked like a short-term anomaly in terms of yield, that should be taken advantage of.
4. Buy the 'short-term yield anomaly'
5. Notice the share price of my new HYP share gradually decline over time since purchase.
6. After a period of time, usually at the next set of results, notice that the company has announced a cut to it's dividend, and thus what was going to be my 'abnormally high yield' has now become an 'abnormally low yield' when compared to my purchase price...
7. Notice that following the dividend-cut news, the share price of the company would continue to drift down for some time. Notice that also, quite often, the new level of dividend along with the new much-lower share price actually made the company look like a good prospect now, with regards to potential yield at that point....
8. Carry the share in my HYP for some time, with it's lower share price and lower 'yield on cost', as a gentle reminder never to chase 'short-term yield anomalies' ever again....
9. Spot what looks like a 'short-term yield anomaly' in my filters.....
10. etc.....
To help avoid the above process, I simply stopped chasing 'yield-anomalies'.
I obviously don't know if the above process will ring any bells with you, but I'd be interested in feed-back from people for whom it does, as I think it's a fairly common trap to fall into for income-investors just starting out.
In reality, looking back from here, I really didn't lose a massive amount of money whilst learning this valuable lesson, and will of course put that down to part of the cost of my investment-education.
Call it yield 'danger zones' if you like, although I think that whole process was an over-complication of a very simple concept. Run your filters and compare potential candidate-yields with other related-sector yields and general FTSE-returns. If there's a big difference, it's usually there for a good reason....
As an aside to the above, I also now balance my HYP share-purchases with some income-oriented Investment Trusts as well. I've noticed that these are much less volatile than individual HYP share-purchases and yet still give me a return that's satisfactory to my particular situation. There might be very little harm done if you were to look at using a similar approach to help balance out the individual-company side of your HYP, and of course simply having such IT''s in your HYP means that you're much more aware of their potential over the years as you can compare more directly with your other holdings. I'd suggest perhaps looking into this for at least part of your HYP approach.
Cheers,
Itsallaguess