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Seeking advice on HYP construction

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EssDeeAitch
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Seeking advice on HYP construction

#167832

Postby EssDeeAitch » September 21st, 2018, 5:55 am

I am considering building an HYP and would like to ask if there are any hints, tips and advice experienced investors can/will share with me.

I have read a number of articles on the matter but would like to flesh this out with some real world experiences.
Any help will be much appreciated.

idpickering
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Re: Seeking advice on HYP construction

#167833

Postby idpickering » September 21st, 2018, 6:11 am

EssDeeAitch wrote:I am considering building an HYP and would like to ask if there are any hints, tips and advice experienced investors can/will share with me.

I have read a number of articles on the matter but would like to flesh this out with some real world experiences.
Any help will be much appreciated.


Hi EssDeeAitch, welcome to the wonderful world of HYPing! I have been playing this game for many years, and it has resulted in me leaving paid employment, and moving to Orkney, so no complaints from me. Back to your question though, I use the stock screener at digitallook.co.uk . My choices are normally look for companies of sufficient size. I start with market cap of £1bn, mainly from ftse100, then minimum yield of 4%, low pe, but utilities are higher, and sufficient cover. I go for 1.5 in cover. A rising dividend is good too, but some of the big guns like Shell RDSB have kept their div the same for a while now. Then work your way down the list, picking one from each sector. Remember to concentrate on the dividends. HYP is all about the income, capital gains and losses are secondary at best. I amass the divis received in cash in my ISA then invest that money on a monthly basis as we don’t need the income currently. In short, enjoy, and keep us informed if you like,

Ian.

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Re: Seeking advice on HYP construction

#167838

Postby TUK020 » September 21st, 2018, 6:57 am

EssDeeAitch wrote:I am considering building an HYP and would like to ask if there are any hints, tips and advice experienced investors can/will share with me.

I have read a number of articles on the matter but would like to flesh this out with some real world experiences.
Any help will be much appreciated.


Possibly the most helpful post I have encountered on the practical process of building an HYP was a "worked example" of how Gengulphus (aka 'Big G' :D ) selected shares for a model portfolio. I cannot post a link here as it was on the predecessor board in Dec 2015. So obviously all of the data is out of date, but the thought process is explained from a screener to individual share selection

most of post reproduced:
[i]This post does the next stage of the UHYP15 selection process, namely choosing the best share of those found in each sector by the filtering and "black-marking" stages I did earlier in the thread.


In the cases below where I take a look at debt measures, the ones I use below are based on the most recent annual report or full-year results of the company, as follows:


Net debt: As reported by the company, if the company supplies such a figure. Otherwise I attempt to calculate it from balance sheet items.
Gearing: Net debt divided by (net assets attributable to shareholders minus goodwill). If a separate goodwill figure is not available, instead subtract all intangible assets.
Debt multiple: Net debt divided by the earnings figure used to calculate adjusted (or underlying) earnings per share. If such an earnings figure is not available, instead divide by the earnings figure used to calculate basic earnings per share.
Interest cover: Earnings before net financing costs (and taxation), divided by net financing costs. Calculated on a pre-exceptionals basis where relevant - the point is to see how well the company can pay its net interest bills going forward, not to look at unusual past interest bills.


Where subsequent results give an updated net debt, I will say what it has changed to give an idea which direction it's heading, but not normally try to recalculate the other figures (too tricky a job for some of them). Where they don't, I will say what the change in net debt is from the previous year, again to give an idea which direction it's heading.


On to the individual sectors, in each of which I indicate my eventual choice om table by emboldening its row:

Company EPIC Sector Price Market cap H.Yield F.Yield H.cover F.cover Record Black marks
------------------------------------------------------------------------------------------------------------------------------------
HSBC HSBA Banks 540.50p £105,264m 6.14% 6.13% 1.38 1.57 Good *
Investec INVP Banks 567.50p £3,501m 3.52% 4.03% 1.97 1.91 OK **

HSBC's much better yield, hugely greater market cap and better dividend growth record wins this sector. Its cover is worse but forecast to move in the right direction and so not a huge concern to me. But it is very irritating that they're still trying to decide whether to move abroad and there's still no clear timescale for the decision to be made - the recent statement about it in their third-quarter results seems to be back-pedalling on the original deadline of the end of this year:


**********
Domicile


In April 2015, the HSBC Holdings plc Board of Directors asked management to commence a review to assess the best place for the HSBC Group's headquarters to be located to maximise long-term shareholder value and the Group's future strategic opportunities. Although management is undertaking the review on behalf the Board, it is the Board that will make the final decision regarding the location of the Group's headquarters. The review will focus on long term perspectives, as opposed to short-term factors.


Whilst there is a considerable amount of work still to do, a significant amount of work has been carried out, supported by a number of external advisers. In addition, as the review has progressed, further information has been requested by the Board.


Whilst the target for completion of the review was initially set as by the end of 2015, this is a self-imposed deadline that can be moved should the Board require further work to be performed. An announcement will be made when the Board makes its final decision and, if necessary, a further update will be provided at the time of the full year results announcement.
**********


I think I'm just going to have to let HSBC proceed to the shortlist of 'sector champions' and (I suspect) get into the final selection for UHYP15, taking the risk that it will stay in the portfolio for quite a short time before being tinkered away as a foreign share. If it does happen, at least UHYP15 will be in good company: HSBC is already in my main HYP (in ISA, SIPP and dealing accounts!), GDHYP, UHYP13 and UHYP14...

Company EPIC Sector Price Market cap H.Yield F.Yield H.cover F.cover Record Black marks
------------------------------------------------------------------------------------------------------------------------------------
Carillion CLLN Construction 312.90p £1,349m 5.67% 5.77% 1.90 1.87 Poor **
Galliford Try GFRD Construction 1472.00p £1,180m 4.62% 5.43% 1.71 1.61 Good *
Kier KIE Construction 1352.00p £1,268m 4.08% 4.72% 1.74 1.64 Poor **

Carillion beats the other two on market cap, yield and cover, but has a much less good forecast dividend increase (as evidenced by the difference between the forecast and historical yields). So I'm inclined to give the top spot to Carillion, but want to check the debt situations:


Carillion: Net debt £177.3m (up to £199.6m in interims), gearing negative equity situation, debt multiple 1.2 times, interest cover 4.0 times.


Galliford Try: Net debt £17.3m (up from £5.1m the previous year), gearing 4%, debt multiple 0.2 times, interest cover 12.4 times. Should be added that average net debt over the year was £168m, which would be equivalent to gearing of 39% and a debt multiple of 1.8 times, so those year end figures are flattering!


Kier: Net debt £141m (up from £123m the previous year), gearing 190%, debt multiple 5.0 times, interest cover 5.8 times. Average net debt is indicated as £82.9m, which would be equivalent to gearing of 112% and a debt multiple of 2.9 times, so clearly a different pattern to Galliford Try.


After looking at those debt figures, Galliford Try's better dividend record, forecast dividend increase and debt figures outweigh Carillion's somewhat better market cap and forecast yield and cover figures for me. Quite a close call, though!


Company EPIC Sector Price Market cap H.Yield F.Yield H.cover F.cover Record Black marks
------------------------------------------------------------------------------------------------------------------------------------
BAE Systems BA. Defence 513.50p £16,443m 3.99% 4.06% 1.85 1.80 OK *
Meggitt MGGT Defence 375.00p £2,996m 3.67% 3.83% 2.36 2.05 Good **
Cobham COB Defence 302.30p £3,405m 3.52% 3.74% 1.74 1.78 Good **
Rolls-Royce RR. Defence 601.00p £11,152m 3.84% 3.04% 2.83 2.96 Good ****

All the cover figures and dividend records are OK as far as I am concerned, and BAE Systems has the best yield and (much less important) market cap, so it takes this sector.

Company EPIC Sector Price Market cap H.Yield F.Yield H.cover F.cover Record Black marks
------------------------------------------------------------------------------------------------------------------------------------
Morgan Adv'd Materials MGAM Electronic & Electrical 247.20p £711m 4.41% 4.56% 2.03 1.92 Good **

Only candidate in sector.


Company EPIC Sector Price Market cap H.Yield F.Yield H.cover F.cover Record Black marks
------------------------------------------------------------------------------------------------------------------------------------
SSE SSE Energy Utilities 1462.00p £14,686m 6.05% 6.17% 1.40 1.26 OK **
Centrica CNA Energy Utilities 219.10p £11,194m 6.16% 5.49% 1.42 1.48 Cut ****
National Grid NG. Energy Utilities 925.70p £34,913m 4.63% 4.72% 1.36 1.38 OK **

My immediate inclination is to go for SSE with its high yield. But I have to remember that my very positive experience of being a shareholder in the company goes back to flotation (as Scottish Hydro-Electric) getting on for 25 years ago, so much of it may not be all that relevant today!


So trying to move beyond that immediate inclination, I can see things I like in all three: SSE has the highest yield, Centrica has got its cut out of the way and the medicine seems to be working on its debt ( as I recently posted in http://boards.fool.co.uk/-i-was-quite-s ... he-drop-... ), National Grid feels like the most solid of the three. I think I'll have a look at their debt figures to try to resolve the issue:


SSE: Net debt £7,568m (increased to £7,937m in subsequent interims), gearing 358%, debt multiple 6.2 times, interest cover 5.3 times. I should say that I have used the company's "adjusted net debt and hybrid capital" figure here, which is considerably larger than its plain net debt figure, and I've used the company's interest cover calculation because it takes the interest-like payments on the "hybrid capital" into account. That's partly to be conservative, partly because the "hybrid capital" (which makes up the bulk of the difference) does seem to have a lot of the characteristics of debt.


Centrica: Net debt £5,196m (reduced to £4,905m in subsequent interims), gearing 4124%, debt multiple 5.4 times, interest cover 5.9 times.


National Grid: Net debt £23,915m (increased to £24,592m in subsequent interims), gearing 351%, debt multiple 10.9 times, interest cover 3.8 times.


Cannot say I like any of those sets of debt figures! But high debt is more acceptable for utilities than most types of company, due to their relatively reliable revenues, so that dislike probably shouldn't count for much. More important are the comparisons between the companies: on those, National Grid stands out for its significantly higher debt multiple and lower interest cover than either of the other two, so with the lowest yield as well, I'm going to rule it out.


Between SSE and Centrica, I see little to choose on the debt multiple and interest cover. Centrica's gearing is considerably higher, but gearing is basically a measure of how well a company could repay its debt if it suddenly had to do so, making it relatively unimportant for utilities IMHO. So it boils down to SSE having the higher yield vs Centrica having its dividend cover and debt moving in the right directions... I think I'll go for Centrica, despite its cut: I regard cuts mainly as a warning that more cuts are likely to be on the way, but as I say above, in this case the medicine seems to be working and so I'll discount that danger significantly.

Company EPIC Sector Price Market cap H.Yield F.Yield H.cover F.cover Record Black marks
------------------------------------------------------------------------------------------------------------------------------------
Vesuvius VSVS Engineering 336.20p £927m 4.83% 4.86% 2.06 1.77 OK **
IMI IMI Engineering 920.50p £2,558m 4.08% 4.15% 2.07 1.61 Good *
Weir Group WEIR Engineering 1129.00p £2,512m 3.90% 4.02% 3.21 1.77 Good **
Smiths Group SMIN Engineering 1023.00p £4,069m 4.01% 3.97% 2.10 1.89 Poor **

Vesuvius looks like the obvious candidate, with a yield quite a bit ahead of the others and nothing major wrong with it - just its small size. But I think I'll check up on its debt as well:


Vesuvius: Net debt £268.3m (rising to £296.0m in sbsequent interims), gearing 81%, debt multiple 3.0 times, interest cover 8.8 times


Nothing very worrying there, and I think I'll save myself the trouble of working out the debt situations for the other three companies - they're unlike to be sufficiently better than Vesuvius's to end up beating it.

Company EPIC Sector Price Market cap H.Yield F.Yield H.cover F.cover Record Black marks
------------------------------------------------------------------------------------------------------------------------------------
Tate & Lyle TATE Food Producers 602.50p £2,759m 4.65% 4.67% 1.36 1.24 OK **

Only candidate in sector, Unilever having too low a historical yield compared with the FTSE 100 yield.

Company EPIC Sector Price Market cap H.Yield F.Yield H.cover F.cover Record Black marks
------------------------------------------------------------------------------------------------------------------------------------
Persimmon PSN Housebuilder 1942.00p £5,740m 4.89% 5.18% 1.31 1.57 OK *
Taylor Wimpey TW. Housebuilder 198.00p £6,139m 4.67% 4.91% 1.21 1.52 Short ***
Berkeley BKG Housebuilder 3602.00p £4,922m 5.00% 4.25% 1.46 1.61 Short ***
Bovis Homes BVS Housebuilder 982.50p £1,241m 3.56% 4.07% 2.25 2.44 Good ***

Note: In view of today's news and consequent fairly major price change, I've updated Berkeley's line. This is not something I've done in general - one can waste a lot of time futilely trying to base one's share selections on absolutely up-to-date data! But major news does merit an update.


Persimmon has the best yield, there's not much to choose between the first three on the other figures, and it's got the longer dividend record. So I think it fairly clearly beats Taylor Wimpey and Berkeley. Bovis is quite a lot better on cover, is paying dividends in a much more traditional way, and has staged a very nice dividend recovery over the last 5 years or so, so things aren't quite so clear with regard to it - but it's got a significantly less good yield and market cap, and I don't feel that adds up to a case that it's a better choice than Persimmon. So Persimmon takes the sector as far as I am concerned.

Company EPIC Sector Price Market cap H.Yield F.Yield H.cover F.cover Record Black marks
------------------------------------------------------------------------------------------------------------------------------------
Admiral ADM Insurance 1650.00p £4,565m 5.96% 5.83% 1.05 1.03 OK ****
Legal & General Group LGEN Insurance 272.70p £16,227m 4.13% 4.92% 1.48 1.42 Good **
Old Mutual OML Insurance 208.60p £10,360m 4.17% 4.49% 2.06 2.10 Good
Standard Life SL. Insurance 415.00p £8,234m 4.10% 4.41% 0.93 1.28 OK ***
Aviva AV. Insurance 512.50p £20,755m 3.53% 4.09% 2.67 2.08 Cut ****

Legal & General has the second best dividend yield in the sector and an excellent reputation among HYPers (*), so is the share to beat in this sector. Admiral doesn't do it for me: its dividend policy of paying out almost all its earnings as dividends, about half of which they call ordinary dividends and half special dividends, means that either you treat it as a fairly low yielder with decent cover (by only counting the ordinaries) or, as in the above table, as a high-yielder with wafer-thin cover. Things have gone well for it over the last few years, but when business hits a bad patch (which it will over the years - repeatedly), I cannot see its decent dividend record being sustained. Indeed, their choice to call around half of their dividends specials pretty blatantly says "we're giving you upfront warning that we will cut the payout immediately earnings are down"...


Aviva loses to Legal & General on every front except a mildly better market cap, and Standard Life doesn't even have that exception.


Old Mutual gives Legal & General the best run for its money: I regard the choice between them as quite finely balanced, with Legal & General having the better dividend prospects and mildly better market cap, and Old Mutual the better cover. I've ended up going for Legal & General on essentially a "gut feel" tiebreaker.


(*) Which I have to confess does make me a bit nervous - there are too many past examples of shares with such reputations that have ended up coming a cropper! But only a bit - somewhat paradoxically, that's because they demonstrated several years back around the time of the financial crisis that they do bend in a storm rather than break. Take a look athttp://www.legalandgeneralgroup.com/i ... nd-histo... to see how it's done. They halved their final dividend between 2007 and 2008, nearly halved their interim between 2008 and 2009 - and yet their total dividend for 2011 was back above 2007 levels. (And as an aside, they're a really spectacular example of why "sell immediately on the first dividend cut" isn't necessarily a good idea: that first cut, of the 2008 final, would have been announced in early 2009. One only needs to look at a long-term share price chart for Legal & General to see what a bad mistake that would have turned out to be!)

Company EPIC Sector Price Market cap H.Yield F.Yield H.cover F.cover Record Black marks
------------------------------------------------------------------------------------------------------------------------------------
Marston's MARS Leisure 173.40p £983m 4.04% 4.22% 1.84 1.87 OK **
William Hill WMH Leisure 365.80p £3,143m 3.34% 3.44% 2.45 1.87 Good ****
Greene King GNK Leisure 963.00p £2,581m 3.09% 3.27% 2.05 2.03 OK ****

Marston's yield is quite a lot higher than either of the other two and the covers are acceptably high. Its only real weakness is the rather low market cap, but that isn't enough to counterbalance the yield advantage in my view, and so Marston's gets this sector's nomination as far as I am concerned.

Company EPIC Sector Price Market cap H.Yield F.Yield H.cover F.cover Record Black marks
------------------------------------------------------------------------------------------------------------------------------------
Pearson PSON Media 823.00p £6,807m 6.20% 6.56% 1.31 1.31 OK **
UBM UBM Media 506.50p £2,237m 4.21% 4.24% 1.81 1.80 Poor *

Pearson has the much higher yield, but low cover, while UBM looks rather safer on the figures above. Pearson is also known to be restructuring itself, which is always a bit fraught - one needs to trust management rather more than usual to know what they're doing... A fairly finely balanced decision, and I'm going to look at the debt figures to ry to get a further clue:


Pearson: Net debt £1,639m (up to £2,289m in subsequent interims, though that rise looks partly seasonal, say 60% seasonal, 40% non-seasonal), gearing 173%, debt multiple 3.0 times, interest cover 4.3 times.


UBM: Net debt £538.0m (a bit down to £519.6m in subsequent interims), gearing negative equity situation, debt multiple 4.3 times, interest cover 7.3 times.


Hmm... Cannot say I see a strong reason for preferring either of those sets of debt figures over the ot

Moderator Message:
Edited to remove excess spaces to make it flow. Raptor.

Alaric
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Re: Seeking advice on HYP construction

#167865

Postby Alaric » September 21st, 2018, 9:20 am

idpickering wrote: HYP is all about the income, capital gains and losses are secondary at best.


Beware though of Companies that seek to delude investors as to their strength and dividend paying ability by essentially paying dividends out of capital or even worse from borrowings. There's a notorious example of one of these mentioned in the other post.

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Re: Seeking advice on HYP construction

#167878

Postby EssDeeAitch » September 21st, 2018, 9:55 am

TUK020 wrote:
Possibly the most helpful post I have encountered on the practical process of building an HYP was a "worked example" of how Gengulphus (aka 'Big G' :D ) selected shares for a model portfolio. I cannot post a link here as it was on the predecessor board in Dec 2015. So obviously all of the data is out of date, but the thought process is explained from a screener to individual share selection most of post reproduced:
Edited to remove excess spaces to make it flow. Raptor. [/mod]


That's a great post to show an analytical way of assessment. The case of Carillion is of course a prime example of how things can go badly wrong despite deep scrutiny (as an ex supplier to Carillion and the infrastructure sector in general, I would never have bought into them, they are dreadful, predatory organisations in my experience).

Many thanks for taking the time to show me this.

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Re: Seeking advice on HYP construction

#167879

Postby EssDeeAitch » September 21st, 2018, 9:58 am

Alaric wrote:
idpickering wrote: HYP is all about the income, capital gains and losses are secondary at best.


Beware though of Companies that seek to delude investors as to their strength and dividend paying ability by essentially paying dividends out of capital or even worse from borrowings. There's a notorious example of one of these mentioned in the other post.


Good reply Alaric and many thanks, also thanks to IDPickering for his comments

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Re: Seeking advice on HYP construction

#167884

Postby Gostevie » September 21st, 2018, 10:19 am

idpickering wrote:
EssDeeAitch wrote:I am considering building an HYP and would like to ask if there are any hints, tips and advice experienced investors can/will share with me.

I have read a number of articles on the matter but would like to flesh this out with some real world experiences.
Any help will be much appreciated.


Hi EssDeeAitch, welcome to the wonderful world of HYPing! I have been playing this game for many years, and it has resulted in me leaving paid employment, and moving to Orkney, so no complaints from me. Back to your question though, I use the stock screener at digitallook.co.uk . My choices are normally look for companies of sufficient size. I start with market cap of £1bn, mainly from ftse100, then minimum yield of 4%, low pe, but utilities are higher, and sufficient cover. I go for 1.5 in cover. A rising dividend is good too, but some of the big guns like Shell RDSB have kept their div the same for a while now. Then work your way down the list, picking one from each sector. Remember to concentrate on the dividends. HYP is all about the income, capital gains and losses are secondary at best. I amass the divis received in cash in my ISA then invest that money on a monthly basis as we don’t need the income currently. In short, enjoy, and keep us informed if you like,

Ian.


Very helpful advice from Ian. Just one thing: I too use the Digital Look screener and like it a lot but it does throw out some anomalies. For example, it shows the dividend cover of RDSB as being just 0.84, which I am guessing might be due to dividend being declared in US dollars.

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Re: Seeking advice on HYP construction

#167905

Postby Gengulphus » September 21st, 2018, 12:02 pm

I think I would actually reckon that my 2011 "lump sum all at once" HYP construction exercise is the best one to start with, mainly because that single thread contains the entire selection process I used (do take care to look through all of it, though, because I did revise the list in the light of comments received - and the reason why I did that illustrates a danger of using secondary data sources quite well!):

https://web.archive.org/web/20161114200 ... sort=whole

Note I'm not claiming that the HYP I constructed in it was a particularly good one. I've done no tracking of it since, but a glance through it reveals quite a few shares that have subsequently turned out to be HYP 'bad boys'... And as I did warn in it, I didn't take a very good look at the companies with the sort of 'due diligence' I would have had there been real money involved!

But I think it does illustrate what I believe to be the three legs of the HYP stool one should aim for: high yield, dividend safety, diversification. High yield is probably the easiest of those, though there are a few issues about exactly what it means - e.g. whether it's historical yield or forecast yield, whether one should include special dividends in it (answer IMHO clearly no unless there is clear evidence of them being repeated each year, as there is for a few companies).

Diversification is a bit harder, mainly because the aim is to avoid too many overlaps of companies' businesses and the risks they face, but the official ICB sector classification isn't ideal for telling one about them - sometimes quite similar businesses happen to fall on different sides of a sector boundary and sometimes significantly more different ones fall into the same sector. For example, consider Halfords, Marks & Spencer and Tesco: they're all retailers, but Halfords sells mainly car and cycle equipment and services, while Marks & Spencer and Tesco both sell food, clothing and some other household stuff - just with more emphasis on clothing for Marks & Spencer and on food for Tesco. Buit in terms of the ICB classification, Marks & Spencer is in the same General Retailers sector as Halfords, while Tesco is in the Food & Drugs Retailers sector. Or as a more major example of significantly different businesses falling into the same sector, consider Reckitt Benckiser and Persimmon. I find it very hard to think of any significant business similarity between them, but they're both in the Household Goods & Home Construction ICB sector...

Dividend safety is probably the hardest, just because there are so many ways of trying to assess it - debt levels (which can be assessed in various different ways), dividend cover (which could be by earnings or by free cash flow), the company's size (a big company ought to be more resilient), the company's dividend record (good steady growth suggests management that regards dividends as important and doesn't over-commit on them), one's assessment of the company's 'culture', the yield being very high (which essentially amounts to a lot of other investors not believing the dividend is safe), etc. They all have their pitfalls and shortcomings, and I strongly suspect every one of them has those with no faith in it whatsoever! Basically, all I can suggest about that is that you use more than one of them, picking the ones that make sense to you. If you use a lot of them, you'll need either to set them not very stringently or not require that a shares passes on all of them - just a big enough number. Otherwise you'll find that you simply don't find enough shares to pick a well-diversified portfolio from.

There is also the approach of building one's HYP up with regular investments over time, buying new shares each time to start with to build up the diversification and gradually shifting towards topping up existing holdings as good new shares become less common. My demonstration portfolio GDHYP has been built up by that approach, starting in 2008. It's bought 30 different shares in a total of 51 purchases so far, but only has 28 shareholdings at present due to one (Amlin) having been taken over and another (Carillion) going bust. I do have its history more-or-less completely archived, but won't try giving links - there's probably something of the order of 200 of them by now!

Which of the two approaches one takes should IMHO be driven by how one is getting the money to invest in the HYP. If one doesn't have a lump sum available, one cannot invest one (short of borrowing it - not a good move IMHO) and so has to use regular savings to fund the HYP. In the opposite situation where one has a lump sum but doesn't have regular savings available, one can 'drip feed' it into the HYP and some do like doing it that way because it reduces the worry of putting it all in at the top of the market - but it's not all that much of a reduction unless one spreads it out over quite a few years, and if one does it that way, the odds are that one will pay a substantial price in terms of lost returns because of keeping quite a lot of money in cash for quite a long time.

Finally, I have got links to archived copies of the UHYP15 selection process that TUK020 partially quoted. There are two threads involved in the selection process - the second was because I used a poll in it and (as here) polls could only start threads:

https://web.archive.org/web/20161213103 ... sort=whole
https://web.archive.org/web/20161217143 ... sort=whole

The bit TUK020 quoted starts about 60% of the way down the first thread and continues until near its end. I should also say that a lot of it is in the context of having done similar exercises in the previous two years, resulting in portfolios called UHYP13 and UHYP14. Any links to stuff about them and further stuff about UHYP15 in the archived copies might well work, as I archived such material as well, but no guarantees - TMF pages often had multiple different links that would get to them on TMF, but the archive.org site won't know about that and so will only find it if I (or someone else) happened to archive it as precisely the same link as I used in the original post.

Gengulphus

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Re: Seeking advice on HYP construction

#167909

Postby idpickering » September 21st, 2018, 12:12 pm

EssDeeAitch wrote:
Alaric wrote:
idpickering wrote: HYP is all about the income, capital gains and losses are secondary at best.


Beware though of Companies that seek to delude investors as to their strength and dividend paying ability by essentially paying dividends out of capital or even worse from borrowings. There's a notorious example of one of these mentioned in the other post.


Good reply Alaric and many thanks, also thanks to IDPickering for his comments


You're most welcome. There was mention that sometimes even digitallook get some information wrong, which is true I guess. If in doubt check the figures from the selected share's own website. Further to my reply to you earlier, watch out for your sector diversification. Make sure you spread your risk over a number of sectors. I hold 32 shares covering 21 sectors. Some here prefer less holdings than me, and some more. I put my own HYP up on this board recently, here's a link to that if you want to see it; viewtopic.php?f=15&t=13319&p=161786#p161786

The bottom line though, is that we're here to help and learn from each other, so when you think you've picked your likely candidates, put them up here, and the team will help you out.

Ian.

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Re: Seeking advice on HYP construction

#168000

Postby SlickMongoose » September 21st, 2018, 6:37 pm

Gostevie wrote:Very helpful advice from Ian. Just one thing: I too use the Digital Look screener and like it a lot but it does throw out some anomalies. For example, it shows the dividend cover of RDSB as being just 0.84, which I am guessing might be due to dividend being declared in US dollars.


One issue with stock screeners to keep in mind is that they use the latest full year results, so after a company has released interim results they tend to be out of date.

So for the year 2017, Shell had a dividend cover of 0.84. This is the problem with having a reputation of never cutting the dividend in a cyclical industry, so when oil prices are low, they pay out more than they earn. Oil prices have recovered this year, and the cover for H1 2018 was 1.2.

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Re: Seeking advice on HYP construction

#168070

Postby idpickering » September 22nd, 2018, 6:14 am

By the way EssDeeAitch, watch out for shares offering seemingly very high yields, in the to good to be true vein.

Good luck and I look forward to seeing your chosen picks in your HYP soon.

Ian.

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Re: Seeking advice on HYP construction

#168089

Postby Raptor » September 22nd, 2018, 8:59 am

Whatever "criteria" you select at this point will "change" as you go through the learning phases and move from building, to holding, to taking income. So do what you feel happy with and see how it works out. I think we have all "picked" at least one "poor" choice, but you learn. I am no longer in the building phase and partially drawing down divi's.

My criteria has "morphed" (I like that word) but when I was "building". I would use the "stepone spreadsheet" for FTSE350 (updated monthly). I used to select companies >500m, forecast yield > FTSE100, Cover >1, rising divi over 5yrs. Mind you the data is/was not always accurate (for instance those companies declaring in anything other than £). Then I would sort by yield. Start at the top and work my way down, discarding shares I already own or sectors already covered and then do a lot more investigating. You may want to look at P/E and/or debt, your choice of how much "risk" you feel you can take.

Today I would add "a too good to be true" yield. Carillion taught me a lesson of chasing the yield. Currently my limit is around 7%, above 8% I discard.

Good luck and would be nice to see what you choose as criteria.

Raptor.

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Re: Seeking advice on HYP construction

#168322

Postby EssDeeAitch » September 23rd, 2018, 10:28 am

Raptor wrote: I would use the "stepone spreadsheet" for FTSE350 (updated monthly). I used to select companies >500m, forecast yield > FTSE100, Cover >1, rising divi over 5yrs. Mind you the data is/was not always accurate (for instance those companies declaring in anything other than £). Then I would sort by yield. Start at the top and work my way down, discarding shares I already own or sectors already covered and then do a lot more investigating. You may want to look at P/E and/or debt, your choice of how much "risk" you feel you can take.
Today I would add "a too good to be true" yield. Carillion taught me a lesson of chasing the yield. Currently my limit is around 7%, above 8% I discard.
Good luck and would be nice to see what you choose as criteria.
Raptor.


Many thanks fo this reply, I understand and like your methodology and the spreadsheet is terrific, many thanks indeed.

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Re: Seeking advice on HYP construction

#168336

Postby monabri » September 23rd, 2018, 11:15 am

I would also refer to "dividendata" for info on company market cap, current yield, dividend history, dividend XD and pay dates...all in one easy/quick to access location (note, the column headers allow sorting - min to max, max to min).

https://www.dividenddata.co.uk/dividend ... &order=#AV.

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Re: Seeking advice on HYP construction

#168398

Postby EssDeeAitch » September 23rd, 2018, 5:05 pm

monabri wrote:I would also refer to "dividendata" for info on company market cap, current yield, dividend history, dividend XD and pay dates...all in one easy/quick to access location (note, the column headers allow sorting - min to max, max to min).

https://www.dividenddata.co.uk/dividend ... &order=#AV.


Another really helpful response, many thanks! One follow up question, do high yield IT's and OEICS have any place in a HYP?

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Re: Seeking advice on HYP construction

#168401

Postby Itsallaguess » September 23rd, 2018, 5:12 pm

EssDeeAitch wrote:
One follow up question, do high yield IT's and OEICS have any place in a HYP?


I have around 38% of my HYP capital allocated to income-oriented Investment Trusts, many of which are aligned with wider world markets that are difficult to tap into with FTSE shares.

With that said, the discussion of such investments on this particular board (HYP Practical) is off-topic, and rightly discouraged, so if this is an area that you're keen to investigate, I would suggest heading over to the wider-remit of the High Yield Shares & Strategies (General) board, where discussions regarding these types of income-related investments is accepted as part of it's much wider remit -

https://www.lemonfool.co.uk/viewforum.php?f=31

I'd suggest that any deeper discussions around this area of income investment is not carried out on this thread, or this HYP Practical board, so perhaps starting a thread on the above High Yield Shares & Strategies (General) board might be worth thinking about, but also having a trawl through existing threads on that board might initially gain you some inspiration in this area....

Cheers,

Itsallaguess

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Re: Seeking advice on HYP construction

#168412

Postby EssDeeAitch » September 23rd, 2018, 5:48 pm

Thanks for the info, I shall keep the two threads separate as you suggest.

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Re: Seeking advice on HYP construction

#168510

Postby EssDeeAitch » September 24th, 2018, 7:29 am

I have looked at the resources and suggestions provided by members (many thanks) and have settled (more or less) on the following screening data for HYP stock

Selection Criteria
Market Cap >500m | PE <20 | Divi Yield >3.5% | EPS Growth >5% | Divi Cover > 1 | Increasing Divs Yes | Fair Value >1


Having filtered through the data and looking at other resources I have arrived at these two candidates and would appreciate any feedback.

Galliford Try - Buy
Market Cap 1.18b | PE 19.2 | Divi Yield >9.3% | EPS Growth >158% | Divi Cover > 2 | Increasing Divs Yes | Fair Value 1.11

SSE - Buy
Market Cap 11.46b | PE 12.9 | Divi Yield >8.1% | EPS Growth >33% | Divi Cover > 1.2 | Increasing Divs Yes | Fair Value 1.14

Do these selections make sense? Am I on the right track?

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Re: Seeking advice on HYP construction

#168514

Postby idpickering » September 24th, 2018, 8:17 am

EssDeeAitch wrote:I have looked at the resources and suggestions provided by members (many thanks) and have settled (more or less) on the following screening data for HYP stock

Selection Criteria
Market Cap >500m | PE <20 | Divi Yield >3.5% | EPS Growth >5% | Divi Cover > 1 | Increasing Divs Yes | Fair Value >1


Having filtered through the data and looking at other resources I have arrived at these two candidates and would appreciate any feedback.

Galliford Try - Buy
Market Cap 1.18b | PE 19.2 | Divi Yield >9.3% | EPS Growth >158% | Divi Cover > 2 | Increasing Divs Yes | Fair Value 1.11

SSE - Buy
Market Cap 11.46b | PE 12.9 | Divi Yield >8.1% | EPS Growth >33% | Divi Cover > 1.2 | Increasing Divs Yes | Fair Value 1.14

Do these selections make sense? Am I on the right track?


You are most certainly on the right track. As regards the two shares, I've never held Gailllford Try, not that that matters, but that high yield does look rather lofty for me. SSE look ok, but don't forget the Corbyn factor.

Ian.

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Re: Seeking advice on HYP construction

#168516

Postby EssDeeAitch » September 24th, 2018, 8:31 am

idpickering wrote:
You are most certainly on the right track. As regards the two shares, I've never held Gailllford Try, not that that matters, but that high yield does look rather lofty for me. SSE look ok, but don't forget the Corbyn factor.

Ian.


Thanks Ian, just checked out the yield on Galliford and it is overstated in the StepOne spreadsheet but still high at 8.3 with both WebFG and Fidelity. The forward yield is consistent and from what I can see, looks OK.
As to Corbyn, oh God, I would rather not think about it actually :shock:
Thanks for the input.


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