Seeking advice on HYP construction

[cshfool]

Try Stephen Blands "Dividend newsletter" for a well informed and experienced entry into this sometimes tricky space, and who has his own money in a substantial HYP portfolio apparently. It was, in large part Stephens writings on this that got the HYP snowball rolling some years ago - I think the initial deal is still £99 for a year to new subscribers.

csh

[EssDeeAitch]

Try Stephen Blands "Dividend newsletter" for a well informed and experienced entry into this sometimes tricky space, and who has his own money in a substantial HYP portfolio apparently. It was, in large part Stephens writings on this that got the HYP snowball rolling some years ago - I think the initial deal is still £99 for a year to new subscribers.

csh

Thanks for this, looks interesting, taken the 30 day free trial and will maintain if it seems to be good value

[OLTB]

Try Stephen Blands "Dividend newsletter" for a well informed and experienced entry into this sometimes tricky space, and who has his own money in a substantial HYP portfolio apparently. It was, in large part Stephens writings on this that got the HYP snowball rolling some years ago - I think the initial deal is still £99 for a year to new subscribers.

csh

Thanks for this, looks interesting, taken the 30 day free trial and will maintain if it seems to be good value

Hi EssDeeAitch

This is how I started my HYP journey a couple of years ago (I was a novice at HYP - still learning!) and TDL has worked well for me.

Cheers, OLTB.

[EssDeeAitch]

I have arrived at what I think is a good HYP portfolio thanks to all the input I have got from the forum members. In compiling this list I have used empirical data from the StepOne spreadsheet, WebFinancialGroup, Fidelity and DividendData. I have listed the data I used in making comparisons below and used a simple scoring method to arrive at an overall score. If there was a significant yield difference, that would sway me if scores between the two companies were equal or very close.

COMPARATIVE MEASURES
Yield 2018/2019 | Cover 2018 | Continuous Dividend Payments (y/n) | Dividend Grown or Held (y/n) | Years of Consecutive Dividend Growth |
5 Yr Div Growth Rate | 10 Yr Div Growth Rate | PE 2018/19 | PEG 2018/19 | DPS Growth 2018/19 | EPS Growth 2018/19 | Fair Value | Price to Book
EBITDA | ROA | ROE | ROIC

I know that there is debate on the veracity of some of these measure but they have been applied consistently and so I feel they are fair. After all this, I have come up with this portfolio (I have put the company I compared it to in brackets, the compared companies having made the first pass by yield, EPS growth, market cap etc.).

Lloyds Grp. (HSBC)
Std Life Aber (Investec)
National Grid (Centrica)
Aviva (Legal&General)
WPP (MoneySupermarket)
Rio Tinto (BHP Billiton)
Vodafone Grp. (BT)
Royal Dutch Shell 'B' (BP)
Glaxosmithkline (AstraZeneca)
Imp.Brands (BAT)
Direct Line (Admiral)

Any comment or advice would be appreciated as I intend to invest fully next week.

[idpickering]

I have arrived at what I think is a good HYP portfolio thanks to all the input I have got from the forum members. In compiling this list I have used empirical data from the StepOne spreadsheet, WebFinancialGroup, Fidelity and DividendData. I have listed the data I used in making comparisons below and used a simple scoring method to arrive at an overall score. If there was a significant yield difference, that would sway me if scores between the two companies were equal or very close.

COMPARATIVE MEASURES
Yield 2018/2019 | Cover 2018 | Continuous Dividend Payments (y/n) | Dividend Grown or Held (y/n) | Years of Consecutive Dividend Growth |
5 Yr Div Growth Rate | 10 Yr Div Growth Rate | PE 2018/19 | PEG 2018/19 | DPS Growth 2018/19 | EPS Growth 2018/19 | Fair Value | Price to Book
EBITDA | ROA | ROE | ROIC

I know that there is debate on the veracity of some of these measure but they have been applied consistently and so I feel they are fair. After all this, I have come up with this portfolio (I have put the company I compared it to in brackets, the compared companies having made the first pass by yield, EPS growth, market cap etc.).

Lloyds Grp. (HSBC)
Std Life Aber (Investec)
National Grid (Centrica)
Aviva (Legal&General)
WPP (MoneySupermarket)
Rio Tinto (BHP Billiton)
Vodafone Grp. (BT)
Royal Dutch Shell 'B' (BP)
Glaxosmithkline (AstraZeneca)
Imp.Brands (BAT)
Direct Line (Admiral)

Any comment or advice would be appreciated as I intend to invest fully next week.

That looks like a sound HYP to me. Well done sir.

Ian.

[monabri]

Centrica...would definitely be at the bottom of the list. A definite ' no' vote from me.

[OLTB]

I have arrived at what I think is a good HYP portfolio thanks to all the input I have got from the forum members. In compiling this list I have used empirical data from the StepOne spreadsheet, WebFinancialGroup, Fidelity and DividendData. I have listed the data I used in making comparisons below and used a simple scoring method to arrive at an overall score. If there was a significant yield difference, that would sway me if scores between the two companies were equal or very close.

COMPARATIVE MEASURES
Yield 2018/2019 | Cover 2018 | Continuous Dividend Payments (y/n) | Dividend Grown or Held (y/n) | Years of Consecutive Dividend Growth |
5 Yr Div Growth Rate | 10 Yr Div Growth Rate | PE 2018/19 | PEG 2018/19 | DPS Growth 2018/19 | EPS Growth 2018/19 | Fair Value | Price to Book
EBITDA | ROA | ROE | ROIC

I know that there is debate on the veracity of some of these measure but they have been applied consistently and so I feel they are fair. After all this, I have come up with this portfolio (I have put the company I compared it to in brackets, the compared companies having made the first pass by yield, EPS growth, market cap etc.).

Lloyds Grp. (HSBC)
Std Life Aber (Investec)
National Grid (Centrica)
Aviva (Legal&General)
WPP (MoneySupermarket)
Rio Tinto (BHP Billiton)
Vodafone Grp. (BT)
Royal Dutch Shell 'B' (BP)
Glaxosmithkline (AstraZeneca)
Imp.Brands (BAT)
Direct Line (Admiral)

Any comment or advice would be appreciated as I intend to invest fully next week.

Hi EssDeeAitch

That looks a good start - for me, I would choose the following from your selection, but you must do what you are comfortable with. As Ian (Pickering) has said before, you must be able to sleep at night with all of your decisions (wise words!):

HSBC
SLA
NG.
L&G
BHP
VOD
Either RDSB or BP (perhaps do both but halve the investment in each so you're not overexposed in oil sector)
GSK
IMB
DLG

Aim to slowly build up to a minimum of 18 diversified sectors - in practice, many HYPers have more than this as different sectors come into focus and I certainly will be building up the sectors I currently have (17).

Cheers, OLTB

[richfool]

SDH,

For what it's worth I would favour LGEN and on the earlier list above, in preference to Aviva, and would be less keen on WPP, VOD and LLoyds.

[tjh290633]

My only comment is that you are a bit heavy on the financial side, with a bank, an insurer, a fund manager, another insurer and an odd financial outfit.

5 out of 11 is a bit too concentrated for me. Two would be enough at this stage. You have a lot of sectors uncovered.

TJH

[EssDeeAitch]

My only comment is that you are a bit heavy on the financial side, with a bank, an insurer, a fund manager, another insurer and an odd financial outfit.

5 out of 11 is a bit too concentrated for me. Two would be enough at this stage. You have a lot of sectors uncovered.

TJH

I agree that they are all in "financial" but in different sectors of the broader financial world -
Banks
Financial Services
Life Insurance
Nonlife Insurance

But I do take your point and will look at the other sectors currently left out.

[OLTB]

My only comment is that you are a bit heavy on the financial side, with a bank, an insurer, a fund manager, another insurer and an odd financial outfit.

5 out of 11 is a bit too concentrated for me. Two would be enough at this stage. You have a lot of sectors uncovered.

TJH

I agree that they are all in "financial" but in different sectors of the broader financial world -
Banks
Financial Services
Life Insurance
Nonlife Insurance

But I do take your point and will look at the other sectors currently left out.

Hi EssDeeAitch

A respected poster here - Gengulphus - has mentioned before that he had a little too much exposure to the 'Financials' sector just prior to the 2008 financial crises and has set limits on sector maximums. I would heed TJH's comments and perhaps consider alternatives - ITV or Greene King (GNK)/Marstons (MARS) perhaps?

Cheers, OLTB.

[moorfield]

I agree that they are all in "financial" but in different sectors of the broader financial world -
Banks
Financial Services
Life Insurance
Nonlife Insurance

I find it useful to apply a weight limit at the broader (ICB) Industry level, as well as the Sector level – this gives me flexibility to hold multiple (and duplicate) related sectors as you do.

For example, from my own portfolio currently:

3 banks, 1 life insurer (“Financials”), which collectively account for 16.9% capital and 19.9% income.

1 farming & fishing, 2 tobacco, 1 personal goods (“Consumer Goods”), which collectively account for 18.2% capital and 19.5% income.

(No prizes for guessing what that weight limit is ... )

[micrographia]

I agree that they are all in "financial" but in different sectors of the broader financial world -
Banks
Financial Services
Life Insurance
Nonlife Insurance

But I do take your point and will look at the other sectors currently left out.

There are more than a few of us here who had the same attitude circa 2007. Seriously, these sectors are all intimately interconnected and the companies themselves do not always fit into neat sectorial pigeonholes - I'm sure you've noticed that your bank would be delighted to sell you most varieties of insurance and financial services. About 12% of my HYP income came from financials last year and I'm not in a hurry to see that increase. Diversification in your portfolio is important - this is a hard won truth. At your stage I'd pick a bank and an insurer in your initial 11 and leave it at at that.

Good luck! EEM

[EssDeeAitch]

I agree that they are all in "financial" but in different sectors of the broader financial world -
Banks
Financial Services
Life Insurance
Nonlife Insurance

But I do take your point and will look at the other sectors currently left out.

There are more than a few of us here who had the same attitude circa 2007. Seriously, these sectors are all intimately interconnected and the companies themselves do not always fit into neat sectorial pigeonholes - I'm sure you've noticed that your bank would be delighted to sell you most varieties of insurance and financial services. About 12% of my HYP income came from financials last year and I'm not in a hurry to see that increase. Diversification in your portfolio is important - this is a hard won truth. At your stage I'd pick a bank and an insurer in your initial 11 and leave it at at that.

Good luck! EEM

Thanks micrographia (Mr Hooke?),

I have re-thought this and most likely will drop Lloyds and Aviva and include a selection from Unilever, BAE Systems, Compass, Diageo, Greene King & Unilever (and a few others I will be looking at). I shall get some more sector diversification as well so this revision is a welcome step.

[monabri]

I think you might want to consider Merchants or CTY ! (so much easier..but not HYP Practical).

[Raptor]

My only concern is that currently Unilever does not fit as a HYP share, especially with the forthcoming vote on taking the company out of the UK. No problem with any of the others. A good selection and choice.

Will be nice to see your portfolio after purchases.

Raptor

[Breelander]

My only concern is that currently Unilever does not fit as a HYP share, especially with the forthcoming vote on taking the company out of the UK.

It will still have a UK listing, but the main reason it doesn't fit as a new HYP purchase is that the yield is just too low.

[EssDeeAitch]

My only concern is that currently Unilever does not fit as a HYP share, especially with the forthcoming vote on taking the company out of the UK.

It will still have a UK listing, but the main reason it doesn't fit as a new HYP purchase is that the yield is just too low.

Yes, it is too low to be HYP. Now in the round file

[Walrus]

Tin hat firmly on here

Firstly I wouldn't advise trying to buy a HYP in one like this. I would go for an investment trust such as CTY if I need the income over the next 12 months, and then reallocate to HYP shares when I consider them to be on sale.

Effectively looking to move funds out of that baseline CTY into HYP shares that are currently out of favour.

Currently that being tobacco financials telecoms and utilities. Over a few years you build your HYP.

Having to buy yields of sub 3 percent or fishing around in Greene King for diversification is crazy from the onset in my opinion.

[moorfield]

Yes, it is too low to be HYP. Now in the round file

One caveat, IMO (this has been discussed to death here, before you joined): I think ULVR is an acceptable addition provided that the yield of your whole portfolio remains high. Agree you might want to hold off though until the vote is settled.