Top up pickering

[Arborbridge]

Front runner is PSN, but a top up would result in it delivering 5% of my income - up against my self imposed limit. Should I be worried about this, or just go ahead anyway? The reliability of the dividend after the current program is a complete unknown.
Centrica - I feel I've invested enough in this for the moment, the invested capital standing at 3.77%. This also gives me an excuse over and above Corbyn worries.
SLA is a highly probable topup for this month, despite the doubts and poor cover.

Below these three, I see a couple of utilities which I will probably veto, but then BT and GNK are both looking worthy of topping up - good yield, cover and PE. Neither fall foul of my self imposed rules on capital input or income provided.
Then, bubbling under is BAT which hasn't been anywhere near the top for a while and is very tempting.

Cheap dealing day for me is Wednesday, so I'll be placing and order of Tuesday. Until then, any input to help my pickering would be appreciated. Incidentally, there's enough cash to topup PSN, SLA and BT.







I notice a subconscious slip, in that I've not commented on VOD. The low cover, high PE and the fact I topped it up recently probably accounts for passing over it, but otherwise, it is also another possibility.

Arb.

[idpickering]

Front runner is PSN, but a top up would result in it delivering 5% of my income - up against my self imposed limit. Should I be worried about this, or just go ahead anyway? The reliability of the dividend after the current program is a complete unknown.
Centrica - I feel I've invested enough in this for the moment, the invested capital standing at 3.77%. This also gives me an excuse over and above Corbyn worries.
SLA is a highly probable topup for this month, despite the doubts and poor cover.

Below these three, I see a couple of utilities which I will probably veto, but then BT and GNK are both looking worthy of topping up - good yield, cover and PE. Neither fall foul of my self imposed rules on capital input or income provided.
Then, bubbling under is BAT which hasn't been anywhere near the top for a while and is very tempting.

Cheap dealing day for me is Wednesday, so I'll be placing and order of Tuesday. Until then, any input to help my pickering would be appreciated. Incidentally, there's enough cash to topup PSN, SLA and BT.







I notice a subconscious slip, in that I've not commented on VOD. The low cover, high PE and the fact I topped it up recently probably accounts for passing over it, but otherwise, it is also another possibility.

Arb.

Hi Arb, thanks for the name check lol. On reading your post, and options, I think you'd do about right by just topping up PSN, SLA and BT. It is my intention to top up my PSN holdings soon, but I have enough of the other two. Similarly with VOD, I have enough of that too.

Ian.

[IanTHughes]

Front runner is PSN, but a top up would result in it delivering 5% of my income - up against my self imposed limit. Should I be worried about this, or just go ahead anyway? The reliability of the dividend after the current program is a complete unknown.
Centrica - I feel I've invested enough in this for the moment, the invested capital standing at 3.77%. This also gives me an excuse over and above Corbyn worries.
SLA is a highly probable topup for this month, despite the doubts and poor cover.

Below these three, I see a couple of utilities which I will probably veto, but then BT and GNK are both looking worthy of topping up - good yield, cover and PE. Neither fall foul of my self imposed rules on capital input or income provided.
Then, bubbling under is BAT which hasn't been anywhere near the top for a while and is very tempting.

Cheap dealing day for me is Wednesday, so I'll be placing and order of Tuesday. Until then, any input to help my pickering would be appreciated. Incidentally, there's enough cash to topup PSN, SLA and BT.

Here is my twopence worth …..

Standard Life Aberdeen (SLA)
You might want to hold off until after the Return of Capital and share consolidation. If you buy in before 18 October you will receive in excess of 11% back on 2 November.

British American Tobacco (BATS)
The current yield of 5.70% is less than offered by Imperial Brands (IMB) which is 6.65%

BT Group (BT-A)
Greene King PLC (GNK)
Seem like excellent choices to me

Persimmon PLC (PSN)
This is my choice for top-up on Wednesday (I guess we share a broker) but I currently only have a small holding and unlike you, I do not limit my Income concentration

Centrica PLC (CNA)
This one is a real puzzle to me. I do not hold although it is in a family member portfolio that I manage. Nursing a heavy capital loss too! Sorry cannot help on this one

So, my advice? PSN and BT-A but hold off on SLA. If you want a third then IMB

I hope that helps and good luck


Ian

[IanTHughes]

I notice a subconscious slip, in that I've not commented on VOD. The low cover, high PE and the fact I topped it up recently probably accounts for passing over it, but otherwise, it is also another possibility.

Sorry, I missed this one

I have no problem with Vodafone Group (VOD) which despite its low dividend cover, seems to throw off a lot of cash. My family member HYP will be topping up on Wednesday.

Have fun


Ian

[Arborbridge]

British American Tobacco (BATS)
The current yield of 5.70% is less than offered by Imperial Brands (IMB) which is 6.65%



So, my advice? PSN and BT-A but hold off on SLA. If you want a third then IMB

I hope that helps and good luck


Ian

Thanks for your detailed advice - much appreciated.

The reason IMB is below the radar is because I am more or less running TJH's system and on that it comes up in 14th position. I normally allow my self to choose from any of the top 12 so it was ignored. In any case, its capital weight is 1.23x the median, to it probably doesn't strictly warrant a topup - though I've never applied rules strictly!

BTW, there was a sorting error in my spreadsheet and the true topup order should have been:-

CNA
SLA
SSE
VOD
UU
BT-A
PSN
GNK
BATS
NG
WPP
AV

This probably doesn't alter matters very much but pushes PSN down a bit and VOD up which was last topped up in May.

Arb.

[tjh290633]

Having been relatively incommunicado for the last month, which has seen a lot of dividend money roll in, I expect to be doing a bit of topping up next week.

Top of the list is SSE, which I am avoiding until the corporate action is complete. Then come VOD, BATS and MARS, in that order. I see no reason not to follow what the list tells me.

TJH

[Gengulphus]

Front runner is PSN, but a top up would result in it delivering 5% of my income - up against my self imposed limit. Should I be worried about this, or just go ahead anyway? ...

How on earth can we advise you about your self-imposed limit? You have defined the limit and you are in a position to determine whether it applies or not, not us!

It may be that you haven't defined it well enough, leaving it ambiguous whether it applies or not. If that's the case, you need to make it better defined. We might be able to help with that, but only if you give us details of the limit and what it is about Persimmon that has exposed an ambiguity in it.

Or it may be that your limit is saying clearly "don't buy Persimmon", but you're wondering whether you should ignore that and buy Persimmon anyway. If that's the case, I'd suggest that one way or another, you avoid deliberately breaking your own self-imposed rules: you can do that by abandoning those rules, by modifying them to allow for a case you hadn't thought of originally or that you've decided doesn't actually need as strict a rule as you'd adopted, or by accepting their answer and not breaking them. But believing you have a self-imposed 5% limit and deliberately breaking it, or anything similar, is just an exercise in kidding yourself!

Gengulphus

[moorfield]

Front runner is PSN, but a top up would result in it delivering 5% of my income - up against my self imposed limit. Should I be worried about this, or just go ahead anyway? ...

How on earth can we advise you about your self-imposed limit? You have defined the limit and you are in a position to determine whether it applies or not, not us!

I'm comfortable with a top up that puts a holding over limit (in my case 10%), but won't top up anything that already is, if that makes sense. You will no doubt find your income (and capital) percentages are constantly in flux with top us, dividend increases, and cuts etc. If you are slightly over limit on one holding, you may find that diluted soon enough by tops up and dividend increases elsewhere.

[Arborbridge]

Front runner is PSN, but a top up would result in it delivering 5% of my income - up against my self imposed limit. Should I be worried about this, or just go ahead anyway? ...

How on earth can we advise you about your self-imposed limit? You have defined the limit and you are in a position to determine whether it applies or not, not us!


Gengulphus

Well, one could say: that's a silly limit. Or that's a sensible limit. Or my limit is something different, thus. Or discuss it in some other helpful way. Or you could explain that PSN is a very reliable share and worth going over the limit for, or you could say it's a diabolical share and Iyouwouldn't take the risk of going further. Or you could decide it wasn't worth answering my plea.

But alternatively you could just be brutally unhelpful and take the piss out of me.


Arb.

[Itsallaguess]

Front runner is PSN, but a top up would result in it delivering 5% of my income - up against my self imposed limit.

Should I be worried about this, or just go ahead anyway?

It's not a limit if you ignore it Arb.....

The thing with these self-imposed limits is that you're protecting yourself from yourself - try to remember that when you're thinking of breaking them...

I've got my own self-imposed limits on HYP income and capital, and I try to remember the specific situations that led to me introducing them. Such memories are often not happy ones....

The reliability of the dividend after the current program is a complete unknown.

Doesn't that statement alone give you enough of a reason to justify sticking to your self-imposed limit in this particular case?

I've found that there are nearly always palatable investment alternatives in these types of situations, and it sounds like you've got enough of a doubt here to justify taking a breather before rushing in. ...

Why not take a bit more time and see if there's anything that will deliver the same income and diversification requirements, but not touch your limits? The market throws new HYP options up quite regularly, and there's rarely a hugely pressing-need to get new capital into the market - why not take your time a bit with this one?

Cheers,

Itsallaguess

[Arborbridge]

It's not a limit if you ignore it Arb.....



Itsallaguess

Thanks for your helpful reminder and advice - it's constructive, thus appreviated.

I suppose when I wrote that, there were various things in mind, unwritten, but broadly as follows:

Limits can be modified in the light of experience: I've noticed other people quite happily having one share providing much higher percentages, so am I being unnecssarily restrictive here? Secondly, PSN is a fairly new consideration for me so I haven't followed the history of the returns to shareholders and don't have a feel as to its "character" as a share and whether going over a limit is justifiable exception.

Anyhow, I do not need to act in haste (thi particular broker account does not have set cheap days) and my thought this morning is that I will play up to my limit, not beyond. If any confirmation were needed, I only have to remind myself what my mood was after BP "went down" - and that was only contributing around 3.5% at the time, I think.

Sometimes on these boards, we indulge in thinking aloud or soul searching. What is needed in those cases is some empathy such as you have provided rather than derision.

Arb.

[kempiejon]

Arb,

As you have noted a top up would bring you up to your self imposed 5% limit, if you're not breaking that limit you're true to your rules. I like to think of my rules as guidelines that flex a bit, I will occasionally overweight, but that's because I'll balance with future top ups. PSN do have a very juicy double digit yield but x-specials only a few years of recent dividend history. Over the longer term there has been feast and famine. The commitment to returning money to share holders does have a nice ring to it and I like a company that sets out its commitment to my income but then what?

Coming back to your suggestions I like BT and IMB, not Centrica a cutter. Between SSE, VOD and GNK they all have an unblemished decade plus of increasing dividends; VOD is the biggest cap, GNK is from the lower index, is SSE going to have ofgem or government change the rules?
My next buys will probably be AIM or IT, no HYP buys until SKY unwraps and although a way off I've considered splitting that between WPP and VOD.

[vrdiver]

'morning Arb.

You've imposed limits on your holdings to protect yourself from moments of exuberant optimism about any particular share or sector. I also have holding limits:
No share should provide more than 1.5x the 1/25th* holding of income - so any share that provides more than 6% of my income becomes a candidate for review and subsequent trimming.
On value, I take the view that x2 of the median of the top 20 is an appropriate level for review. 
The reason is as much for the "sleep well at night" factor as anything else.

In your case, if you breach your self-imposed limit and all goes well, you'll have "learnt" that the limit can be ignored; sooner or later there will be another black swan event, maybe survivable, as in BP, maybe not, as in Carillion. When it happens, how will you feel (and how will you be financially impacted) if it is one of your over-the-limit shares?

My own view is that it's better to forego the extra upside of a share rather than risk meaningful losses in the event of a single-company catastrophe.

There are lots of bad things that can happen. I feel no desire to add to them...

So back to your self-imposed limit. There's no harm in reviewing it, but it's better to do it as a general case, rather than as a mental exercise to squeeze extra holdings of a specific share into the portfolio. My review process assumes a Carillion-style loss. If that would be too painful, then my individual holdings are too big and need to be spread out. If such an event were not too painful, then perhaps I can raise the limit?

For me, it's the consequences of the downside that create the limits; my limits are unlikely to be suitable for anyone else to just take and use "off the shelf", as would be true of all of us, assuming the same reasoning applies.

So back to your limits: what lets you sleep at night?

Have fun pondering!
VRD


*My limits only consider the top 25 or top 20 holdings, so my smaller-value stocks don't depress the limits for the main holdings.

[Itsallaguess]

Limits can be modified in the light of experience:

I've noticed other people quite happily having one share providing much higher percentages, so am I being unnecessarily restrictive here?

I personally don't think so Arb.

I think it's simply the case that those people might not have learnt to set a limit yet....

Cheers,

Itsallaguess

[vrdiver]

I've noticed other people quite happily having one share providing much higher percentages, so am I being unnecessarily restrictive here?

I personally don't think so Arb.

I think it's simply the case that those people might not have learnt to set a limit yet....

Have you noticed how they feel about it when that one share tanks?

I agree with IAAG, but also, more importantly, how would YOU feel about it?

VRD

[scrumpyjack]

Don't worry about the PSN dividend being too large a portion. They are only paying it for another 2 years and then the divi reverts to 110p (currently 235p)

https://www.persimmonhomes.com/corporat ... eturn-plan

[vrdiver]

Don't worry about the PSN dividend being too large a portion. They are only paying it for another 2 years and then the divi reverts to 110p (currently 235p)

https://www.persimmonhomes.com/corporat ... eturn-plan

Are you certain?

We increased this commitment by c. £860m (£2.80 per share) on 23 February 2016, by a further c. £77m (25p per share) on 24 February 2017 and by a further c. £1,170m (or £3.75 per share) on 26 February 2018

No commitment to another increase in February 2019, but there has been a pattern...

VRD

[scrumpyjack]

Well the board describe all these payments as 'capital return' not normal dividends and their current published schedule clearly shows it dropping to 110p in 2 years time and even that is still a 'capital return' not a normal dividend.

As profits have surged higher they have increased the payments, but I haven't seen any commentator suggest that builders profits are about to surge significantly higher from current levels. Rather the concern is how long they can maintain the current level of exceptionally high margins and profits.

The last lurch higher in the capital repayment plan was announced at the same time as the furore over the CEO getting £100 million. One can reasonably suppose that the (temporary) doubling of the payout was at least partly motivated by a desire to head off shareholder anger at the vast dollops of cash taken by the directors.

I continue to have a large holding of PSN, the total cost of which has already been easily covered by the cash return, but I do think that we are at the point where 'this is as good as it gets'. The market obviously thinks so too as evidenced by the 10% yield. I really can't see a 10% yield being sustained in the longer term.

[vrdiver]

I do think that we are at the point where 'this is as good as it gets'. The market obviously thinks so too as evidenced by the 10% yield. I really can't see a 10% yield being sustained in the longer term.

I tend to agree with you, but think there may be a bit more room for another return whilst the housing shortage and government policies continue to promote housebuilder profits. An economic downturn could easily see this reversed and housebuilders become the pariah stocks again, as they have been before.

VRD

[moorfield]

Limits can be modified in the light of experience: I've noticed other people quite happily having one share providing much higher percentages, so am I being unnecssarily restrictive here?

It's a variation of the "How many shares?" question is essence - pyad originally plumped for 15, Philip Carret 10, an index tracker 100 - and can be answered by how much income you have the stomach to lose. I can't recall if you held CLLN, but there's one answer ... in my case it was contributing ~8.5% of income before it popped, however my own long term saving targets have ridden that out well.

On your top up candidates, I'd pick VOD. I'm not usually one for "smell tests" but am deliberately avoiding adding more utilities this year, and probably next.