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Pearson: am I at the tipping point?

Practical discussions about equity High-Yield Portfolios (HYP) for income
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Arborbridge
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Pearson: am I at the tipping point?

#191905

Postby Arborbridge » January 8th, 2019, 10:52 am

An unanswerable question, and I don't expect much advice or hand holding. But one share I mentioned as being on my list to tinker away is Pearson - actually, it's been there for a year or so.

Today, there's a nice rise in price to 992p currently, following on from a few good days. The historic yield is well under 2% and the share price has given me much more in cash terms than I could have hoped from a year's dividends. My projected price given by a point and figure price back in March was just over the 1000p mark, so virtually on the money at present. Is it now time to cash in my chips and move on? Or set a stop loss and hope? Sell half and hope? Aargh!

I understand there should be a trading announcement out soon and by the way the share price is behaving, it could be better than the previous one. However, very often good news is accomapied by profit taking, so if I'm going to go, I may as well go now.

Picker, picker, picker. As ever, there is no right answer except by hindsight.

Arb.

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Re: Pearson: am I at the tipping point?

#191914

Postby moorfield » January 8th, 2019, 11:59 am

Arborbridge wrote:An unanswerable question, and I don't expect much advice or hand holding.


I disagree Arb. Frame the question in terms of your overall portfolio income - and you've already given us one answer yourself on Arb's HYP 12th year.

The important fact for me is that the income overall has been more than good enough to pay my pension requirements.


So, why fiddle?

Picker, picker, picker. As ever, there is no right answer except by hindsight.


But you can certainly attempt an answer with a little foresight. That's the point of my graph on moorfield HYRP. It's certainly a temptation to bin my own CNA, JMAT, SGE holdings, but I simply don't need to while that graph tells me as much.

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Re: Pearson: am I at the tipping point?

#191915

Postby kempiejon » January 8th, 2019, 12:03 pm

Arb,

I've got Pearson too and it's recent capital appreciation has been amongst the best in my HYP. Income-wise it's been in the doldrums for a couple of years but this year's interim is more than last year's. If it can manage to increase the dividend but maintain the yield it'll be a good prospect for me but if I see an increase in dividend and decrease the yield that'd be fine. I'm probably not going to do anything with mine. The share is in an ISA so no tax implications. Stick.

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Re: Pearson: am I at the tipping point?

#191918

Postby kempiejon » January 8th, 2019, 12:06 pm

Moorfield, Johnson MATthey and Sage both increasing income at over 8% annually in the past decade, no they're keepers. Centrica I hold and they're not doing the business to increase my income so no new money.

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Re: Pearson: am I at the tipping point?

#191921

Postby StepOne » January 8th, 2019, 12:37 pm

Well if it's confession time, I was forced to liquidate part of my HYP about a year ago to fund a house purchase, and Pearson was one of those I chose to dispose of completely. Since I sold it has risen 31%.

If I were you, I would do nothing for 6 months and review the situation then.

Cheers
StepOne

Arborbridge
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Re: Pearson: am I at the tipping point?

#191932

Postby Arborbridge » January 8th, 2019, 1:13 pm

StepOne wrote:If I were you, I would do nothing for 6 months and review the situation then.

Cheers
StepOne


Yes, that's what I keep doing - it's a sort of long term pickering exercise :)

Arborbridge
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Re: Pearson: am I at the tipping point?

#191935

Postby Arborbridge » January 8th, 2019, 1:22 pm

moorfield wrote:
So, why fiddle?



Well, a direct answer to this is that I, in general following the guidelines of one particularly experienced investor - TJH - who argues that one gains an advangtage by disposing of low yielders (half the FTSE yeild or 2%) and replacing them by high yielders. This would rachet up the income and Pearson is well overdue on this basis.

I've no doubt Wizard would support this - one could easily double the income or more in either a dependable old warhorse IT or a middle ranking direct share holding.

Arb.

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Re: Pearson: am I at the tipping point?

#191940

Postby tjh290633 » January 8th, 2019, 1:49 pm

Arborbridge wrote:
moorfield wrote:
So, why fiddle?



Well, a direct answer to this is that I, in general following the guidelines of one particularly experienced investor - TJH - who argues that one gains an advangtage by disposing of low yielders (half the FTSE yeild or 2%) and replacing them by high yielders. This would rachet up the income and Pearson is well overdue on this basis.

I've no doubt Wizard would support this - one could easily double the income or more in either a dependable old warhorse IT or a middle ranking direct share holding.

Arb.

I would counter that by pointing out that Pearson is the share in my HYP which rose in value the most in the past year. See viewtopic.php?p=190298#p190298

Hence its low yield is a consequence of its rise in price. I shall wait for future dividend declarations before I decide on its fate.

TJH

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Re: Pearson: am I at the tipping point?

#191951

Postby moorfield » January 8th, 2019, 2:33 pm

Arborbridge wrote:
moorfield wrote:
So, why fiddle?



Well, a direct answer to this is that I, in general following the guidelines of one particularly experienced investor - TJH - who argues that one gains an advangtage by disposing of low yielders (half the FTSE yeild or 2%) and replacing them by high yielders. This would rachet up the income and Pearson is well overdue on this basis.

I've no doubt Wizard would support this - one could easily double the income or more in either a dependable old warhorse IT or a middle ranking direct share holding.

Arb.


Fair comments, I agree with the notion of disposing at half the FTSE yield, but I think there are some misnomers here too. The idea of "ratcheting up income" (in my mind) relies on no dividend cuts elsewhere to be effective, but we know everyone's portfolios regularly suffer these, and if Pearson does start improving dividends, you'll see a similar effect anyway by simply holding and reinvesting elsewhere. My feeling is not to use the ratchet until I have to, again the point of my graph. The notion of "doubling the income" is also misleading I think, discussed recently with absolutezero on Swapping Sage for? so no need to repeat myself here.

Arborbridge
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Re: Pearson: am I at the tipping point?

#191955

Postby Arborbridge » January 8th, 2019, 2:50 pm

tjh290633 wrote:I would counter that by pointing out that Pearson is the share in my HYP which rose in value the most in the past year. See viewtopic.php?p=190298#p190298

Hence its low yield is a consequence of its rise in price. I shall wait for future dividend declarations before I decide on its fate.

TJH


Pearsons yield dropped because it cut the dividend, and the rise in price (which reduced the yield even further) is owing to the turnaround hopes. The only thing for me to decide is whether I'm willing to wait for an unknown time for the recovery of the dividend from a company which has completely changed its market, or whether to "do a Dod" and clear off to pastures new. If it takes even half as long as Lloyds, it will be a long wait :(


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Re: Pearson: am I at the tipping point?

#191961

Postby flint » January 8th, 2019, 3:15 pm

Pearson is a conviction holding for Nick Train.
I expect that he knows more about them than thee or me.
Perhaps worth waiting for the next update from Pearson

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Re: Pearson: am I at the tipping point?

#191971

Postby Wizard » January 8th, 2019, 3:38 pm

Arborbridge wrote:
moorfield wrote:
So, why fiddle?



Well, a direct answer to this is that I, in general following the guidelines of one particularly experienced investor - TJH - who argues that one gains an advangtage by disposing of low yielders (half the FTSE yeild or 2%) and replacing them by high yielders. This would rachet up the income and Pearson is well overdue on this basis.

I've no doubt Wizard would support this - one could easily double the income or more in either a dependable old warhorse IT or a middle ranking direct share holding.

Arb.

My question is simple, is there an alternative you are happy putting the money in to* that will give the ratchet effect? If 'yes' then do it, if 'no' there is no point selling.

Terry.

* Of course being happy will be a function of portfolio diversification, other available opportunities, other holding sizes, etc.

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Re: Pearson: am I at the tipping point?

#191979

Postby Dod101 » January 8th, 2019, 4:05 pm

flint wrote:Pearson is a conviction holding for Nick Train.
I expect that he knows more about them than thee or me.
Perhaps worth waiting for the next update from Pearson


I am not sure that that is the case. He did a lot of soul searching at one time and wrote quite extensively about it. So I am not sure 'conviction' is quite how he sees his holding.

I thought I had responded but apparently not. I wrote to say that having held on this long Arb might be better just to wait and see as the worst may be over. Sometimes it is better to take a more modest yield which, when accompanied by a decent capital gain will produce the total return needed. OTOH if income is really needed, then there is no option but to sell and buy a higher yielder. Personally I would have sold some tome ago but I never held it.

Dod

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Re: Pearson: am I at the tipping point?

#191983

Postby Arborbridge » January 8th, 2019, 4:16 pm

Well, I missed the chamce today...

However, I find it quite heartwarming that several people seem to be taking a fairly fundamentally HYP stance on this, which also slightly surprised me. There have been quite a few posts in the past year casting doubts on whether we are doing the right thing by holding on, yet it seems many of us are still sticking with HYP principles.

Whether the worst is over Dod, I'm not at all sure and there has been quite a lot of adverse commentary about their new direction and the previous results. However, given that news is often indicated by the share price, the worst could be over - or it could be just a honeymoon period as in the case of Tesco's "run" which reversed sharply.

Arb.

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Re: Pearson: am I at the tipping point?

#191984

Postby idpickering » January 8th, 2019, 4:18 pm

Arborbridge wrote:
StepOne wrote:If I were you, I would do nothing for 6 months and review the situation then.

Cheers
StepOne


Yes, that's what I keep doing - it's a sort of long term pickering exercise :)



Good advice from StepOne IMHO. As for the long term pickering exercise, I'm into "speed pickering" now Arb. See; viewtopic.php?f=15&t=15203&start=80

Ian.

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Re: Pearson: am I at the tipping point?

#191990

Postby Dod101 » January 8th, 2019, 4:59 pm

StepOne wrote: If I were you, I would do nothing for 6 months and review the situation then.


Aka kicking the can down the road.

Dod

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Re: Pearson: am I at the tipping point?

#192010

Postby moorfield » January 8th, 2019, 7:47 pm

flint wrote:Pearson is a conviction holding for Nick Train.
I expect that he knows more about them than thee or me.
Perhaps worth waiting for the next update from Pearson


I think "conviction holding" is often employed as a euphemism for "well yes, I'd look pretty stupid if I sold them now..." :oops:

Yes Pearson is due a trading update next week, with full year results due late February.

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Re: Pearson: am I at the tipping point?

#192021

Postby Itsallaguess » January 8th, 2019, 8:29 pm

moorfield wrote:
I think "conviction holding" is often employed as a euphemism for "well yes, I'd look pretty stupid if I sold them now..."


Hands-up those of us that have never mentally transferred a holding from their HYP to their, erm, Value portfolio....

Cheers,

Itsallaguess

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Re: Pearson: am I at the tipping point?

#192120

Postby pyad » January 9th, 2019, 9:31 am

Arborbridge wrote:Well, I missed the chamce today...

However, I find it quite heartwarming that several people seem to be taking a fairly fundamentally HYP stance on this, which also slightly surprised me. There have been quite a few posts in the past year casting doubts on whether we are doing the right thing by holding on, yet it seems many of us are still sticking with HYP principles.

Whether the worst is over Dod, I'm not at all sure and there has been quite a lot of adverse commentary about their new direction and the previous results. However, given that news is often indicated by the share price, the worst could be over - or it could be just a honeymoon period as in the case of Tesco's "run" which reversed sharply.

Arb.


A couple of points occur to me Arb regarding your message and the original one.

As a confirmed tinkerer, it's probably better to use a policy of dumping a share on a rule-based math appraisal of its current yield, say when it falls below some figure relative to the market or the like. That will avoid the dithering. This will result in some poor and some effective decisions over the long term but such is the lot of the tinkerer. You know where I stand on this.

Second, refrain from considering the opinion of others too much, including mine. Make up your own mind. Just in the current thread you say for example:

...I find it quite heartwarming that several people seem to be taking a fairly fundamentally HYP stance on this...

It should not be heart warming at all. If anything you should be somewhat suspicious of a strong consensus.

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Re: Pearson: am I at the tipping point?

#192122

Postby monabri » January 9th, 2019, 9:44 am

Pearson...yield is 1.74% (figure from dividend data)....what possible reason is there to keep hold of when one could buy income of 3x this amount without too much digging. The only reason I can think of is that the share price is well below the purchase price and that is a factor?

Or, for every £1k of currently invested money in PSON, one could sell and effectively buy £3k "worth" of dividend elsewhere....


edit..or one could buy 3 off £1k top ups ..thus spreading the 'out of the frying pan' risk...


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