Candidate list

[toofast2live]

Hi

I used to find Luni's monthly list of HYP candidates most useful - or at least food for thought. My brain's too addled to produce such a list, so does any one else have the motivation to continue this. HYP practical is almost 99% about candidates for inclusion - the other 1% is (debatable OT) discussion about tinkering.

I dont mean the simplistic screen approach which was just that - simplistic. I mean a real slide rule over companies' long term treatment of dividend based owners of a common share. I say that because I just did a digitallook screen, FTSE100, dividend over 3.5%, divis and eps growing by over 2%pa 4 years, and it delivered just 2 shares! IMB and ITV!

I have posted elsewhere that my HYP compares unfavourably to my wife's collection of ITs on a TR basis and is about almost par on dividends over the last 26 years. I'll throw in the towel and go to a John Barron/Luni basket approach unless someone other than Luni comes along.

[MDW1954]

I cannot offer any hard data, because I never bother to compare my HYP to total return indices. It is about income.

But I would have thought that many HYP companies are HYP because they are in some way marked down by the market, and therefore have a whiff of value about them. This should lead to over-performance, at least as far as those companies that don't tank. But if you are predisposed to pick marked-down companies and pick those where the market is correct, then under-performance will follow.

I am still in the HYP-building phase, in my early 60s. The majority of my investments are in trackers and ITs. The ITs have been chosen for income in retirement, the trackers will probably be converted to a mix of HYP shares and ITs.

My existing HYP shares are a non-insignificant sum, but give me the most pleasure.

MDW1954

[tjh290633]

I cannot offer any hard data, because I never bother to compare my HYP to total return indices. It is about income.

But I would have thought that many HYP companies are HYP because they are in some way marked down by the market, and therefore have a whiff of value about them. This should lead to over-performance, at least as far as those companies that don't tank. But if you are predisposed to pick marked-down companies and pick those where the market is correct, then under-performance will follow.

You could say that there are two sorts of HYP candidate companies - those which are ex-growth and so have a higher yield to compensate, and those which are currently out of favour with the market, hence their price is depressed and the yield high.

I can give one example of shares going out of favour. In February 2016 I trimmed back both Compass (CPG) and Imperial Brands (IMB) (actually still Imperial Tobacco at that time). Both would have been over 150% of the median holding value at that time. Currently CPG is ranked fifth by weight, at 113% of the median, while IMB is 26th, at 93% of the median. When trimmed back, both would have been about 113% of the median, so CPG has held its position while IMB has dropped somewhat. Incidentally my heaviest shares are Aviva and IMI, both at about 117% of the median. My most recent trimming actions has been to reduce Reckitt Benckiser (RB.), Rio Tinto (RIO) and BAE Systems (BAS.), of which RIO is ranked 3rd at 114%, BA. is ranked 1th at 105% while RB. has dropped to 24th at 97%.

The Market moves in mysterious ways.

TJH

[will89]

Indeed, by 'locking in' some profit on the IMB example above by reducing it to median you would have had the result of gaining on two fronts, the locked in profit AND the reduced 'loss' as the price dropped, as you would have had less invested after the top-slice. I know HYP is about the income, but this double whammy bonus potential when top-slicing always seems appealing. Of course, the opposite can be true and after the top-slice the price can fly, but it always feels nice to limit the downside risk.

[77ss]

I just did a digitallook screen, FTSE100, dividend over 3.5%, divis and eps growing by over 2%pa 4 years, and it delivered just 2 shares! IMB and ITV!

So why doesn't LGEN fit? If your screen misses this company, how many others does it miss?

There are several other questions you need answered too.

Does the company only have to be in the FT100 now, or does it have to have been in the over the entire period?

Does the 2% growth target have to be met in each individual year, or does an average suffice?

When a company reports in a foreign currency, does the dividend target have to met in the reporting currency, or in sterling - and what the hell happens when a company changes its reporting currency.

I don't use screens much at all - and never for previous years. Too easy to throw out the baby with the bathwater.

[77ss]

Indeed, by 'locking in' some profit on the IMB example above by reducing it to median you would have had the result of gaining on two fronts, the locked in profit AND the reduced 'loss' as the price dropped, as you would have had less invested after the top-slice

I don't know about the 'reduced loss' - isn't that just a 'feelgood' thing?

More interestingly perhaps, market volatility can offer sensible repurchase opportunities. With the share in question, IMB, I was overweight so trimmed by about 20% in July. Following a 13% drop in share price, I just rebought in November. In retrospect, I should have made a larger top-slice - I think Terry usually does.

[tjh290633]

Indeed, by 'locking in' some profit on the IMB example above by reducing it to median you would have had the result of gaining on two fronts, the locked in profit AND the reduced 'loss' as the price dropped, as you would have had less invested after the top-slice. I know HYP is about the income, but this double whammy bonus potential when top-slicing always seems appealing. Of course, the opposite can be true and after the top-slice the price can fly, but it always feels nice to limit the downside risk.

Agreed. I've seen shares get near the trigger point for trimming and fall back the next day, when I was all psyched up to sell them if the rise continued.

My principle when trimming back is to reinvest the proceeds in shares with a higher yield than the one sold, so that way I can jack up the dividend income, faster than the natural progression .

TJH