HYP Candidates

[EssDeeAitch]

I was going to reply to a post on the Sainsbury thread viewtopic.php?f=15&t=16357 but thought it too OT so created this one. The general feeling reflected in a number of the posts in the above thread is that Retailers are a poor holding for HYPm new HYP holdings, where to look for sector diversification?

I ran a screen on the StepOne spreadsheet excluding sectors I already hold and with the following criteria:-

Yield > 4.5%; EPS Growth > 0%; Divi Cover > 1.5; Increasing Divi Y; Market Cap > £1b and I am left with the options below (five in the broad church of finance, no Utilities companies made the cut and only Kingfisher in Retail passed muster).



Do any of the above look to be LTBH stocks and inspire confidence as a new holding? It seems unless my screening criteria is flawed, that there are few valid HYP targets. Any insight on this screen, the quality of the stock thus identified and helpful comments would be much appreciated

[idpickering]

I'd certainly think of BAE Systems as fitting the bill, despite yesterdays 8% drop in SP. I hold. Great for added diversification outside of the usual suspects.

Ian.

[Dod101]

The one which stands pout for me is Schroders although Close Brothers have an excellent long term record. I would not touch housebuilders and I do not know much about some of the others so may be missing something.

From your list I hold only Schroders which are certainly well down on their peak price. They have not lost much business though, unlike say Standard Life Aberdeen, and are conservatively managed. The Schroder family own just under 50% of the company and are represented on the Board. As long as you do not mind the Non Voting shares you will get a yield of around 4.5%.

Like Aviva, RSA seems to have improved in recent years but I do not like them very much. They like Aviva have a patchy record.

Dod

[TUK020]

I hold two on your list:
BA - large solid company in defensive sector. Worry about debt and pension liability.
SDRC - In an industry under margin pressure, but profitable growing business with net cash, enviable track record in dividend growth

If I were picking from your list I would go for SDRC

[Arborbridge]

THe problem at the moment with many large and potentially HYPable companies is the cover. Cover has deteriorated over the past few years and so is forced to balance one's desire for diversity against one's desire for cover. Actually, although I too look at cover, I'm don't believe it was one of the original pyad screening factors, but five years record of good dividend payments was, so that should be checked too. Back in the old days, we I used to like a cover of 2x but that possibility is now just a distant memory except for very few shares. Thus we have had to increase our risk or starve.

I agree with Dod on Schroders, except that the yield seems a bit low for the current climate - although it is about as good as it gets for this company. The chart below for SDR (which I'd reckon is about the same in shape as SDRC, non-voting) shows that the yield was better a little while ago, but it is still fairly near the top.

https://www.dividenddata.co.uk/dividend ... y?epic=SDR

Click on a longer period for an overall view. "Max" shows three peaks in SDRs yield, and we are close to one now.
Arb.

[Arborbridge]

Further on SDRC, I notice the forecast yield given by sharecast.com is 5.4%. If one takes the forecast dividend for SDR of 113.61 at the current SDRC price, that looks about right.

If so, that completely transforms the picture - so my mentioning 4.5% was my own confusion for which I apologise.

I'll be looking at more SDRC myself, in that case! - and thanks for highlighting it.

Arb.

[EssDeeAitch]

Thanks for the notes on Schroders, Close and BAE. Divi cover is 1.9, 2.1 and 2.0 respectively so that helps and from Dividend data I can see that Schroders have the higher dividend growth rate over five and 10 years followed by Close and then BAE.


More work to do, but thanks for these pointers.

[monabri]

You mention SDR...but you might wish to consider the non voting shares - SDRC.

SDR shares confer voting rights but the yield is lower.

[Dod101]

The non voting shares are the Schroder shares to go for, as I mentioned in my earlier post. You might also wish to note that the Schroder patriarch, Bruno Schroder has just died. He was 86 and had been on the Board for a very long time. I do not see why that should make any difference since the Schroder family holding of around 47% is held in trusts but my newspaper is questioning a possible future realignment of the shareholding. Probably not worth worrying about.

Dod

[EssDeeAitch]

You mention SDR...but you might wish to consider the non voting shares - SDRC.

SDR shares confer voting rights but the yield is lower.

Many thanks, both Arb and TUKO mentioned them as well so that is what I shall be looking at

[kempiejon]

I looked at Redrow a couple of weeks back, and liked the numbers, they are returning cash to share holders next year dividend 3 times covered.
I hold BAe, Close bros and SDRC as HYPable.

[Davidsb]

Hi EssDeeAitch -

I hold four of the shares listed in my 46-share (soon to be either 45- or 44-share) HYP, BWY, BAB, INVP and RSA.

BWY has been held since early 2015, when it was yielding around 5%. I hold slightly less than my average holding, but have a number of other shares in the construction sector, so am not looking to add to BWY at present. By the beginning of 2018, the company's share price had doubled, but it has since sunk back to just a 50% gain - and the forecast yield is now 5.3%. The company appears to be conservatively managed, and I see BWY as a steady income generator. The housebuilders are possibly seen as (a) cyclical and (b) exposed to Brexit pressures, but I hope to use my diversification as protection.

BAB is the most recent addition to my HYP, being purchased at the beginning of 2018. I hold just under half of an average investment, and would consider adding to the holding. The share price is down by around 25% at present, but the forecast dividend has stayed steady. The forecast yield is 5.5%, but I would not increase my holding until I see more of a positive track record.

INVP is the share which I have held longest of the four - the first purchase was in early 2009, with top-ups in late 2012 and late 2013. I hold about 1.5 times my average holding, with the share price rising by 40% against my blended purchase price. The dividend per share has almost doubled since my first purchase, and the share now offers a forecast yield of 5.2%. I have been happy with the company, but I am aware that the company has substantial business in South Africa, which to my mind is not the most stable of countries. Thus, I would be unlikely to increase my holding in IRV.

RSA is another long-term holding, being purchased in mid-2009, followed by top-ups in early 2010, late 2011 and early 2013. I did not take up the March 2014 rights issue due to lack of funds at the time. The shareholding is almost exactly average-sized, showing a 10% decline against my blended purchase price - although the sale of my nil-paid rights puts the share on break-even in capital terms. The dividend is still recovering from cancellation in 2014, and offers a forecast yield of 4.2%. I'm not quite sure how the company passed the >4.5% yield test in your screen..... Anyway, the company has had its difficulties, and as far as I can see is still working its way back to HYP fitness.

So, looking to the long term and being willing to ignore any short-term bumpiness, I would, all other things being equal, select BWY, with a second choice of INVP.

[EssDeeAitch]

Hi EssDeeAitch -

I hold four of the shares listed in my 46-share (soon to be either 45- or 44-share) HYP, BWY, BAB, INVP and RSA.
................

So, looking to the long term and being willing to ignore any short-term bumpiness, I would, all other things being equal, select BWY, with a second choice of INVP.

Many thanks for these insights. I am not keen on housebuilders (not entirely sure why) and with other sectors open, I will fill these first. I suspect that Schroders, possibly Close will be selected.

[Arborbridge]

Hi EssDeeAitch -

I hold four of the shares listed in my 46-share (soon to be either 45- or 44-share) HYP, BWY, BAB, INVP and RSA.
................

So, looking to the long term and being willing to ignore any short-term bumpiness, I would, all other things being equal, select BWY, with a second choice of INVP.

Many thanks for these insights. I am not keen on housebuilders (not entirely sure why) and with other sectors open, I will fill these first. I suspect that Schroders, possibly Close will be selected.

I am not keen on housebuilders (not entirely sure why)

Maybe you think you have enough invested in housing through your own home? That's certainly why I have been light on them for years - it seemed a sector I didn't need to have on that account - though I view the logic as a bit flakey!

[EssDeeAitch]

Hi EssDeeAitch -

I hold four of the shares listed in my 46-share (soon to be either 45- or 44-share) HYP, BWY, BAB, INVP and RSA.
................

So, looking to the long term and being willing to ignore any short-term bumpiness, I would, all other things being equal, select BWY, with a second choice of INVP.

Many thanks for these insights. I am not keen on housebuilders (not entirely sure why) and with other sectors open, I will fill these first. I suspect that Schroders, possibly Close will be selected.

I am not keen on housebuilders (not entirely sure why)

Maybe you think you have enough invested in housing through your own home? That's certainly why I have been light on them for years - it seemed a sector I didn't need to have on that account - though I view the logic as a bit flakey!

That forms part of my thinking indeed. But the sector just seems a bit flakey to me.

[midgesgalore]

Hi EssDeeAitch -

I hold four of the shares listed in my 46-share (soon to be either 45- or 44-share) HYP, BWY, BAB, INVP and RSA.
................

So, looking to the long term and being willing to ignore any short-term bumpiness, I would, all other things being equal, select BWY, with a second choice of INVP.

Many thanks for these insights. I am not keen on housebuilders (not entirely sure why) and with other sectors open, I will fill these first. I suspect that Schroders, possibly Close will be selected.

Hi EssDeeAitch
I tried to buy some of the Schroders non-voting today as some substantial dividends + special dividends + capital returns have built up (in two separate accounts).
Both of my ISA providers couldn't fulfill the order.
I cancelled the order in one account and was just as rejected with the other account ii & HL respectively.
Maybe the order amount was too much for this class of share however I don't think I had an overly large investment for their systems to non-quote.
Maybe folks are hanging onto their shares today.

midgesgalore

[EssDeeAitch]

Hi EssDeeAitch
I tried to buy some of the Schroders non-voting today as some substantial dividends + special dividends + capital returns have built up (in two separate accounts).
Both of my ISA providers couldn't fulfill the order.
I cancelled the order in one account and was just as rejected with the other account ii & HL respectively.
Maybe the order amount was too much for this class of share however I don't think I had an overly large investment for their systems to non-quote.
Maybe folks are hanging onto their shares today.

midgesgalore

Thanks for the heads up, I am with II so would have the same problem. I never imagined liquidity to be an issue or perhaps there is something else behind it?