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OLTB's HYP - Sold United Utilities.

Practical discussions about equity High-Yield Portfolios (HYP) for income
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OLTB
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OLTB's HYP - Sold United Utilities.

#205354

Postby OLTB » March 4th, 2019, 11:20 am

Morning all

This morning I sold my holding in United Utilities (UU.) within my HYP.

I have been worried about what the future may hold for UU. and yes, I understand that is an unknown and it may well go on to churn out RPI increasing dividends year after year.

I do not wish to be worried though and therefore I sold. My worries were specifically about what happens post 2020 and whether the goal of RPI linked dividends will continue given Ofwat's planned introduction of a tougher pricing structure from 2020. Also, possible re-nationalisation, although this is diminishing somewhat.

UU.'s share price had improved quite a way recently and as I had bought during some lows a while back, more or less broke even (very slightly down in capital terms). The proceeds were re-invested into Merchants IT (MRCH) to maintain a UK biased dividend income investment, with the forecast income from MRCH to be slightly higher than it was with UU. over the year.

My HYP now looks like this (I haven't included MRCH in order to stay OT with this board):



I am also aware that there are potential disasters/cuts with all of the above constituents, so the argument might be why not sell them all. I'm not going to, it was just this one utility where the price had recovered to such an extent that the annual income wouldn't be affected.

Thanks to those who helped in my decision making.

Cheers, OLTB.

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Re: OLTB's HYP - Sold United Utilities.

#205357

Postby moorfield » March 4th, 2019, 11:27 am

OLTB wrote:
This morning I sold my holding in United Utilities (UU.) within my HYP.

I have been worried about what the future may hold for UU. and yes, I understand that is an unknown and it may well go on to churn out RPI increasing dividends year after year.




... in contrast I'm happy to keep holding, although not topping up for the foreseeable (*). Of the utilities I hold currently, UU. is the one that seems most committed to its dividend, unlike SSE and CNA who I fear will cut in 2020.


(*) as I've mentioned elsewhere, at least until we've seen the riddance of John McDonnell.

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Re: OLTB's HYP - Sold United Utilities.

#205405

Postby Arborbridge » March 4th, 2019, 2:08 pm

THe pendulum of what is essential in a HYP has swung away from utes in the past three years or so. Whether this is just a passing phase is not possible to tell, but I can "feel" this pressure also. At one time, SSE, NG a water company and yes, even CNA where regarded as important shares to hold. CNA was once, I seem to remember reading somewhere, so "stalwart" that almost any investor should own a slice.

Yet, here I am, reluctant to topup any of them and possibly it's crossing my mind that I would be better off selling CNA to redduce risk.
Reading the boards can be like the eroding drip of water on the stone of certainty.

Arb.

PS I've just noticed that UU's yield is "only" 5% and that's more than 10% below my average - so for the moment toppingup is something I probably won't worry about.

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Re: OLTB's HYP - Sold United Utilities.

#205450

Postby Dod101 » March 4th, 2019, 4:04 pm

The universe of HYP shares is fast diminishing I fear. I now hold only National Grid of the utilities. Was on the point of selling when I decided that I would be better selling Vodafone so that is what I did.

It seems that a Corbyn government is not now looking as likely as it once was but even without that threat, shaky finances and/or a tougher regulatory regime for most of the utilities has taken the shine off them.

Dod

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Re: OLTB's HYP - Sold United Utilities.

#205478

Postby Arborbridge » March 4th, 2019, 5:25 pm

Dod101 wrote:The universe of HYP shares is fast diminishing I fear. I now hold only National Grid of the utilities. Was on the point of selling when I decided that I would be better selling Vodafone so that is what I did.

It seems that a Corbyn government is not now looking as likely as it once was but even without that threat, shaky finances and/or a tougher regulatory regime for most of the utilities has taken the shine off them.

Dod


Too early to say what will happen in the next election. So much depends on the public reaction to May's Brexit outcome and the fact that both parties are in disarray with voters hardly endorsing either (or at least, that's my interpretation).

Anyhow, my feeling is that there's nothing certain in the weird world of modern democracy - which makes it harder for us. I suggest "don't panic" should be the motto 8-)


Arb.

idpickering
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Re: OLTB's HYP - Sold United Utilities.

#205503

Postby idpickering » March 4th, 2019, 7:34 pm

In the overall utilities sector I hold United Utilities, SSE PLC, and National Grid, in roughly equal weighting. I shall continue to do so, as I’m happy in my ignorance of the future, for good or bad, of any of them. One can try to be to clever for ones own, and our HYPs health imho.

Ian.

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Re: OLTB's HYP - Sold United Utilities.

#205504

Postby Walrus » March 4th, 2019, 7:40 pm

idpickering wrote:In the overall utilities sector I hold United Utilities, SSE PLC, and National Grid, in roughly equal weighting. I shall continue to do so, as I’m happy in my ignorance of the future, for good or bad, of any of them. One can try to be to clever for ones own, and our HYPs health imho.

Ian.


I'm in a similar boat, Averaging down during the lows last year this one is actually a pretty decent performer for me. It's quite interesting that I'm now looking at the yield and thinking it looks a bit expensive......

Itsallaguess
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Re: OLTB's HYP - Sold United Utilities.

#205505

Postby Itsallaguess » March 4th, 2019, 7:51 pm

OLTB wrote:
This morning I sold my holding in United Utilities (UU.) within my HYP.

I have been worried about what the future may hold for UU. and yes, I understand that is an unknown and it may well go on to churn out RPI increasing dividends year after year.

I do not wish to be worried though and therefore I sold. My worries were specifically about what happens post 2020 and whether the goal of RPI linked dividends will continue given Ofwat's planned introduction of a tougher pricing structure from 2020. Also, possible re-nationalisation, although this is diminishing somewhat.

UU.'s share price had improved quite a way recently and as I had bought during some lows a while back, more or less broke even (very slightly down in capital terms). The proceeds were re-invested into Merchants IT (MRCH) to maintain a UK biased dividend income investment, with the forecast income from MRCH to be slightly higher than it was with UU. over the year.


Smart move OLTB - you've traded away what to you was a real and ongoing investment-concern, and replaced it with a well-diversified 'HYP-in-a-box', which currently yields around the same as the worrisome single-company income-investment you've sold out from.

I have no doubt at all that you've done the right thing for you, which is sometimes far more important than what might be the right HYP thing to do....

Cheers,

Itsallaguess

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Re: OLTB's HYP - Sold United Utilities.

#205516

Postby csearle » March 4th, 2019, 8:25 pm

Itsallaguess wrote:I have no doubt at all that you've done the right thing for you, which is sometimes far more important than what might be the right HYP thing to do....
Oi, you poaching our HYPers? ;) C.

Itsallaguess
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Re: OLTB's HYP - Sold United Utilities.

#205520

Postby Itsallaguess » March 4th, 2019, 8:46 pm

csearle wrote:
Itsallaguess wrote:
I have no doubt at all that you've done the right thing for you, which is sometimes far more important than what might be the right HYP thing to do....


Oi, you poaching our HYPers? ;)


Well, I think 'poaching' may be over-playing it a little!

Perhaps turning the light on above the revolving door, maybe....

https://www.lemonfool.co.uk/viewtopic.php?f=31&t=15438

Cheers,

Itsallaguess

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Re: OLTB's HYP - Sold United Utilities.

#205531

Postby IanTHughes » March 4th, 2019, 9:16 pm

Itsallaguess wrote:Smart move OLTB - you've traded away what to you was a real and ongoing investment-concern, and replaced it with a well-diversified 'HYP-in-a-box'

No, The Merchants Trust PLC (MRCH) is not an "HYP in a box". Unless of course you are happy for an HYP to be nearly 30% invested in Financials, I am not.

Check it out if you do not believe me

https://www.merchantstrust.co.uk/Portfo ... rformance#


Ian

Itsallaguess
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Re: OLTB's HYP - Sold United Utilities.

#205535

Postby Itsallaguess » March 4th, 2019, 9:24 pm

IanTHughes wrote:
Itsallaguess wrote:Smart move OLTB - you've traded away what to you was a real and ongoing investment-concern, and replaced it with a well-diversified 'HYP-in-a-box'


No, The Merchants Trust PLC (MRCH) is not an "HYP in a box". Unless of course you are happy for an HYP to be nearly 30% invested in Financials, I am not.

Check it out if you do not believe me

https://www.merchantstrust.co.uk/Portfo ... rformance#


Thanks Ian - I take your point, but with regards to this single lump of capital, it was invested into United Utilities and is now in a much more diversified position in it's new home....

The specific risks that were the primary cause for concern to the OP have been factored out considerably by this move, in my opinion.

Cheers,

Itsallaguess

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Re: OLTB's HYP - Sold United Utilities.

#205536

Postby IanTHughes » March 4th, 2019, 9:38 pm

Itsallaguess wrote:
IanTHughes wrote:
Itsallaguess wrote:Smart move OLTB - you've traded away what to you was a real and ongoing investment-concern, and replaced it with a well-diversified 'HYP-in-a-box'


No, The Merchants Trust PLC (MRCH) is not an "HYP in a box". Unless of course you are happy for an HYP to be nearly 30% invested in Financials, I am not.

Check it out if you do not believe me

https://www.merchantstrust.co.uk/Portfo ... rformance#


Thanks Ian - I take your point, but with regards to this single lump of capital, it was invested into United Utilities and is now in a much more diversified position in it's new home....

Maybe that is so, but no-one should fool themselves that to do so is to remain as an HYPer, it is not. The resulting portfolio is no longer an HYP.



Ian

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Re: OLTB's HYP - Sold United Utilities.

#205541

Postby Dod101 » March 4th, 2019, 10:07 pm

IanTHughes wrote:Maybe that is so, but no-one should fool themselves that to do so is to remain as an HYPer, it is not. The resulting portfolio is no longer an HYP.


Maybe not a HYP in the purest sense of the term. Personally I do not care what my High Yield Portfolio is called by anyone. it contains single company shares and a few higher yielding investment trusts and does the job for me so that is all I need.

Dod

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Re: OLTB's HYP - Sold United Utilities.

#205544

Postby MDW1954 » March 4th, 2019, 10:14 pm

IanTHughes wrote:
Itsallaguess wrote:
IanTHughes wrote:
No, The Merchants Trust PLC (MRCH) is not an "HYP in a box". Unless of course you are happy for an HYP to be nearly 30% invested in Financials, I am not.

Check it out if you do not believe me

https://www.merchantstrust.co.uk/Portfo ... rformance#


Thanks Ian - I take your point, but with regards to this single lump of capital, it was invested into United Utilities and is now in a much more diversified position in it's new home....

Maybe that is so, but no-one should fool themselves that to do so is to remain as an HYPer, it is not. The resulting portfolio is no longer an HYP.



Ian


Moderator Message:
To be totally clear here, the remaining portfolio, minus MRCH, is still a HYP. But for ease of reporting purposes, if a HYP contains 5% or so of foreign shares, or even ITs, moderators will be relaxed. This precedent was established several months ago, precisely to draw a line under discussions like these. -- MDW1954

monabri
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Re: OLTB's HYP - Sold United Utilities.

#205550

Postby monabri » March 4th, 2019, 10:40 pm

I just had a quick look through the Allianz (Merchants IT) classifications - in particular relating to the 29% financials.

Worse case would be that OLTB has added maybe 1% extra "financials" to his portfolio (29% of perhaps 3% average holding)?

However, when you look at how Allianz defines "financials", here are the companies that it classes as "financials". (yes, the numbers in their tables don't seem to cross tally with their own tables but I can't be fussed to investigate to that level of detail).


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Re: OLTB's HYP - Sold United Utilities.

#205577

Postby Raptor » March 5th, 2019, 7:38 am

Moderator Message:
Just to make it clear. Discussing purchasing ITs on here is off topic. Mentioning them, as MDW pointed out, is ok. However, any further posts on the subject are now off topic for this forum. Raptor.

OLTB
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Re: OLTB's HYP - Sold United Utilities.

#205592

Postby OLTB » March 5th, 2019, 8:41 am

Thanks all for your feedback - this is a discussion board and I fully appreciate your comments (that's why I post here!) and right to be challenged. It may turn out to be the incorrect move to have made and this will be a lesson for me - and I learn from my mistakes.

I maintain that my remaining individual holdings as set out in my OP are a HYP and will be topping them up in the future as and when dividends build up as I am below my target income which I will update at my year end in August.

I set out my specific concerns for UU. (I don't know why it bothers me so much, but it does) and have made the change - importantly, income will not adversely be affected and that itch has been scratched. I will not include/mention the thing that I have re-invested into on this board as I understand it is not the correct forum - it was mentioned only to confirm where proceeds were paid.

I call it Practical Pickering® ;)

Cheers, OLTB.

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Re: OLTB's HYP - Sold United Utilities.

#205598

Postby moorfield » March 5th, 2019, 9:01 am

OLTB wrote:I call it Practical Pickering® ;)


... others might call it dumpology ? ;)

A hypothetical 50% divi cut by UU. would reduce my overall portfolio income by 2.5%, a full cut by 5.0%, assuming all other dividends remain static (which is becoming a habit actually ...). In the meantime, its contribution is being diluted by top up's elsewhere. Not enough to perturb me to itch the sell button ...
Last edited by moorfield on March 5th, 2019, 9:12 am, edited 3 times in total.

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Re: OLTB's HYP - Sold United Utilities.

#205600

Postby Walrus » March 5th, 2019, 9:10 am

Itsallaguess wrote:
OLTB wrote:
This morning I sold my holding in United Utilities (UU.) within my HYP.

I have been worried about what the future may hold for UU. and yes, I understand that is an unknown and it may well go on to churn out RPI increasing dividends year after year.

I do not wish to be worried though and therefore I sold. My worries were specifically about what happens post 2020 and whether the goal of RPI linked dividends will continue given Ofwat's planned introduction of a tougher pricing structure from 2020. Also, possible re-nationalisation, although this is diminishing somewhat.

UU.'s share price had improved quite a way recently and as I had bought during some lows a while back, more or less broke even (very slightly down in capital terms). The proceeds were re-invested into Merchants IT (MRCH) to maintain a UK biased dividend income investment, with the forecast income from MRCH to be slightly higher than it was with UU. over the year.


Smart move OLTB - you've traded away what to you was a real and ongoing investment-concern, and replaced it with a well-diversified 'HYP-in-a-box', which currently yields around the same as the worrisome single-company income-investment you've sold out from.

I have no doubt at all that you've done the right thing for you, which is sometimes far more important than what might be the right HYP thing to do....

Cheers,

Itsallaguess


I don't really follow this logic. If the UU holding is part of a diversified portfolio, and it's portfolio yield is higher that the IT it's doing it's job as part of a diversified portfolio with lower running costs than an IT. Potentially depending on the portfolio removing UU and adding a basket of shares he already holds may actually increase his portfolio risk.

I'm not quite sure if you are advocating just selling up everything and investing in an Income IT, in which case the risks must surely be similar, or advocating a higher risk approach of holding an IT and then having tilts at specific higher yielding shares to enhance income.


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