moorfield wrote:tjh290633 wrote:ElectronicFur wrote:I don't understand the logic. Surely as announced in March 2019, they have cut the annual dividend from 15.07 to 9 and so are no longer eligible for top-up?
That would rule them out for selection as a new share. Topping up criteria are up to the individual.
If they still rank high and are in recovery mode, then I see no reason not to top up.
How does a Vodafone share know if it's being "bought new" or "topped up" ?
It doesn't - but TJH and his portfolio do know! And I'm sure that many other HYPers here consider whether a share is already in their HYP as a factor in their purchase selection criteria - how important a factor will probably vary widely, from "tiebreaker only, for the cases where I haven't been able to decide between potential purchases on other grounds" (*) to "if I've got a share in a sector, don't buy a new share in that sector". Certainly I do, and I think that what I tend to do in practice (I've never really formalised it) is closer to the "tiebreaker only" end of the scale, though definitely not at it.
I do also think there may be some semantic confusion around, due to "eligible" having (at least) two possible meanings: "eligible for discussion on this board" and "eligible under my HYP's purchase selection criteria". As far as the first is concerned, all
this board's guidance says about dividend cuts and history is in the paragraph:
"
Selection criteria may include the yield, the dividend record and a history of increases. Debt level and free cash flow should be considered. Personal feelings can affect the choice, including ethical considerations. Additional criteria may be used by individuals."
That's "may include" rather than "must include" or "should include" - i.e. an option one is entirely free to choose to use or not. The only criteria about the share I can see that the guidance imposes on discussing new-share purchases are that it's an ordinary share, in the FTSE 350, has a yield above the FTSE 100 yield and is not a non-REIT investment trust (there are also criteria about diversification and an LTBH approach, but those can only be checked against an entire HYP and how it is run, not about any specific share). Vodafone currently meets all of those criteria, and so
any purchase of Vodafone by a HYP is still eligible for discussion on this board. Whether it's a top-up purchase or not might be relevant if Vodafone had stopped meeting those criteria (e.g. if its yield were below the FTSE 100's as a result of the cut), but that isn't the case.
The same paragraph also says that people can use additional criteria, and whether a share is already in one's HYP is clearly an additional criterion.
So I agree with what TJH's comment "
That would rule them out for selection as a new share. Topping up criteria are up to the individual." actually
says, but only on the understanding that the ruling-out in its first sentence is
also a matter of his personal criteria. I.e. I disagree with its (possibly unintended) implied contrast that Vodafone being ineligible for a new-share purchase is not up to the individual, but whether it is eligible for a top-up purchase is up to the individual. As far as I can see,
both are up to the individual, including whether the individual wants to distinguish between them.
And I think the discussion would be more productive if less were said about whether Vodafone
is eligible, and more about whether participants
choose to regard it as eligible under their own criteria and their reasons for regarding it that way... And to try to make a start on this myself ;
-) , the dividend cut has pushed me over the edge to regarding it as ineligible for any HYP purchase - I've been uneasy about the company ever since the 2014 deal with Verizon left it with a mountain of corporate action proceeds, only part of which it returned to shareholders. While I had no problem with them retaining part of it for reinvesting in the now-reduced business, success at that reinvestment hasn't by any means been clear. Hence my unease, and the dividend cut has confirmed it to the extent that it's now flagged as "no top-ups" in my main HYP-tracking spreadsheet.
That's all a rather tentative view, as what the practical effect of that flag is actually "don't top this holding up unless you've the time and energy to research the company fully again, actually do that research and decide as a result to remove the flag". I.e. that view is rather quickly formed, on inadequate up-to-date research - but I want to delay actually doing that research until and unless it can be done for the purposes of a purchase I'm actually contemplating at the time (or indeed a sale, but Vodafone hasn't yet done anything that makes it a tinker candidate for me). At present, Vodafone is 12th equal in the top-up order for my 40-share HYP, due to a capital value just below average (and also just below median for those who prefer to use that) and a distinctly above-average yield, but by no means one of the HYP's top-yielders. Even taking into account the fact that I will disallow some of the holdings above it in the top-up order on diversification grounds and/or because they are also flagged, things will need to change a bit before I seriously consider it for a top-up.
(*) Note that as a tiebreaker, it can work both ways - in favour of a new share purchase if the HYPer wants the diversification increase from a new share more than they dislike the admin increase, and in favour of a top-up purchase if the opposite.
(**) Note that it can only disallow
discussing purchases that don't meet those criteria, and certainly cannot disallow having personal criteria that sometimes break them or actually purchasing shares chosen by one's personal criteria. Indeed, my personal criteria are slightly more relaxed than them on one detailed point, and as a result 3 shares in my 40-share HYP didn't meet this board's criteria when I bought them, don't now and probably never will. No problem - if and when I want to discuss them, I'll post on another board.
Gengulphus