Vodafone topped up

[tjh290633]

No not trolling. It seems peculiar to me that buying new "fails guidance" yet a topping up "is acceptable" here - Pyadic checks should apply consistently to both actions, I would have thought, which is why I frame the question from a Vodafone share's perspective.

The share is inanimate, hence your original question is a nonsence, and I treated it as such and ignored it.

If the yield had been 2% it would not have been topped up, but, despite having had the dividend reduced considerably, the yield is still very acceptable. Had it not been there would have been no question of it being topped up, because it would not have featured in the top-up list. Tesco has been paying dividends for some time now, since it paused them, but the yield is so low that it is a long way down the top-up list.

If a big rights issue is coming, it makes more sense to participate in that rather than buy new shares in the market. If the company is about to split, and you may not want the bit to be split off, it may make more sense to sell it than to buy more. Then buy back after the split. I did that when the Verizon split took place.

Like they say, be alert. The world needs lerts.

TJH

[torata]

How does a Vodafone share know if it's being "bought new" or "topped up" ?

Not sure if you are serious or just "trolling" but what is meant is the you have some money to buy in your portfolio. You already have vod in the portfolio and you decide to top-up, thus you purchase and it is acceptable in the guidelines, but if you do not have it in your portfolio already then it fails guidance of a rising yield this is a "brought new" share.

No not trolling. It seems peculiar to me that buying new "fails guidance" yet a topping up "is acceptable" here - Pyadic checks should apply consistently to both actions, I would have thought, which is why I frame the question from a Vodafone share's perspective.

Hi Moorfield
(some feedback from a disinterested party) I also took what you wrote as trolling. Perhaps if it had not been just a single sentence, it would have been easy to get your intended meaning.
HTH
torata

[Itsallaguess]

No not trolling. It seems peculiar to me that buying new "fails guidance" yet a topping up "is acceptable" here - Pyadic checks should apply consistently to both actions, I would have thought, which is why I frame the question from a Vodafone share's perspective.

If the yield had been 2% it would not have been topped up, but, despite having had the dividend reduced considerably, the yield is still very acceptable.

Had it not been there would have been no question of it being topped up, because it would not have featured in the top-up list.

I think it might be useful to be able to discuss this subject without a rush to accuse people of trolling if they wish to do so, and so with that said, I think where moorfield might be coming from is to perhaps ask why, if a 'reduced considerably' dividend might bar a share from being purchased as a new holding, why that 'safety-check rule' can be ignored completely for top-ups...

On the face of it, I think it's a good question, and I'm really not sure there's been a justifiable answer to it at this point....

If the 'don't buy a cutter' rule in the Pyad guidance is there to protect us from ourselves, why is that guidance suddenly ignorable when discussing top-up capital.....?

What makes that top-up capital special, over any of the other non-top-up capital that we've invested and 'protected' better?

What specifically is it that makes a share 'safer to invest in', just because we already happen to own it?

Cheers,

Itsallaguess

[uspaul666]

A reason for me why I might still be willing to top up even though it’s not as good as it was when I bought it is the practical reason that I don’t want to increase my portfolio beyond 30 shares. pyad was always happy for any rule to be ignored if there was a good reason. Reducing the time needed to manage a portfolio is a good reason for me as long as I know I’m doing it.

[monabri]

Isn't there good news expected on the Liberty Global acquisition front (i.e the EU have allowed it)?

[Alaric]

Isn't there good news expected on the Liberty Global acquisition front (i.e the EU have allowed it)?

News reports indicate that the deal seems likely to be approved.

The question remains as to how it intends to pay for the acquisition and why it wouldn't make a further dividend cut likely or possible to help with the financing.

[Dod101]

This whole thread is very strange to me. Some appear to follow pyad's and the Board's guidance to the letter, others make up their own rules (which is what I do).

I sold Vodafone in January at £1.478. I am not buying back. Like others I cannot understand why someone would rule out the share for a new purchase and yet are quite prepared to top up except of course that in the scheme of things, the top up may not amount to very much anyway.

I think there is still far too much debt in Vodafone and if the Liberty purchase goes through that will not help it. I doubt that the modest cut in the dividend will help the debt position very much either.

Dod

[Arborbridge]

If the 'don't buy a cutter' rule in the Pyad guidance is there to protect us from ourselves, why is that guidance suddenly ignorable when discussing top-up capital.....?

What makes that top-up capital special, over any of the other non-top-up capital that we've invested and 'protected' better?

What specifically is it that makes a share 'safer to invest in', just because we already happen to own it?

Cheers,

Itsallaguess

Some excellent thoughts here, with Itsallaguess cutting to the chase, as he can usually be relied upon to do.

Arb.

[Arborbridge]

This whole thread is very strange to me. Some appear to follow pyad's and the Board's guidance to the letter, others make up their own rules (which is what I do).


Dod

Seems "HYP practical" normal to me!

Some try to stay true to the original concept, others see reasons to diverge occasionally. Some comentators have compared HYPing to a religion and I can see the connection.... a dogma is quite hard to follow absolutely, so there are lapses, experiments, doubts etc. All very understandable in my view.

Arb.

[funduffer]

I am with moorfield on this one - if a share is not eligible as a new purchase, it is also not eligible as a top-up.

So a cutter is ineligible for top-up until it has re-established its dividend-growing credentials over several years.

This may mean that you miss buying at the bottom of the market, but HYP is a strategy that balances achieving high income with reducing income risk. As a retirement living strategy, a growing and stable income is a must, so if this means sacrificing some potential capital gain for increased dividend security, then that is what HYP is all about, in my view.

So for me, VOD is off the table for a top-up, until it has demonstrated a recovery in its dividend.

Good luck to tjh, though, I hope it works out well for him.

FD

[Arborbridge]

I am with moorfield on this one - if a share is not eligible as a new purchase, it is also not eligible as a top-up.

So a cutter is ineligible for top-up until it has re-established its dividend-growing credentials over several years.



FD

Quite correct in principle, but one sometimes is tempted to stray!
In the case of TESCO and LLOYD I strayed and topped up at a low capital price in exchange for what I saw as the [potential. In no way am I suggesting this was a HYP driven move, but it was a judgement made at the time about the possible re-establishment of the dividend.
There is one difference between a new purchase and a topup which might influence us in a practical sense, and that is that the latter is usually much smaller. When I topped up the two I've mentioned, they were relatively small "gambles" on the future, not new "whole unit" purchases.

Arb.

[tjh290633]

I am amused by the comments about the HYP religion and dogma. We have guidelines which are not holy writ. You can adapt or improve them as you see fit.

Topping up is not part of the original Gospel according to Pyad. Neither is what to do with a share which has reduced, rebased or cut its dividend. We have had many an Epistle to the followers and nonbelievers alike, concerning events not foreseen at the outset.

My view is simple. If a company cuts its dividend and does not resume in the near future, then I will either sell completely or hold for recovery if in my opinion it will resume paying dividends before long. Sometimes a company having a rights issue has cancelled the dividend which would have been paid at the same time. In my view this is a sensible action and can be ignored.

When we come to companies reducing or rebasing their dividend, if the yield stays at a sensible level, then there is little point in incurring the costs of selling to buy another share with a similar yield. I will continue to hold and, if the criteria are met, will top up such a share. Usually this sort of action is the precursor to a fairly sharp recovery, so it is an opportunity to be grasped. Waiting for 5 years as the price rises and the dividends multiply does not make sense to me. You are losing out on dividend flow and capital appreciation while you wait.

Here endeth the Epistle.

TJH

[moorfield]

I am with moorfield on this one - if a share is not eligible as a new purchase, it is also not eligible as a top-up.

... and a corollary is that if a Vodafone top-up is tolerated here then so should a new purchase be. 1 Vodafone share will pay the same income (or not) next year to a TJH as it would to a newbie.

[Arborbridge]

Usually this sort of action is the precursor to a fairly sharp recovery, so it is an opportunity to be grasped. Waiting for 5 years as the price rises and the dividends multiply does not make sense to me. You are losing out on dividend flow and capital appreciation while you wait.

TJH

Hear, hear. My italics - show what I also believe, and why I've topped up "prematurely" on a number of occasions. On this point, like TJH, I diverge from "strictly PYAD": just one of my foibles. And remember I am talking about top-ups here, so by definition not huge forays which would disturb the general run of things.


Arb.

[Walrus101]

One of the big red numbers. Still don't think it's particularly a basket case, unlike certain other stalwarts. That being said I wish I'd listened to Dod and got out at 160. Has more debt than I'd like but the yield and cash flow is still ok and maybe even some growth potential from here.

[Dod101]

This may mean that you miss buying at the bottom of the market, but HYP is a strategy that balances achieving high income with reducing income risk. As a retirement living strategy, a growing and stable income is a must, so if this means sacrificing some potential capital gain for increased dividend security, then that is what HYP is all about, in my view.

The trouble is that the classic HYP is not simply sacrificing some potential capital gain for increased dividend security, it is often sacrificing any capital gain and quite often incurring a capital loss so I do not see HYP as particularly low risk and it needs care in just the same way that any other investment strategy does.

When posters write that say Vodafone is not eligible for a top up, they surely mean that in their opinion it is not eligible for a top up. Anyone is entitled to top up, top slice or sell the lot any time they like. HYP strategy is surely not set in tablets of stone, so what anyone chooses to do is entirely up to them, so long as they follow the general guidelines of the Board.

Dod

[SDN123]

When posters write that say Vodafone is not eligible for a top up, they surely mean that in their opinion it is not eligible for a top up. Anyone is entitled to top up, top slice or sell the lot any time they like. HYP strategy is surely not set in tablets of stone, so what anyone chooses to do is entirely up to them, so long as they follow the general guidelines of the Board.

Dod

I’d put it stronger than that... I’d say HYP strategy is surely not set in tablets of stone, so what anyone chooses to do is entirely up to them, so long as they only comment on what they’ve done on this board following the general guidelines of this Board.

I mostly follow a plain vanilla version of HYP and I get plain vanilla type results. THJ and others, including Dod, smudge more at the edges and certainly get better results than me. When I’ve tried my own minor smudging, results have been mixed. When it doesn’t work out I return to my core strategy for a while and try and learn lessons before smudging again. I completely except this process and that it costs me “optimal” results because “satisfactory” results are all I need. This process is why I read these boards; I read to continue learning from mistakes and successes, mine as well as others. My aim is that by the time I live off the dividends of my HYP* I’m as successful as THJ and others, including Dod.

SDN

* If I’m lucky enough to be in that position and if circumstances make HYP the right solution for me at that time.

[88V8]

Another problem with the rising-divi-no-cutter approach is that the universe of such shares has become rather small.
Man cannot live on Shell alone.

V8

[SDN123]

To expand on my previous reply to Dod I see the following approaches as all perfectly valid HYP approaches:

Dod, lives off his “HYP-like” dividends, one of his priorities is don’t lose money... sell Vod at an appropriate price on the strong possibly of a cut.

THJ, uses his HYP dividends for luxuries, has other incomes... top up Vod on a small cut as that may reward him handsomely.

SDN, building a HYP and learning on the job... holds Vod and won’t sell (generally doesn’t sell and a small cut is not a strong enough signal for him) and won’t top up (too many uncertainties such as small cut in div, low cover, etc).

SDN

[Dod101]

Another problem with the rising-divi-no-cutter approach is that the universe of such shares has become rather small.
Man cannot live on Shell alone.

V8

That is absolutely correct to my mind, and one reason why I have felt it necessary to look again at growth shares and to some extent ITs. In that even of course not losing capital becomes all the more important. In fact I have almost come full circle in the last 20 years. I lost a bit of capital in the tech bubble as well as by chance doing well from GEC/Marconi, selling before the crash. But I changed to an almost wholly income approach after that, reasoning that if all else failed at least I would have the dividends. I thus fell into a HYPish approach a long while before I had ever heard of the Motley Fool or pyad. I have been living off my investments since I was given early retirement at the end of 1994 so investment income of one sort or another has been vital for me.

A HYP does work as long as a choice of high income shares is available.

Dod