Which criteria differ between "new buys" and "top ups"

[Wizard]

In my previous poll I asked if people applied the same or different criteria for shares they were adding to their HYP versus topping up ones they already owned, as of now of the 25 replies over half have said they apply different criteria. I therefore felt it may be worth trying to dig a little deeper to see if there were any particular criteria that people varied.

[IanTHughes]

None of the above

[tjh290633]

I'm a bit puzzled. Which way do they differ? In which case do they differ?

I doubt if the responses will tell you much.

TJH

[Wizard]

I'm a bit puzzled. Which way do they differ? In which case do they differ?

I doubt if the responses will tell you much.

TJH

I was thinking that if a couple of criteria got significantly more votes than the others I would run a third poll trying to find out how they were varied. But maybe it won't reveal much.

[88V8]

If I already hold a share and have read nothing negative about it, I might be lazy and just top it up.
Not very analytical I'm afraid.

V8

[moorfield]

I therefore felt it may be worth trying to dig a little deeper to see if there were any particular criteria that people varied.

Your other poll shows opinion here is clearly polarized on using the same criteria for selecting "top ups" and "new shares" (nearly as polarized as Breixt ), yet on this poll "Track record of holding or increasing dividend" is emerging as the dominant criteria.

Meanwhile the board guidance suggests (my bold):

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.

Or put less charitably perhaps - make it up as you go along.

For a newbie HYPster considering buying Vodafone this must all look like Alice in Wonderland stuff ...!

[IanTHughes]

I therefore felt it may be worth trying to dig a little deeper to see if there were any particular criteria that people varied.

Your other poll shows opinion here is clearly polarized on using the same criteria for selecting "top ups" and "new shares" (nearly as polarized as Breixt ), yet on this poll "Track record of holding or increasing dividend" is emerging as the dominant criteria.

Meanwhile the board guidance suggests (my bold):

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.

Or put less charitably perhaps - make it up as you go along.

For a newbie HYPster this must all look like Alice in Wonderland stuff ...!

I would tell a newbie HYPster that the "Board Guidelines" are the guidelines that one should read before posting on this board. Sure, they do mention some parts of the HYP Strategy but if anyone is looking to start up an HYP they should read up about the HYP Strategy, not simply the Board Guidelines.


Ian

[moorfield]

I would tell a newbie HYPster that the "Board Guidelines" are the guidelines that one should read before posting on this board. Sure, they do mention some parts of the HYP Strategy but if anyone is looking to start up an HYP they should read up about the HYP Strategy, not simply the Board Guidelines.


Ian

Ergo it's fine to buy Vodafone as a new holding ("personal feelings"!), which renders "Track record of holding or increasing dividend" unnecessary. Or Mr Bland's HYP acronym is being misappropriated here.

[IanTHughes]

I would tell a newbie HYPster that the "Board Guidelines" are the guidelines that one should read before posting on this board. Sure, they do mention some parts of the HYP Strategy but if anyone is looking to start up an HYP they should read up about the HYP Strategy, not simply the Board Guidelines.

Ergo it's fine to buy Vodafone as a new holding ("personal feelings"!), which renders "Track record of holding or increasing dividend" unnecessary. Or Mr Bland's HYP acronym is being misappropriated here.

No, not at all. The HYP Strategy, as laid out by Stephen Bland, makes no mention of Vodafone Group (VOD), nor any other share by name. What it does is lay out a suggested process for the running of an HYP, including a process by which selections can be made. There are also warnings with regard to the risks of the strategy, which any "newbie HYPster" would do well to take on board.


Ian

[Pendrainllwyn]

None of these criteria. However I will often add to an existing position by opting to take a dividend in stock (if the company offers that option) and find that I am less price sensitive when doing so than when deciding whether to add to my position by buying shares in the market. It can sometimes be economically irrational and in markets such as HK it leaves you with odd lots which are more expensive to trade out of but it is typically a relatively small amount and I like the idea of building a position.

Pendrainllwyn

[Alaric]

What it does is lay out a suggested process for the running of an HYP, including a process by which selections can be made.

Which is where we came in.

In 2019 selecting shares with higher dividend yields than the high anyway FTSE 100 gives you a mixture of capital distributors, junk and recovery. How do you tell the difference? If you are seeking an immediate income, capital distributors are OK, but a little pointless if the need for income is some years in the future. But other than scouring the Accounts for clues, how do you tell the difference between junk and recovery?

As Vodafone is being discussed, its lack of profits and need for capital to finance its ongoing business is not encouraging for its prospects as a "recovery" share. The relatively low yields on its Corporate Bonds suggests it isn't junk, or at least not yet.

[IanTHughes]

What it does is lay out a suggested process for the running of an HYP, including a process by which selections can be made.

Which is where we came in.

In 2019 selecting shares with higher dividend yields than the high anyway FTSE 100 gives you a mixture of capital distributors, junk and recovery. How do you tell the difference? If you are seeking an immediate income, capital distributors are OK, but a little pointless if the need for income is some years in the future. But other than scouring the Accounts for clues, how do you tell the difference between junk and recovery?

All I can tell you is that I have a process that works for me and has produced what I consider to be reasonable returns, for Income and Capital as it happens. If anyone does not have a process that they are content with, they should perhaps not get involved in HYP, or indeed any other Equity investing.

As Vodafone is being discussed, its lack of profits and need for capital to finance its ongoing business is not encouraging for its prospects as a "recovery" share. The relatively low yields on its Corporate Bonds suggests it isn't junk, or at least not yet.

You may be right or you may be wrong, only time will tell for sure. I am invested in Vodafone Group (VOD) and my return is currently in positive territory, not huge but definitely positive. I will not be selling out, but neither will I be buying, not until I can see a definite turn around on the dividend, after the recent cut.


Ian

[csearle]

Poll didn't really do it for me.

As well as the normal criteria, top-ups for me include criteria involving going overweight in terms of income and capital, by firm, sector, and super-sector; whereas a new member, as well as the normal criteria, only has to meet the sector and super-sector criteria. Apart from that the current dividend yield is the deciding factor. Sometimes if a sector not often "on offer" throws up a candidate I might go for it for the sake of a bit of diversification.

This is the particular HYP strategy variant that suits me. I'm sure that others have theirs too, which works well for them.

Regards,
Chris

[tjh290633]

In 2019 selecting shares with higher dividend yields than the high anyway FTSE 100 gives you a mixture of capital distributors, junk and recovery. How do you tell the difference? If you are seeking an immediate income, capital distributors are OK, but a little pointless if the need for income is some years in the future. But other than scouring the Accounts for clues, how do you tell the difference between junk and recovery?

OK, here is a list of my portfolio ranked by dividend yield as of lastnight:

Rank   EPIC   Yield 
   1   TW.    10.51%
   2   IMB     9.89%
   3   SSE     8.38%
   4   BT.A    7.69%
   5   WMH     7.30%
   6   AV.     6.90%
   7   BATS    6.84%
   8   MARS    6.42%
   9   LGEN    5.91%
  10   VOD     5.90%
  11   BP.     5.82%
  12   RDSB    5.64%
  13   S32     5.57%
  14   BLND    5.55%
  15   LLOY    5.51%
  16   ADM     5.50%
  17   NG.     5.47%
  18   MKS     5.26%
  19   UU.     5.15%
  20   KGF     4.92%
  21   GSK     4.88%
  22   RIO     4.74%
  23   BHP     4.52%
  24   BA.     4.46%
  25   SMDS    4.41%
  26   IMI     3.85%
  27   TATE    3.83%
  28   AZN     3.27%
  29   ULVR    2.71%
  30   RB.     2.67%
  31   SGRO    2.48%
  32   TSCO    2.46%
  33   PSON    2.18%
  34   CPG     1.99%
  35   DGE     1.92%

You will note that a considerable number have yields above that of the FTSE100, which was 4.24% according to the FT today http://markets.ft.com/Research/Markets/ ... &Type=GWSM

Perhaps you would like to indicate which of those 25 fall into your categories of capital distributors, junk and recovery?

TJH

[NeilW]

Since the War Loan vanished, I've been using the City Of London Investment Trust as the benchmark yield.

What's the view here of sweeping yielders lower than that into that IT? I wonder whether the diversification into lower yielders actually gives any benefits that you couldn't get simply by holding the City of London It.

[Alaric]

Perhaps you would like to indicate which of those 25 fall into your categories of capital distributors, junk and recovery?

That's the point, you don't know without trying to get under the skin of the Company. In particular identify any fiction in the accounts.

Just taking Taylor Wimpey as an example, the price today is around the same as it was four years ago, so total return has been in the form of dividends. A distributor of capital plausibly as a first guess. Actually you could add an extra category, where the Company used equity as a borrower and paid high dividends instead of loan interest

[Alaric]

I wonder whether the diversification into lower yielders actually gives any benefits that you couldn't get simply by holding the City of London It.

Perhaps think about how the yield on the FTSE 100 or a proxy like City of London is constructed. The yield comes from the sum of capitalisation * yield divided by the sum of capitalisation. It follows then that in the extreme simplification that every stock has exactly the same total return, that those with above average yields will have poorer capital performance but higher dividends and those with lower dividends, better capital performance.

If you need the income now, higher current yield at the expense of capital performance is the likely choice. If looking for income for reinvestment, a lower yield by higher growth share does that for you.

A minimum dividend yield might be sensible though. That filters out those Companies that are just potentially just bubbles, or cannot be bothered to pay dividends. A sensible level might be at what you can get on longer conventional gilts at around 1.5%.

[IanTHughes]

Perhaps you would like to indicate which of those 25 fall into your categories of capital distributors, junk and recovery?

That's the point, you don't know without trying to get under the skin of the Company. In particular identify any fiction in the accounts.

Just taking Taylor Wimpey as an example

No. I have no idea whether Taylor Wimpey (TW) is a winner or a loser but the first thing you must understand is that you must look at the portfolio as a whole, not one single constituent. Any HYP will include winners and losers and fixating on one single share that you consider a loser is meaningless, in fact totally pointless.


Ian

[Alaric]

. Any HYP will include winners and losers and fixating on one single share that you consider a loser is meaningless, in fact totally pointless.

I've long taken the view that a method of outperforming an index would be to eliminate the failures if you could identify them beforehand and invest in the rest. Doesn't HYP make the implicit assertion that higher yield shares will perform better than lower yielding ones? If not, then why go to the trouble of identifying them? Just investing in the FTSE 100 would give a dividend yield in excess of 4% which is way better than cash or Gilts.

[IanTHughes]

. Any HYP will include winners and losers and fixating on one single share that you consider a loser is meaningless, in fact totally pointless.

I've long taken the view that a method of outperforming an index would be to eliminate the failures if you could identify them beforehand and invest in the rest.

Hardly novel thinking!

Doesn't HYP make the implicit assertion that higher yield shares will perform better than lower yielding ones?

No. The HYP Strategy suggests that a portfolio of high yield shares will provide a sustainable and growing income. However, the constituents of the portfolio must be diverse sector-wise and carefully selected to ensure, as best one can, that the income derived from the portfolio will grow over time. The HYP Strategy does not suggest that any high yield share will naturally outperform any low yield share. Your continued inability to understand what is a very simple Strategy makes your criticism of HYP as an Income Strategy mostly nonsense, in my view.


Ian