Are some HYP favourites doomed?

[IanTHughes]

StepOne

HYP is not a dividend reinvestment strategy. It is a strategy for providing an income to live off so dividend reinvestment is a red herring.

Timing is everything because think what has happened to the value of the share in 20 years in terms of purchasing power if it has the same nominal value today as it did 20 years ago? I do not have the price history but if Alaric is correct then only if you avoided buying at what turned out to be the peak would you have made money and it does not sound as if it was much of a HYP candidate for much of the time anyway.

It wasn't …. an HYP Candidate that is, not at the turn of the century anyway, the yield was no more than 1.00%! The point being that no HYPer would have bought such a share at that point in time and any HYPers already holding at that point in time would have bought at a much lower price/higher yield, and therefore the returns now being enjoyed, as measured since that original purchase, would be somewhat greater than "breaking even".

In fact the yield never grew above 3.50% until 19 May 2004, when a sharp drop in price caused it to a rise to 4.04%! Before that you have to go back at least several years to find what I would call an HYP candidate.


Ian

[IanTHughes]

RTO is an interesting case for me, and I do not need to use hindsight to find out what happened. I swapped out of Rentokil shares into some Reckitt and some National Grid shares in May 2010. So thus far that isn't hindsight, it's on record.

When I last did a "tinkering study" in November 2017, I put this case down as a "tinkering win" with the two substitute shares showing a bigger TR and dividend output than Rentokil would have done.

A tinkering win? Not bad considering the Total Return that would have been received by remaining with Rentokil Initial (RTO) is currently around 16.50% per annum! Well done!

Note: I said up to 2017. I believe the RTO shareprice picked up quite strongly after that. My RTO XIRR would have been 7.73% and that of RTO sold then NG and RB continuing is 17.73%.

Oh I know and you are right, RTO has picked up tremendously just recently. What pricked my interest about your scenario was the fact that you put part of the proceeds into National Grid (NG). I have owned NG for over 4 years - bought in April 2015 - and since then at least the total return has barely broken 4.00%, never mind getting to the dizzying heights of 15.00%!

Anyway, I think you are right when you say that "tinkering" is a 50/50 game of chance as to whether you end up coming out ahead, certainly when measuring Total Return. It is just so difficult to know, in advance, that a new holding will definitely outpace a current sluggish performer! Of course, if the tinkering is only involved in switching from a Low to High Yield and one is only measuring the Income result, maybe that will work out more often as a win, although I would say that even that is up for debate.


Ian

[Arborbridge]

As regards studying one's own tinkering, the problem comes in looking at the cases one might have tinkered but didn't! The ones where one actually sold and bought something else are easy to look at, but the other sort riddle with hindsight questions.



Arb.

[moorfield]

An interesting article regarding the dangers of value traps and how structural changes may affect some HYP favourites - https://www.ii.co.uk/analysis-commentar ... I1NDY1NQS2

Turn that question around. Will some doomed shares become HYP favourites ?

Someone once wrote here that with regards to the future, "none of us knows dick about anything".

Who it was escapes me momentarily, I will update if I recall.

[Breelander]

Someone once wrote here that with regards to the future, "none of us knows dick about anything".

Who it was escapes me momentarily, I will update if I recall.

It was pyad (who else could it be?)

viewtopic.php?p=143859#p143859

[moorfield]

Someone once wrote here that with regards to the future, "none of us knows dick about anything".

Who it was escapes me momentarily, I will update if I recall.

It was pyad (who else could it be?)

viewtopic.php?p=143859#p143859

Oh yes. Of course.

[pendas]

Looking at my records I see I first purchased Rentokil in March 2006 with subsequent purchases in October 2006 and November 2007.

The last recorded dividend was in October 2008 with the princely sum of £20.79 received. I sold out in Feb 2012.

Total purchase price £5008
Dividends received £589
Sale proceeds £2415
Annualised return -9.8%