IMB yield

[monabri]

Anyone thinking of topping up at 11.3% yield...?

[kempiejon]

Anyone thinking of topping up at 11.3% yield...?

Is that trailing if so forecast could be 12%? But no my tobacco box probably has enough for now.

[monabri]

Trailing yield..

[idpickering]

Anyone thinking of topping up at 11.3% yield...?

I'm at my maximum spend limit on these, or any of my HYP holdings, so I'm not keen to continue throwing money at them. I topped up this January, and four times last year. They're my worst performing share on the capital gains/loss aspect. So, in short, no thanks. The yield's getting into the "to good to be true" area for me.

Ian.

[IanTHughes]

Anyone thinking of topping up at 11.3% yield...?

In a word ....... no!

1) Imperial Brands PLC (IMB) have already advised that the current policy of year-on-year dividend increases of 10% will end after this year.
2) IMB have already indicated that earnings from New Generation Products (NGP) will be disappointing - flat from an Earnings per Share (EPS) perspective.`

https://www.investegate.co.uk/imperial- ... 00047512N/

The second point may well explain the first.

All in all I am not convinced that there will be a dividend increase after this year and who knows, maybe there will be a cut.

We may know more next week (final results 5 Nov 2019)


Ian

[moorfield]

Anyone thinking of topping up at 11.3% yield...?

Nope. It's yield is too high, being well beyond my ceiling check - twice that of City of London IT.

So IMB is on the bench until either (i) market sentiment that its current dividend can be maintained and grown returns, ie. more buyers lower the yield, or (ii) the dividend is rebased and yield adjusted accordingly.

As I have written here before, this is a simple mechanism I use to help curb my predeliction for chasing pretty yields. 11.3% is signalling something smelly IMO, but of what I do not know ...

[Minesadouble]

Anyone thinking of topping up at 11.3% yield...?

Oddly enough I’ve just halved my holding, double digit yields usually herald trouble in my experience.

It takes two to make a market though, not saying I’m right!

[Dod101]

The market is usually right in these matters, a high yield signalling trouble and I am content to sit this one out (having got quite enough tobacco shares) As ITH has said, their finals are due next week and let's hope that they go with a bang, in the right direction. I would be surprised if there were a cut in the dividend although that is by no means impossible. This otherwise inexplicable yield does seem too good to be true, but who knows?

If monabri thinks that the yield will drop because of market sentiment bringing in more buyers he should certainly buy now, like the rest of us. No point in waiting until the share price rises and the yield drop to a 'safe' zone, then buying.

Dod

[Arborbridge]

The market is usually right in these matters, a high yield signalling trouble and I am content to sit this one out (having got quite enough tobacco shares) As ITH has said, their finals are due next week and let's hope that they go with a bang, in the right direction. I would be surprised if there were a cut in the dividend although that is by no means impossible. This otherwise inexplicable yield does seem too good to be true, but who knows?

If monabri thinks that the yield will drop because of market sentiment bringing in more buyers he should certainly buy now, like the rest of us. No point in waiting until the share price rises and the yield drop to a 'safe' zone, then buying.

Dod

Actually, he didn't say he thought that, just that he would feel more comfortable if more buyers came in. There is some sense in this, particularly if your comment about a high yield signalling trouble is correct: the corollary may also be true.
It's only the inverse of what chart watchers do every day - waiting for some momentum to show a resurge in confidence - though we just look at the yield instead. Perhaps we could get that goldilocks combination of a rising trend in price suggesting all is well, together with a very decent yield. We are quite some way from that state, at the moment.

From a medium term historical perspective, it's interesting to notice that in the weel after the referendum, the shares jumped up on a wave of enthusiasm. They have been in decline pretty much ever since. Not intended as a start of a B discussion, just an observation - we have a steadfastly falling share with no relief in sight at present. Something nasty in the woodshed, I fear.

Arb.

[monabri]

To clarify, I was simply remarking on the current yield on IMB based (Trailing 12 month)..more in shock than anything else. I'd feel uneasy topping up -current sentiment & momentum is clearly on a downward trajectory.

IMB already features at 4.4% in my portfolio but frankly it has been "income at the expense of capital" - not a good investment over the short term for me. I don't think that there will be a dividend cut but we will see. The recent announcement of the CEO departure (3rd Oct) didn't help sentiment and the market will "make churn" on the news.

I came across this article

https://www.trustnet.com/news/7459031/r ... t-dividend

He didn't forsee the recent price fall on Microfocus , the biggest holding in the Liontrust fund though.... (and Reckitt Benckiser, Glencore, Standard Life & Aviva haven't exactly been stellar performers).

https://www.trustnet.com/factsheets/o/g ... come-c-acc

[moorfield]

No point in waiting until the share price rises and the yield drop to a 'safe' zone, then buying.

I don't agree Dod, and counter-intuitive as it may seem to this board particularly, I think pyad's method of ranking selections by descending yield, viz: https://www.stockopedia.com/content/how ... hyp-459388, is flawed and exposes his target audience to unnecessary risks (of capital deterioration and dividend cuts).

To faciliate this I use the Stockopedia FTSE100 (UKX) ranking it by descending yield and work my way down,

I posted in a discussion with Arborbridge, some time ago (I have looked for it in my posts history, but cannot find it ...), a notional portfolio of fifteen holdings selected from ranking by ascending yield above a benchmark, that of the City of London IT. I recall that whilst it did not contain the very highest yielders, it did not look much different to many folks' HYPs at all.

Had I selected by ascending yield, I am certain that Carillion or Centrica would never made it into my own portfolio, or at worst would have been last rather than first in the queue of candidates to be custodians of my hard-earned. Those companies are the reason I now try to avoid selecting "too high" a yield.

[monabri]

Another bit of tobacco news, this time related to BAT & their (possible) use of child labour.

https://www.theguardian.com/global-deve ... erty-wages

[Dod101]

No point in waiting until the share price rises and the yield drop to a 'safe' zone, then buying.

I don't agree Dod, and counter-intuitive as it may seem to this board particularly, I think pyad's method of ranking selections by descending yield, viz: https://www.stockopedia.com/content/how ... hyp-459388, is flawed and exposes his target audience to unnecessary risks (of capital deterioration and dividend cuts)

I of course understand the point you are making. I was not being entirely serious and yet...if you were a punter you would be filling your boots with Imperial (some are surely doing so) and may make a killing so then there is no point in waiting until the yield reaches a 'safe' point before buying.

Imperial seems to me to be poised between the one and the other extreme. If only we had a crystal ball. Of course you could use Strategic Ignorance and buy anyway.

Dod

[Arborbridge]

Had I selected by ascending yield, I am certain that Carillion or Centrica would never made it into my own portfolio, or at worst would have been last rather than first in the queue of candidates to be custodians of my hard-earned. Those companies are the reason I now try to avoid selecting "too high" a yield.

Your method (though not strictly HYP) does have some merit, but whether you would have as many bloopers needs to be tested - and this is difficult as one might construct many HYPs over any given period of time. Not easy.

I call to mind TESCO which would certainly have been selected in that way, or perhaps WPP. Or even CLLN and CNA at various times would have been picks, wouldn't they? though I'm not sure of that - weren't their yields fairly ordinary at times?

Anyhow, it's an interesting idea.


Arb.

[tjh290633]

It's strange, isn't it. We have companies that have been increasing their dividends at a very acceptable rate, yet which have yields over 10%. I first obtained IMB when they demerged from Hanson and have trimmed them back and not taken up rights in the past, so that my cost had become negative. More recently, as the price fell, I have added more, but am now almost at my limit, where they are deliverng almost 5% of portfolio income.

The other company in a similar situation is Taylor Wimpey, yet we do not get the same howls of angst and prejudice in that case. Perhaps their use of special dividends gets them off the hook.

This begs the question, how does a company, with rising revenue and profits and a twice covered dividend overcome the prejudice against its main product? As far as I can see that is the only factor depressing the price.

TJH

[Arborbridge]

Interesting: I note that IMB's eps div cover is 1.3 on sharecast, but only 0.76 on ADVFN.

Arb.

[monabri]

I think we have to also consider major consolidation in the tab market. I mean how difficult can it be for 2 major suppliers to merge, shut the worst of their facilities, bin the brands that don't sell, merge the best and (probably) return a pile of cash to shareholders.

That's what I suspect ( or, rather speculate) might happen. With the IMB CEO announcing her "step down" (*), it's a watch this space.




(*) not exactly a surprise.

[Dod101]

I think the reluctance of investors to put money into Imperial shares is probably related not to the traditional ciggies but to the 'What comes next?' market. I see that Altria has just announced a US$4.5 billion write down of its investment in Juul, an e cigarette brand because of uncertainties in the US market in particular. Altria apparently paid $12.8 billion for a 35% stake only last year so it has not proved a very good investment.

All eyes on Tuesday I guess.

Dod

[IanTHughes]

No point in waiting until the share price rises and the yield drop to a 'safe' zone, then buying.

I don't agree Dod, and counter-intuitive as it may seem to this board particularly, I think pyad's method of ranking selections by descending yield, viz: https://www.stockopedia.com/content/how ... hyp-459388, is flawed and exposes his target audience to unnecessary risks (of capital deterioration and dividend cuts).

First of all, any decision to purchase any share exposes an investor to risk of both capital deterioration and dividend cuts. The only way to rid oneself of such risks is to avoid investing in Equities. In fact, in order to be in a position to benefit from the higher rewards normally on offer from Equity investment, the risk taking is necessary not unnecessary.

Secondly, pyad ranks possible selections by descending yield. He then works down that list until he finds the first share where he considers the dividend to be sustainable with room for increase. This process is repeated with the additional filter of appropriate diversification until 15 to 20 shares have been selected. Making the selection from a list of ascending yields simply guarantees a lower yield at outset and furthermore with the same risks as with the HYP approach.

Had I selected by ascending yield, I am certain that Carillion or Centrica would never made it into my own portfolio, or at worst would have been last rather than first in the queue of candidates to be custodians of my hard-earned. Those companies are the reason I now try to avoid selecting "too high" a yield.

Only if Carillion Group (CLLN) and Centrica PLC (CNA) were always among the highest yielders and I can assure you that that was absolutely not the case. In fact, your low yield approach offers no protection at all as going to the wall can happen to any company given the right (or is that wrong?) circumstances.

Look, if you want a lower yield that is of course your decision but do not kid yourself that you are not taking on the same risks associated with Equity Investment as you would with HYP. You most certainly are!


Ian

[Itsallaguess]

No point in waiting until the share price rises and the yield drop to a 'safe' zone, then buying.

I don't agree Dod, and counter-intuitive as it may seem to this board particularly, I think pyad's method of ranking selections by descending yield, viz: https://www.stockopedia.com/content/how ... hyp-459388, is flawed and exposes his target audience to unnecessary risks (of capital deterioration and dividend cuts).

First of all, any decision to purchase any share exposes an investor to risk of both capital deterioration and dividend cuts.

The only way to rid oneself of such risks is to avoid investing in Equities.

In fact, in order to be in a position to benefit from the higher rewards normally on offer from Equity investment, the risk taking is necessary not unnecessary.

I'm not sure that any of that actually addresses the point that moorfield is trying to make Ian.

He's not trying to suggest that investment risk can be removed - just that it might be greater in some circumstances than others, and where it's greater (starting at the highest-yield end of any prospective income-investment options-list) then pyad's target-audience might well end up being exposed to those higher risks in a way that more experienced investors might not be.

You go on to say -

Pyad ranks possible selections by descending yield.

He then works down that list until he finds the first share where he considers the dividend to be sustainable with room for increase.

Which is fine if you know how to tell the difference between a potential (very) high-yield option that is likely to be a good investment, and one that's not, and that gets to the crux of moorfield's point, which is basically to suggest that the HYP philosophy contains, at it's very heart, a quite dangerous clash of assumptions -

1. The idea that you don't need to be an experienced investor to take on the HYP income-investment approach, because all you do is start at the top of of a high-yield list and work down.

2. The idea that an inexperienced investor, whilst fishing in those upper high(est) yield areas actually possesses the necessary skills to discern between a good highest-yielding option, and a potentially poor one.

So moorfield isn't at all trying to suggest that risk can be removed - he's just trying to suggest that a target audience of inexperienced investors are potentially being led towards the risky end of the yield-spectrum and simply being told 'not to worry about anything', because some magic light will come on for them to highlight the difference between the good options and the poor ones when looking in that murky pool of 'highest yielders'.

I think it's simply a case that for much more experienced investors such as yourself, who are clearly not the 'target-audience' that moorfield is discussing here, it might well be much more obvious when fishing in those higher-yielding waters to be able to tell good from bad, but again, the HYP approach is meant to be able to be used by much less-experienced investors, so I think it's unfair to pitch your experience in these matters against the HYP strategy, as I think the strategy needs to score well in this area against that inexperienced target audience, and not someone with your investment experience...

Cheers,

Itsallaguess