Tinkering time again

[tjh290633]

The cost incurred (3 trading fees plus stamp duty on AV. - no SD on S32) amounts to just over 45% of the increase in dividends anticipated. I have assumed that South32 with pay a similar interim to the last final, with no special dividend.

Thanks for taking the time TJH. That’s what I was getting at and I must say I'm surprised by this - 45 pence on the pound seems eye-watering, and you’ve never struck me as someone who needs to buy additional income so expensively. It would be interesting to see how others’ tinkering costs compare.

By the way, I can infer nothing about your holding values!

Out of interest, what you regard as an economic top up amount, in that case? I'm guessing many people might consider 1% a reasonable purchase cost, which would indicate at least 20% of one's income from that would go in charges in the first year given 5% return. But one is not just buying income for one year, and one is buying capital return (hopefully) as well as income.
Running a HYP inevitably has costs, and they aren't necessarily dead cheap. Over 2.5% of my income goes on charges, both trading charges and those associated with having a SIPP.

Arb.

I agree, less than 1% is desirable level. Of course, it's a one off cost. Most of my topping up involves shares above my median yield and below median weight. That median yield is about 5.3%, from memory, so a bit below your 20% level. Where I am selling a low yield share to buy more higher yield shares, it is the difference in yields that matters. That could be more like 50% of the extra income for next year, as I indicated in an earlier post.

TJH

[Arborbridge]

Thanks for taking the time TJH. That’s what I was getting at and I must say I'm surprised by this - 45 pence on the pound seems eye-watering, and you’ve never struck me as someone who needs to buy additional income so expensively. It would be interesting to see how others’ tinkering costs compare.

By the way, I can infer nothing about your holding values!

Out of interest, what you regard as an economic top up amount, in that case? I'm guessing many people might consider 1% a reasonable purchase cost, which would indicate at least 20% of one's income from that would go in charges in the first year given 5% return. But one is not just buying income for one year, and one is buying capital return (hopefully) as well as income.
Running a HYP inevitably has costs, and they aren't necessarily dead cheap. Over 2.5% of my income goes on charges, both trading charges and those associated with having a SIPP.

Arb.

I usually try to top up in amounts of one quarter of annual portfolio income. This year I have done 9 purchases (I had a cash surplus carried over from last) and no sales; the costs incurred amount to just over 5% of the additional income bought, so considerably less than TJHs tinker.

I'd encourage builders in particular to ask themselves what they are trying to achieve through tinkering and top slicing that they cannot by simply continuing to top up elsewhere. And do your purchases on cheap dealing days (£1.50 not £9.95 in my case).

An interesting way of looking at it. I've always only thought in terms of what is a reasonable percentage charge for the purchase, without reference to the income. Your method implies quite large chunks in any one share purchase, and I'd prefer to finesse it rather more. It would also put some purchases well over the allowed capital input for a given share - i.e. make the total too big - which would rule out the purchase anyway. Unless I've completely misunderstood what you are suggesting.

The purchase charge is just a one off, assuming the ideal holding period so doesn't bother me, if the charge is around 1%.