The good, the bad and the uggerly

[BullDog]

Myself, I would say the bottom 7 or 8 on that list should get chopped.

As a matter of interest, I might even look at doing what you say and see how my income would be affected.

The yields that would be disposed of are:

EPIC | Company              | Yield
AV   | Aviva                | 5.18%
HSBA | HSBC Group           | 3.59%
IMB  | Imperial Brands      | 8.31%
SBRY | Sainsbury            | 4.20%
PSON | Pearson              | 2.69%
TSCO | Tesco                | 3.37%
WPP  | WPP                  | 3.21%
LLOY | Lloyds Banking Group | 4.49%

It is a strange Income Strategy that even considers disposing of any holdings with the foregoing yields. Unless of course it was thought that the dividends in question were under risk, not something that I have discovered.

As I said, it takes all sorts but, I shall continue with my High Yield Portfolio (HYP) strategy.


Ian

I can't say here what I would do. But as a general principle, I think the quality of the yield is at least and probably more important than it's weight. If there's better quality elsewhere and I think there might well be, they should go. I think without exception they're all dividend cutters anyway. Who wants cutters? Even worse, cutters that return your capital as income.

[Arborbridge]

Myself, I would say the bottom 7 or 8 on that list should get chopped.

As a matter of interest, I might even look at doing what you say and see how my income would be affected.

The yields that would be disposed of are:

EPIC | Company              | Yield
AV   | Aviva                | 5.18%
HSBA | HSBC Group           | 3.59%
IMB  | Imperial Brands      | 8.31%
SBRY | Sainsbury            | 4.20%
PSON | Pearson              | 2.69%
TSCO | Tesco                | 3.37%
WPP  | WPP                  | 3.21%
LLOY | Lloyds Banking Group | 4.49%

It is a strange Income Strategy that even considers disposing of any holdings with the foregoing yields. Unless of course it was thought that the dividends in question were under risk, not something that I have discovered.

As I said, it takes all sorts but, I shall continue with my High Yield Portfolio (HYP) strategy.


Ian

Thanks for doing it for me, Ian. In my previous reply on this matter, I hadn't checked the yields, but most of those are reasonable, though four would be easily replaced at equal or higher so there wouldn't really be an income issue at all if I wished to ditch owing to consistently poor XIRR. The only question remaining would be whether one could find a share for which the dividend growth was more robust.

Arb.

[Arborbridge]

I can't say here what I would do. But as a general principle, I think the quality of the yield is at least and probably more important than it's weight. If there's better quality elsewhere and I think there might well be, they should go. I think without exception they're all dividend cutters anyway. Who wants cutters? Even worse, cutters that return your capital as income.

A couple of caveats I would suggest. We've just through a period of pandemic where dividend cutting was rife - I would bear that in mind to see how "bad" any cutting was and what the future might be. Secondly, in HYP "cutting" in itself is no reason to immediately sell. One would generally only do that if there was little or no chance of a improvement in the pay out situation. This is to avoid the obvious problem of jumping from frying pan to fire.

In general, I am slow to sell out and move on because I know that half the time it has led to no improvement in my overall performance. HYP is about minimal trading, not about instant judgement. Indeed, pretty much the reason HYP originated was from the observation that most people ditch and switch far too often and to their own disadvantage..


Arb.

[tjh290633]

Newly retired? Terry, I believe, is over 80 and still ratchets up his income whenever possible.
The alternative view is: does DGE or AZN deserve such a huge (relative) holding when they provide half the income that another share could? In fact, my Reckitt holding (a traditional stalwart low yielder) now produces so little, I'm seriously thinking of selling it because I can't be bothered to account for it - it's almost dead wood.

Arb.

I shall soon be in my 90th year, Arb.

I don't trim on high yield or cost, only on high weight. I do avoid topping up if the share of income or cost goes above 5% (4.2% is actually my cut-off point for a 20% top-up). Selling altogether is optional on low yield, hence I still have MARS and MKS who are not paying dividends.

I still live in hope that MARS and MKS will restart dividends soon.

TJH

[Arborbridge]

Newly retired? Terry, I believe, is over 80 and still ratchets up his income whenever possible.
The alternative view is: does DGE or AZN deserve such a huge (relative) holding when they provide half the income that another share could? In fact, my Reckitt holding (a traditional stalwart low yielder) now produces so little, I'm seriously thinking of selling it because I can't be bothered to account for it - it's almost dead wood.

Arb.

I shall soon be in my 90th year, Arb.

I don't trim on high yield or cost, only on high weight. I do avoid topping up if the share of income or cost goes above 5% (4.2% is actually my cut-off point for a 20% top-up). Selling altogether is optional on low yield, hence I still have MARS and MKS who are not paying dividends.

I still live in hope that MARS and MKS will restart dividends soon.

TJH

I only hope I have your enthusiasm and sharpness in approximately 13 years time - and that we will still both be corresponding on here.

[moorfield]

That seems a weird strategy.

It's the weird strategies one should pay attention to Dod I've been clear (I hope) on other threads what my income goals are, when, and how I measure progress towards them. Not many folk do that here. 15 years on with 10ish to go, it's working for me.

[moorfield]

But as a general principle, I think the quality of the yield is at least and probably more important than it's weight. If there's better quality elsewhere and I think there might well be, they should go.

Well put BullDog. The same can be said for ITs, O/T here of course, but which raise a question I like to ask from time to time:

Why am I holding for income this company which is yielding less than half of that IT?

[BullDog]

But as a general principle, I think the quality of the yield is at least and probably more important than it's weight. If there's better quality elsewhere and I think there might well be, they should go.

Well put BullDog. The same can be said for ITs, O/T here of course, but which raise a question I like to ask from time to time:

Why am I holding for income this company which is yielding less than half of that IT?

Indeed. I have sometimes seen it said that having just one, unbending strategy is like playing a round of golf with just a sand wedge. I am not venturing further off topic than that.

[Arborbridge]

I was to update this nearer the year end, but there's been some discussion lately about HYP shares and TR so I thought I would do it now. I've added three newcomers which have just about qualified to be shown on grounds of date purchased. I wouldn't normally take XIRR as stable after initial purchase for three years, but this self-imposed idea notwithstanding, I have added RIO, PHP and UKW - all purchased within three years.

Make of this table what you will. I tend to cast an eye over it when making sell decisions - maybe looking for excuses, confirmation bias, if you like, to justify my own ideas. But philosophically, it does raise the whole issue about backing losers and running winners - and what that actually means. Or in the case of HYP, the question of whether to back a loser for capital, but winner for income, perhaps? A poor capital performer might well be saved if the income generated is reasonable. After all said and done, it is income that interests me because I have no intention of selling - and once you accept that, capital value is less significant except in the minds of those wishing to realise it.

Are those ugly ducklings about to turn into swans, or are the swans, dying swans? The eternal investment dilemma.




As a point of interest concerning my "churn" - I last exited a position in 2020, and my last topup was in March 2023.

[88V8]

Here's the latest table of beauty and the beast contestants.....
I might need some help with this table, in that it is pointing to some possible decision makings as regards sells....
The other point is; should I even be thinking of making changes of any sort during the current period on the markets?

Yes, mmm, the past, the present. XIRR vs the current prospects.
Perhaps Dod has given a clue as to strategy...

...Obviously if you fully embrace the HYP concept, you have not got much choice unless- here's the get out- you establish a separate portfolio called growth to sit alongside the HYP. Then you can have the best of both worlds.

So those shares that no longer merit inclusion but which have in the past been faithful servants, just shunt them into a separate part of your spreadsheet

V8

[XFool]

[Just noticed how long ago the OP here was, however... Interesting to look at the new table]

Here's the latest table of beauty and the beast contestants. Included are all the shares in my HYP which have been held "long enough" to give a reliable XIRR calculation - 32 shares in all. By long enough, is when I feel the XIRR result has settled down - usually about two or three years after purchase.

I might need some help with this table, in that it is pointing to some possible decision makings as regards sells. I don't like churning a portfolio, but there are some serial offenders which could be axed. That is always a hard decision as half the time it is the wrong thing to do.

One could kick off the list of potential sells by looking at the ones where the XIRR is less than the share's yield, and/or combine this with a low average ranking. With 30 plus shares, anything with an average in the high 20s should be suspect.

As one of those on TLF who usually "never comments on financial matters", but a user of XIRR, I have been tempted out of the woodwork by your post.

Unfortunately, as I don't feel equipped for any deep thinking on financial matters, I tend to follow very simplistic approaches to share investing. Probably of a kind that would not be 'approved' of on TLF (certainly not in the HYP community). A sort of "less is more" approach.

I would really expect/hope the long term XIRR on a share to exceed 8% so, looking at your list, that means the first half seem to me to be working and I would likely want to prune all from number 15 (VOD) downwards.

As to what to replace them with, I can only suggest the seemingly more successful companies in the first half of your list. You will probably reply that cuts the number of companies down to "only" 15. It does, but that is even more than I feel I could cope with - I did warn I was a "less is more" investor!

Interestingly, I notice I also have one of the companies in the lower half of your table, CSN, and I have compared my XIRR figure for CSN in my ISA, which is currently 5.04%. But my first purchase was in early 2014, the last was in late 2022, with eight in total including one open offer.

Never say "never".

[Arborbridge]

As one of those on TLF who usually "never comments on financial matters", but a user of XIRR, I have been tempted out of the woodwork by your post.

Unfortunately, as I don't feel equipped for any deep thinking on financial matters, I tend to follow very simplistic approaches to share investing. Probably of a kind that would not be 'approved' of on TLF (certainly not in the HYP community). A sort of "less is more" approach.

I would really expect/hope the long term XIRR on a share to exceed 8% so, looking at your list, that means the first half seem to me to be working and I would likely want to prune all from number 15 (VOD) downwards.

As to what to replace them with, I can only suggest the seemingly more successful companies in the first half of your list. You will probably reply that cuts the number of companies down to "only" 15. It does, but that is even more than I feel I could cope with - I did warn I was a "less is more" investor!

Interestingly, I notice I also have one of the companies in the lower half of your table, CSN, and I have compared my XIRR figure for CSN in my ISA, which is currently 5.04%. But my first purchase was in early 2014, the last was in late 2022, with eight in total including one open offer.

Never say "never".

Much appreciate your comments - they sort of sum up some of my own thoughts and dilemmas. And your illo of CSN shows that it is all quite personal depending on when you bought. No one knows what is just around the corner, and that enables inertia to take root. All things being equal, that helps keep me on the less (churn) is more line.

I could trim as you suggest, but replacements would be difficult. Dump all into ITs? - well the IT basket only just scrapes over 8% XIRR now. I come back to income: the real decider should be around income and income increases - for me they outweigh XIRR if only because I will not need to realise this portfolio, I hope.

Arb.

[Arborbridge]

Here's the latest table of beauty and the beast contestants.....
I might need some help with this table, in that it is pointing to some possible decision makings as regards sells....
The other point is; should I even be thinking of making changes of any sort during the current period on the markets?

Yes, mmm, the past, the present. XIRR vs the current prospects.
Perhaps Dod has given a clue as to strategy...

...Obviously if you fully embrace the HYP concept, you have not got much choice unless- here's the get out- you establish a separate portfolio called growth to sit alongside the HYP. Then you can have the best of both worlds.

So those shares that no longer merit inclusion but which have in the past been faithful servants, just shunt them into a separate part of your spreadsheet

V8

Those shares that don't merit inclusion, would not merit inclusion in a growth portfolio. I have a few of those and world index ETFs, but they do not help much. I mean - they sit there accumulating but don't add much to my wellbeing.

Arb.

[daveh]

Except some of the shares down the bottom end of the list may be about to perform better from today's low price. I like (and own) SMDS, BLND, AV. LLOY. They have a decent dividend which may grow from here as may the share price and I've either topped up recently or they are near the top of my HYTUSS and not ruled out of a top up. I also own TESCO, SBRY, PSN and VOD on that list that I'm less sure about, (VOD is number 1 on HYPTUSS, but I've been bypassing it for top ups). I don't own PHP, but I would have thought now would be the worst possible time to sell. I don't have XIRR calcs for most of my holdings and it would take a long while to do the individual calculations.

[Arborbridge]

Except some of the shares down the bottom end of the list may be about to perform better from today's low price. I like (and own) SMDS, BLND, AV. LLOY. They have a decent dividend which may grow from here as may the share price and I've either topped up recently or they are near the top of my HYTUSS and not ruled out of a top up. I also own TESCO, SBRY, PSN and VOD on that list that I'm less sure about, (VOD is number 1 on HYPTUSS, but I've been bypassing it for top ups). I don't own PHP, but I would have thought now would be the worst possible time to sell. I don't have XIRR calcs for most of my holdings and it would take a long while to do the individual calculations.

Some of those shares are disappointing in that I really expected better from what I believe are well run companies.

Higher interest rates have knocked some of them, so an easing of conditions may do the opposite - in which case it would be foolish to sell out provided the dividends are rolling in. Lloy is a perpetual disappointment as one would expect a bank to do well with high interests rates. And Smiths - what happened there? with everyone having home deliveries it should be a no-brainer.

Arb.

[NeilW]

Banks are margin businesses. They don't care what the interest rate is - they just add their margin on top and lend at that.

High interest rates usually means less demand for loans - certainly home loans - and that's what hurts them. The usual value ratios don't work for banks. Really it's all about the net interest margin and the bad loan percentage.

[dealtn]

Banks are margin businesses. They don't care what the interest rate is - they just add their margin on top and lend at that.

Again apologies as I am not allowed to post here according to the guidelines, but you can't let clearly infactual remarks pass.

They don't take this approach at all. The fact you only consider their assets and not their liabilities should be a red flag in itself, let alone the non-interest income in their p/l accounts.

[BullDog]

Except some of the shares down the bottom end of the list may be about to perform better from today's low price. I like (and own) SMDS, BLND, AV. LLOY. They have a decent dividend which may grow from here as may the share price and I've either topped up recently or they are near the top of my HYTUSS and not ruled out of a top up. I also own TESCO, SBRY, PSN and VOD on that list that I'm less sure about, (VOD is number 1 on HYPTUSS, but I've been bypassing it for top ups). I don't own PHP, but I would have thought now would be the worst possible time to sell. I don't have XIRR calcs for most of my holdings and it would take a long while to do the individual calculations.

Some of those shares are disappointing in that I really expected better from what I believe are well run companies.

Higher interest rates have knocked some of them, so an easing of conditions may do the opposite - in which case it would be foolish to sell out provided the dividends are rolling in. Lloy is a perpetual disappointment as one would expect a bank to do well with high interests rates. And Smiths - what happened there? with everyone having home deliveries it should be a no-brainer.

Arb.

Quite. Quite a few people, me included, expected great things from SMDS given the huge shift to home delivery. We often have three deliveries a day. Our consumption of cardboard packing has increased greatly. I think we're quite typical. SMDS is close to getting the chop. I expect the day I sell will be the day before a takeover bid arrives and the shares go up 50%. There's already mergers or takeovers happening. Yield is OK though, meantime.

[tjh290633]

Except some of the shares down the bottom end of the list may be about to perform better from today's low price. I like (and own) SMDS, BLND, AV. LLOY. They have a decent dividend which may grow from here as may the share price and I've either topped up recently or they are near the top of my HYTUSS and not ruled out of a top up. I also own TESCO, SBRY, PSN and VOD on that list that I'm less sure about, (VOD is number 1 on HYPTUSS, but I've been bypassing it for top ups). I don't own PHP, but I would have thought now would be the worst possible time to sell. I don't have XIRR calcs for most of my holdings and it would take a long while to do the individual calculations.

I said on the other thread that I would publish my year-on-year comparison table of share price changes at the end of the year. Here is the situation to date, showing a 5-year comparison:

2019             2020             2021              2022   To date      2023
Epic   Change    Epic   Change    Epic   Change    Epic    Change    Epic      Change 
SGRO    52.43%   WMH*    43.29%   MKS     69.77%   BA.      55.69%   TSCO       27.48%
TW.     41.94%   ADM     25.86%   S32     55.69%   PSON     53.16%   TW.        27.45%
MARS    35.25%   KGF     24.61%   SGRO    51.59%   BP.      43.69%   ADM        26.39%
TSCO    34.25%   RIO     21.47%   IMI     49.01%   SHEL     43.37%   BA.        22.66%
SSE     33.01%   BHP      8.34%   DGE     40.24%   AZN      29.27%   IMI        21.35%
LGEN    31.17%   PSON     6.81%   LLOY    31.17%   IMB      28.12%   SHEL       10.06%
AZN     29.52%   RB.      6.74%   BP.     29.71%   BATS     20.05%   UU.        10.05%
BATS    29.26%   SGRO     5.62%   RDSB    28.82%   RIO      18.52%   BT.A        9.68%
SMDS    28.37%   SSE      4.28%   BT.A    28.20%   WDS@     17.40%   SSE         7.04%
UU.     28.14%   ULVR     0.95%   AV.     26.20%   BHP      16.84%   SGRO        6.36%
IMI     24.89%   PHP@     0.67%   TSCO    25.28%   CPG*     16.14%   NG.         3.02%
NG.     23.57%   S32     -1.15%   KGF     25.11%   AV.       7.89%   BP.         0.88%
BA.     23.00%   IMI     -1.19%   NG.     22.52%   TATE      7.53%   HLN         0.82%
WMH     21.58%   SMDS    -2.50%   UU.     21.68%   HLN@      6.16%   PSON       -0.21%
RIO     20.72%   AZN     -3.72%   CPG     21.13%   ULVR      5.99%   GSK        -1.27%
LLOY    20.61%   UU.     -5.13%   GSK     19.72%   S32       4.38%   LLOY       -4.27%
BLND    19.80%   NG.     -8.40%   AZN     18.49%   SSE       3.82%   AV.        -5.71%
GSK     19.30%   TSCO    -9.33%   BHP     14.26%   IGG      -3.81%   RKT        -6.19%
TATE    15.18%   DGE    -10.08%   BA.     12.48%   LLOY     -5.00%   BHP        -6.46%
CPG     14.55%   TATE   -11.29%   LGEN    11.76%   NG.      -5.89%   RIO        -6.88%
DGE     14.51%   LGEN   -12.15%   SSE      9.93%   UU.      -8.96%   KGF        -7.07%
ADM     12.80%   BA.    -13.46%   ADM      8.64%   RKT      -9.27%   LGEN       -8.10%
AV.     11.50%   TW.    -14.27%   BLND     8.59%   DGE      -9.56%   SMDS       -9.61%
BHP      7.58%   BATS   -16.20%   TW.      5.85%   GSK     -10.52%   AZN        -9.73%
ULVR     5.89%   VOD    -17.59%   IMB      5.28%   LGEN    -16.13%   ULVR       -9.86%
KGF      4.58%   IMB    -17.84%   SMDS     2.46%   SMDS    -16.23%   IMB       -10.84%
RB.      1.93%   AV.    -22.33%   MARS     1.85%   TSCO    -22.66%   BLND      -11.01%
VOD     -4.02%   BLND   -23.45%   BATS     0.94%   VOD     -24.96%   PHP       -11.96%
RDSB    -4.29%   GSK    -24.56%   PHP     -0.92%   BLND    -25.59%   IGG       -12.53%
BP.     -4.91%   CPG    -27.88%   TATE    -1.93%   IMI     -25.81%   TATE      -13.25%
MKS    -13.63%   BT.A   -31.28%   RKT     -3.06%   PHP     -26.82%   VOD       -15.33%
BT.A   -19.18%   MKS    -36.16%   IGG@    -5.68%   KGF     -30.21%   WDS       -19.65%
IMB    -21.37%   MARS   -40.57%   VOD     -7.18%   ADM     -32.31%   BATS      -23.45%
S32    -23.37%   LLOY   -41.70%   PSON    -9.88%   BT.A    -33.91%   DGE       -24.29%
PSON   -32.12%   RDSB   -43.76%   ULVR   -10.17%   TW.     -42.08%   S32       -29.36%
                 BP.    -45.97%   RIO    -10.57%   MARS*   -42.83%                    
                                                   MKS*    -46.72%                    
                                                   SGRO    -46.84%

@ indicates a new holding in that year.
*indicates a holding sold in the following year.

If you look at the relative positions of a single share, you will see quite a lot of oscillation, S32 is a good example. TSCO is another. If you look at the top runners, how often do you find one in a comparable position the following year. Some, of course, may be condemned to outer darkness, but that is life, and maybe a sign that culling is overdue. Sometimes there is hope after a few years wandering in the Wilderness.

TJH

[Arborbridge]

.

If you look at the relative positions of a single share, you will see quite a lot of oscillation, S32 is a good example. TSCO is another. If you look at the top runners, how often do you find one in a comparable position the following year. Some, of course, may be condemned to outer darkness, but that is life, and maybe a sign that culling is overdue. Sometimes there is hope after a few years wandering in the Wilderness.

TJH

Things come and go, as you say, but that's why I keep a table of the relative XIRR position of each company over the years, so I can keep tabs on this ebb and flow. I showed the average positions only in my table, but that is also an indication of the companies permanently in the hospital ward - if they don't begin to improve (or have some other redeeming feature) I would start looking more seriously at them.

Arb.