Shell vs Glaxosmithkline

[idpickering]

There follows another item from TMF entitled;

Which is the better dividend stock: Royal Dutch Shell plc or GlaxoSmithKline plc?

I hold both these two shares in my HYP, and I'm guessing most that frequent this board do too. Shell (RDSB) are my largest holding in my HYP standing at 6.5% in capital value terms, with Glaxo at 3.6%. The forward yield on these two, according to digitallook, are 6.0%, and 6.1% respectively. As to which is the better of the two as a dividend share, I commented in another thread that Glaxo was more like a bond with it's static dividend. That's how I feel about Shell too. Both true buy and forget shares while you get paid for taking the risk of buying the shares. For me it's a drawer. Here's what the author thinks;

Royal Dutch Shell (LSE: RDSB) and GlaxoSmithKline (LSE: GSK) are two of the most popular dividend stocks in the FTSE 100 index. I own both in my own portfolio. However, neither Shell nor Glaxo are perfect dividend stocks, in my view. Both have struggled with profitability in recent years, and as a result, have not increased their payouts. Today, I’m comparing the two companies. Is one a better dividend stock than the other?

http://www.fool.co.uk/investing/2017/11 ... kline-plc/

What's your verdict?

Ian.

[jackdaww]

i have held big stakes in both for many years , raking in big dividends along the way .

the TMF author owns them also , he holds a little more credence for me than some there.

which will do best ??

no idea , but will continue to hold until i find a good reason not to .

[idpickering]

i have held big stakes in both for many years , raking in big dividends along the way .

the TMF author owns them also , he holds a little more credence for me than some there.

which will do best ??

no idea , but will continue to hold until i find a good reason not to .

Thanks for your offering Jack. I couldn't agree more with your comment above.

Ian.

[Wizard]

...I commented in another thread that Glaxo was more like a bond with it's static dividend. That's how I feel about Shell too. Both true buy and forget shares while you get paid for taking the risk of buying the shares...

I thought one of the fundamental basics behind HYP was to look for a growing dividend? Neither of these would now pass my HYP purchase test of a minimum of 2% growth in dividends over the past 5 years (according to dividenddata.co.uk), so a draw for me as well in that I would not buy or top up either in an HYP at the moment.

Terry.

[idpickering]

...I commented in another thread that Glaxo was more like a bond with it's static dividend. That's how I feel about Shell too. Both true buy and forget shares while you get paid for taking the risk of buying the shares...

I thought one of the fundamental basics behind HYP was to look for a growing dividend? Neither of these would now pass my HYP purchase test of a minimum of 2% growth in dividends over the past 5 years (according to dividenddata.co.uk), so a draw for me as well in that I would not buy or top up either in an HYP at the moment.

Terry.

Hello Terry, thanks for your input. On the face of it, a new HYPer may quite rightly pass over these two for consideration for exactly the reason you mentioned above, that is no growth in dividends. I've held these two for years, and topped both up over the last year or so. I'm 'fully' invested in them so am unlikely to buy more currently. I have no intention of selling my holdings either, as they also form part of my 'core' HYP holdings.

Ian.

[tjh290633]

I own both of these, but oddly (or perhaps not) I have owned BP. and AZN longer. The reason is simple. I inherited ICI from my mother in 1970 and acquired Zeneca when it was split off. BP. was bought when it was first privatised and both shares were sold and re-bought in my PEP in the late 1980s. GSK and RDSB came in in 2010 and 2006 respectively.

So both are second choice for me in their respective sectors. Zeneca was the first share to be trimmed back when, in company with LLOY, it went overweight in 1997 when I decided that 10% ought to be the limit. BP. has had its trouble along the way, most recently with the Macondo incident.

Looking back at their history, AZN was topped up in 2007, 2011, 2012, 2013 and 2016, but was trimmed back in 1997, 2008 and 2014. BP. was first bought in 1979, with a second tranche in 1981 and sold in 1987 to start my PEP. It was not bought into the PEP until 1988, by which time the price at 250p was only a quarter of what I sold them for. There must have been a share split. It was added to in 1990, 1991 and 1994 then split in two in 1999. I added more in 2007, trimmed back in 2008 and 2009 then added more in 2010, 2012, 2013, 2014 and 2015.

Turning now to GSK, bought in 2010 and topped up in 2011. More recently topped up in 2016 on two occasions. RDSB came in in 2006, was topped up in 2007 then trimmed back in 2008. Topped up again in 2010 and trimmed back in 2012, then topped up in 2013 twice, 2015 and 2017.

I see that RDSB replaced BG., sold because of very low yield, and now has bought BG. in its turn.

IRR since first bought has been 15.7% for AZN, 12.8% for BP., 6.1% for GSK and 8.9% for RDSB. Different periods, of course, and chequered histories in all cases. Having kept faith with BP., I have no regrets for holding all of them. Time tends to be a great healer, as the series of trimmings when overweight and topping up when underweight indicates.

TJH

[moorfield]

I thought one of the fundamental basics behind HYP was to look for a growing dividend? Neither of these would now pass my HYP purchase test of a minimum of 2% growth in dividends over the past 5 years (according to dividenddata.co.uk), so a draw for me as well in that I would not buy or top up either in an HYP at the moment.

Terry.

There's always trade off to be made between yield and rate of dividend growth I think.

Shell has been paying a flat dividend (in USD) for the last few years against the backdrop of a junked oil price and mega takeover. But looking further back it has an illustrious dividend history and I am trusting the management will be able to resume that in future. I don't impose arbitrary tests such as "minimum 2% growth" (would 1.9% really not qualify?), and with a 6.3% yield I would still be filling my boots with Shell were it not already at my self-imposed portfolio limit (10% overall income).

Climbing higher up the yield ladder, I bought the fixed dividend of Santander preference shares when a >10% yield was on offer which I felt too good to overlook, and acceptably "HYPable".

[Wizard]

Climbing higher up the yield ladder, I bought the fixed dividend of Santander preference shares when a >10% yield was on offer which I felt too good to overlook, and acceptably "HYPable".

High yieldable, yes. HYPable, no.

Terry

[moorfield]

Climbing higher up the yield ladder, I bought the fixed dividend of Santander preference shares when a >10% yield was on offer which I felt too good to overlook, and acceptably "HYPable".

High yieldable, yes. HYPable, no.

Terry

Forgot I was on HYP, not HYSS

[Breelander]

Climbing higher up the yield ladder, I bought the fixed dividend of Santander preference shares when a >10% yield was on offer which I felt too good to overlook, and acceptably "HYPable".

High yieldable, yes. HYPable, no.

Well, you say that...

but...

...well, it wasn't always so clear cut.

Back in the aftermath of the financial crisis preference shares were yielding well into the double-digits. A fixed yield greater than 10% can easily be turned into a 'synthetic' 5% yield, growing at 5%/annum by the simple expedient of reinvesting half the income - a practical step Gengulphus gave due consideration to when one was nominated for GDHYP.

It seems to me that a reasonable way for a HYP like my demo HYP to think of a high-yielding preference share is as a share whose income needs to be split between drawable income and income required to be reinvested for growth. At NWBD's 8.5% yield, a 50:50 split seems reasonable... I.e. it seems reasonable to me to think of NWBD as at least similar to a more normal HYP share with a 4.25% yield and a 4.25% growth rate - with the oddity that the growth doesn't just automatically affect the share itself; it instead has to be achieved by reinvestment of the half of the dividend income earmarked for growth. While building the portfolio, that happens completely automatically as part of reinvesting all the dividends; while living off its income, it's not difficult to incorporate it into reinvesting the safety margin of the income. I.e. there is no major practical problem about incorporating an NWBD holding into the HYP as a 'mock 4.25% yield, 4.25% growth share'.

https://web.archive.org/web/20161111233 ... 58107.aspx

In the end he ruled it out for the demo HYP - not on unsuitability, but...

...without a suitable data source and being out of time to find one, I'm afraid I'm vetoing NWBD this time around.

[moorfield]

- a practical step Gengulphus gave due consideration to when one was nominated for GDHYP.

That would have been me too I think.

[Breelander]

That would have been me too I think.

Me too - I got LLPD at >12% yield back in the day.

Bree. (who also holds Shell & GSK)

[Wizard]

Climbing higher up the yield ladder, I bought the fixed dividend of Santander preference shares when a >10% yield was on offer which I felt too good to overlook, and acceptably "HYPable".

High yieldable, yes. HYPable, no.

Well, you say that...

but...

...well, it wasn't always so clear cut.

Back in the aftermath of the financial crisis preference shares were yielding well into the double-digits. A fixed yield greater than 10% can easily be turned into a 'synthetic' 5% yield, growing at 5%/annum by the simple expedient of reinvesting half the income - a practical step Gengulphus gave due consideration to when one was nominated for GDHYP.

It seems to me that a reasonable way for a HYP like my demo HYP to think of a high-yielding preference share is as a share whose income needs to be split between drawable income and income required to be reinvested for growth. At NWBD's 8.5% yield, a 50:50 split seems reasonable... I.e. it seems reasonable to me to think of NWBD as at least similar to a more normal HYP share with a 4.25% yield and a 4.25% growth rate - with the oddity that the growth doesn't just automatically affect the share itself; it instead has to be achieved by reinvestment of the half of the dividend income earmarked for growth. While building the portfolio, that happens completely automatically as part of reinvesting all the dividends; while living off its income, it's not difficult to incorporate it into reinvesting the safety margin of the income. I.e. there is no major practical problem about incorporating an NWBD holding into the HYP as a 'mock 4.25% yield, 4.25% growth share'.

https://web.archive.org/web/20161111233 ... 58107.aspx

In the end he ruled it out for the demo HYP - not on unsuitability, but...

...without a suitable data source and being out of time to find one, I'm afraid I'm vetoing NWBD this time around.

I don't disagree with you in the sense that Prefs may make a very good investment, but I say not HYPable based on the recently released guidance for this board.

Terry.

[Breelander]

I say not HYPable based on the recently released guidance for this board.

Yes, I fear that the prescriptive use of word 'exclusively' in place of "doesn't have to adhere 100% to these hallmarks..." from an FAQ that had served well for years is going to cause all sorts of 'mod' headaches.

I should now stop posting here as the 29 shares in my HYP include one that's deemed off-limits. 95% isn't good enough anymore, apparently.

I shall miss you all.

Goodbye.

[idpickering]

I say not HYPable based on the recently released guidance for this board.

Yes, I fear that the prescriptive use of word 'exclusively' in place of "doesn't have to adhere 100% to these hallmarks..." from an FAQ that had served well for years is going to cause all sorts of 'mod' headaches.

I should now stop posting here as the 29 shares in my HYP include one that's deemed off-limits. 95% isn't good enough anymore, apparently.

I shall miss you all.

Goodbye.

I do hope that is not the case Breelander, and common sense will prevail. Failing that, you will be missed.

Ian.

[Raptor]

Moderator Message:
Prefs as a High Yield investment are ideally a topic for the Strategies board. Thank you for your understanding on this. Raptor.

[richfool]

I don't see why the original post or debate should be Shell Vs Glaxo. Surely if one is building or running a HYP, the two stocks should both be considered for inclusion in one's portfolio, as they are in totally different sectors. Surely the OP is simply importing an unnecessary debate from TMF.

[Arborbridge]

I should now stop posting here as the 29 shares in my HYP include one that's deemed off-limits. 95% isn't good enough anymore, apparently.

I shall miss you all.

Goodbye.

This remark comes out of nowhere, as far as I know: I had no idea you were thinking of leaving. Breelander, if you are indeed thinking of quitting this board, please think again. You have been one of the most interesting and supportive of companions on my HYP journey, and I would miss your contributions - and have missed them recently as their number has diminished compared with "the old days". You are also one of the few who give serious reports of your investing progress each year.

Please tell me leaving is not a serious proposition, and/or reconsider. I dare say I am not the only one who would see the day Bree leaves as a very bad one for our HYPing community.

Arb.

[idpickering]

I don't see why the original post or debate should be Shell Vs Glaxo. Surely if one is building or running a HYP, the two stocks should both be considered for inclusion in one's portfolio, as they are in totally different sectors. Surely the OP is simply importing an unnecessary debate from TMF.

I disagree. It is here that we discuss such things regarding the shares in our HYPs. If the mods thought my OP off topic they would've removed it. I am trying to initiate chat on this board.

Ian.

[Breelander]

This remark comes out of nowhere, as far as I know: I had no idea you were thinking of leaving...

Apparently the new RULES mean I no longer qualify as an HYPer. It's getting too claustrophobic here.

Moderator Message:
All of the links were prior to the "rules", so have no relevance here, removed. Raptor.