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Selling Unilever?

General discussions about equity high-yield income strategies
Darka
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Selling Unilever?

#251027

Postby Darka » September 11th, 2019, 12:43 pm

I've been thinking of selling Unilever (3% yield) and moving the money to an IT, possibly City Of London (4.3% yield) or maybe Henderson Far East Income Ltd (5.8% yield) which would not only give me a higher income but also more diversification.

Another share I could do the same with is BAE systems (4.1% yield)…

I think it's a good idea, but I can't decide if I should do it?

OLTB
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Re: Selling Unilever?

#251034

Postby OLTB » September 11th, 2019, 1:04 pm

Hi Darka

It's an interesting conundrum isn't it - I also hold ULVR in my HYP but am not thinking of tinkering at the moment.

TJH has a long and successful history with investing so I think I shall follow his guide in that when a HYP constituent's yield is less than half of the market's yield I will sell a minimum of 20% (it maybe 25%). The reinvestment must provide at least twice the income of that sold.

According to dividend data here https://www.dividenddata.co.uk/dividend ... et=ftse100 the FTSE 100 yield is 4.57% so if the yield for Unilever dips below 2.28%, then a trim may be in order.

If I have made an error, hopefully TJH will be along to set me right, but I think the principle is sound.

Good luck in your naval gazing!

Cheers, OLTB.

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Re: Selling Unilever?

#251038

Postby Dod101 » September 11th, 2019, 1:10 pm

Darka wrote:I've been thinking of selling Unilever (3% yield) and moving the money to an IT, possibly City Of London (4.3% yield) or maybe Henderson Far East Income Ltd (5.8% yield) which would not only give me a higher income but also more diversification.

I think it's a good idea, but I can't decide if I should do it?


I do not think that selling Unilever and buying City of London IT would be a good idea no matter what the motive, unless you are very anxious for an immediate increase in income. I would be surprised if Unilever has not been a better share for total return over the years.

HFEL would I think be a better substitute but even so the characteristics are so different that it is really difficult to compare. Personally, I will keep Unilever no matter what, I would think. I have held it for well over 20 years and it has doe well for me. I topped it when it reached £50 a share.

If diversification is an issue then you would certainly get that with an IT as you know. Obviously, if you hold only Unilever then moving to an IT would be a good idea, and if that is the case, I would not buy either of the ITs you mention, City of London because of the uncertainty of high yield UK shares, and HFEL because as the name implies, it is concentrated on Far East shares. I would be looking at a generalist like F & C, Alliance or say, Finsbury Growth and Income. The latter shares some of the characteristics of Unilever, being invested in high quality international shares, including Unilever itself. You would probably be sacrificing yield though.

Dod

Darka
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Re: Selling Unilever?

#251039

Postby Darka » September 11th, 2019, 1:12 pm

OLTB wrote:It's an interesting conundrum isn't it - I also hold ULVR in my HYP but am not thinking of tinkering at the moment.


Thanks OLTB, it is indeed - not doing anything about it at the moment but maybe in the future.

Darka
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Re: Selling Unilever?

#251041

Postby Darka » September 11th, 2019, 1:14 pm

Dod101 wrote:I do not think that selling Unilever and buying City of London IT would be a good idea no matter what the motive, unless you are very anxious for an immediate increase in income. I would be surprised if Unilever has not been a better share for total return over the years.

HFEL would I think be a better substitute but even so the characteristics are so different that it is really difficult to compare. Personally, I will keep Unilever no matter what, I would think. I have held it for well over 20 years and it has doe well for me. I topped it when it reached £50 a share.

Dod


Thanks Dod, I agree it's been a good share and don't immediately need more income, but with my wife retiring in two years I'm just exploring some options to increase income.

tjh290633
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Re: Selling Unilever?

#251059

Postby tjh290633 » September 11th, 2019, 2:13 pm

OLTB wrote:Hi Darka

It's an interesting conundrum isn't it - I also hold ULVR in my HYP but am not thinking of tinkering at the moment.

TJH has a long and successful history with investing so I think I shall follow his guide in that when a HYP constituent's yield is less than half of the market's yield I will sell a minimum of 20% (it maybe 25%). The reinvestment must provide at least twice the income of that sold.

According to dividend data here https://www.dividenddata.co.uk/dividend ... et=ftse100 the FTSE 100 yield is 4.57% so if the yield for Unilever dips below 2.28%, then a trim may be in order.

If I have made an error, hopefully TJH will be along to set me right, but I think the principle is sound.

Good luck in your naval gazing!

Cheers, OLTB.

Just one comment. I sell 25% if the holding value exceeds my chosen multiple (1.5 times) of the median holding value. If the yield falls below half that of the market, then I consider selling completely. I would not sell part of the holding.

TJH

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Re: Selling Unilever?

#251062

Postby richfool » September 11th, 2019, 2:18 pm

Darka wrote:I've been thinking of selling Unilever (3% yield) and moving the money to an IT, possibly City Of London (4.3% yield) or maybe Henderson Far East Income Ltd (5.8% yield) which would not only give me a higher income but also more diversification.

Another share I could do the same with is BAE systems (4.1% yield)…

I think it's a good idea, but I can't decide if I should do it?

You could look at it another way.

You could sell Unilever and buy into FGT (Finsbury Inc & Grth trust), which holds a large chunk in ULVR along with other diversified "quality" stocks. FGT has an excellent record for capital growth, but you would then get a yield of c 1.63%, whereas ULVR currently yields: 2.74%. CTY has a higher yield, but a poor record of recent growth. You might wish to consider, how important growth is to you as well as dividend yield, and what you consider the future prospects ULVR to be.

Darka
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Re: Selling Unilever?

#251071

Postby Darka » September 11th, 2019, 2:32 pm

richfool wrote:You could look at it another way.

You could sell Unilever and buy into FGT (Finsbury Inc & Grth trust), which holds a large chunk in ULVR along with other diversified "quality" stocks. FGT has an excellent record for capital growth, but you would then get a yield of c 1.63%, whereas ULVR currently yields: 2.74%. CTY has a higher yield, but a poor record of recent growth. You might wish to consider, how important growth is to you as well as dividend yield, and what you consider the future prospects ULVR to be.


Thanks richfool, I do have some FGT (and Scottish Mortgage, Smithson) already and would be buying some more in the next couple of months as I want both income and growth from my IT portfolio.

As for income growth, that's very important but I'm trying to boost income mainly over next two years so that I hit my safety margin.

The goal is to retire shortly after my wife (she does that in 2 years and is older), so we can spend the more active part of our retirement together, rather than waiting until everything is perfect and then she may be unable to be as active if I wait to retire.

So doing the best I can to have income, income growth and also pure growth in the portfolio - not easy sometimes.

regards,

77ss
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Re: Selling Unilever?

#251090

Postby 77ss » September 11th, 2019, 3:04 pm

Darka wrote:I've been thinking of selling Unilever (3% yield) and moving the money to an IT, possibly City Of London (4.3% yield) or maybe Henderson Far East Income Ltd (5.8% yield) which would not only give me a higher income but also more diversification.

Another share I could do the same with is BAE systems (4.1% yield)…

I think it's a good idea, but I can't decide if I should do it?


I think its a terrible idea. Top-slice if its a bit overweight perhaps - I did, when it hit 150% of median in June.

Have you looked at the relevant total returns? I know this is a High Yield board, but it takes an awful lot of extra dividend to compensate for markedly inferior capital growth.

ULVR offers you a non-negligible 2.84% yield, rising dividends (CAGR 8.35% over the past 8 years) and a good record of capital growth - 83% over past 5 years. A bit of everything?

monabri
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Re: Selling Unilever?

#251093

Postby monabri » September 11th, 2019, 3:14 pm

Darka wrote:I think it's a good idea, but I can't decide if I should do it?


No.

(I'll come back with reasoning/evidence later on..I'm not at my laptop at the moment)

monabri
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Re: Selling Unilever?

#251107

Postby monabri » September 11th, 2019, 4:12 pm

As mentioned by other Lemons above, if one considers the Total Return for Unilever over the last 5 years versus FCIT, HFEL,WTAN, CTY, BA. & HFEL, it has outperformed all of them - the likes of BA., CTY & even HFEL by some margin. Of course, past performance etc.

There might be a case that the current price is .."toppy" (who knows?) so there might be options for "trimming" with a view to rebuying when the yield is more favourable (ARB has posted on ULVR "sweet spots" for buying in the past).

Image



FCIT = F&C Investment Trust
HFEL = Henderson Far East IT
WTAN = Witan IT
CTY = City of London IT
BA.= BAE Systems
and, ULVR = ...Unilever

Dod101
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Re: Selling Unilever?

#251122

Postby Dod101 » September 11th, 2019, 5:11 pm

Unilever has of course got to be considered higher risk than holding any investment trust, if for no other reason than the diversification of an IT, and if you felt like that you might like to look at Finsbury, but it would not get you more income which is what you seem to be seeking. To substitute it for HFEL would just be swapping one risk for another to my mind. In all I would just keep Unilever.

Dod

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Re: Selling Unilever?

#251123

Postby digitaria » September 11th, 2019, 5:13 pm

ULVR has been meteoric over the last few months and a good hedge against the struggling pound.

I have a hefty chunk of ULVR and some HFEL and even some CTY, the latter in my SIPP.

I could see the Unilever price falling back if they ever manage to settle this Brexit nonsense and the pound subsequently recovers, but such thoughts fly in the face of strategic ignorance.

I can see the temptation of ditching ULVR and switching the proceeds into the higher-yielding and intrinsically more diversified CTY (incidentally, Unilever is one of CTY's larger holdings :) so Darka wouldn't be completely abandoning ULVR).

My own strategy is mostly to own UK shares directly and only use ITs for overseas investments or other holdings I can't easily acquire myself (makes mental note to review CTY holding in SIPP). Darka can always compromise and top-slice ULVR or even sell half.

Darka
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Re: Selling Unilever?

#251124

Postby Darka » September 11th, 2019, 5:15 pm

77ss wrote:I think its a terrible idea. Top-slice if its a bit overweight perhaps - I did, when it hit 150% of median in June.

Have you looked at the relevant total returns? I know this is a High Yield board, but it takes an awful lot of extra dividend to compensate for markedly inferior capital growth.

ULVR offers you a non-negligible 2.84% yield, rising dividends (CAGR 8.35% over the past 8 years) and a good record of capital growth - 83% over past 5 years. A bit of everything?


Thanks 77ss,

I'm beginning to think it's not such a great idea after all, ULVR has proved to be a good share to me over time - I have top sliced before but think I'll leave well alone for now.

Darka
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Re: Selling Unilever?

#251125

Postby Darka » September 11th, 2019, 5:16 pm

monabri wrote:As mentioned by other Lemons above, if one considers the Total Return for Unilever over the last 5 years versus FCIT, HFEL,WTAN, CTY, BA. & HFEL, it has outperformed all of them - the likes of BA., CTY & even HFEL by some margin. Of course, past performance etc.



Thanks monabri, I think your graphs along with the other comments had made me realise it was a terrible idea - think I'll just leave things as they are :D

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Re: Selling Unilever?

#251173

Postby moorfield » September 11th, 2019, 7:36 pm

Darka wrote:I think it's a good idea, but I can't decide if I should do it?


Frame the question in context of your overall income objective (if you have one), and ask: (1) is overall portfolio income on target, and (2) is overall portfolio yield high ?

I hold ULVR too, and in my case the answers are (1) yes, and (2) yes, above benchmark (CTY, 4.5%). I have no firm reason to sell until the answers change to (1) no, and/or (2) no. But nor do I have a good reason to buy more at current yield, so for the forseeable future ULVR remains a hold for me.

Darka
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Re: Selling Unilever?

#251185

Postby Darka » September 11th, 2019, 8:07 pm

moorfield wrote:Frame the question in context of your overall income objective (if you have one), and ask: (1) is overall portfolio income on target, and (2) is overall portfolio yield high ?

I hold ULVR too, and in my case the answers are (1) yes, and (2) yes, above benchmark (CTY, 4.5%). I have no firm reason to sell until the answers change to (1) no, and/or (2) no. But nor do I have a good reason to buy more at current yield, so for the forseeable future ULVR remains a hold for me.


Very good point moorfield, and my answers are (1) yes (on target but not yet enough to retire) and (2) yes, so a hold it is.

regards,

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Re: Selling Unilever?

#251212

Postby Gengulphus » September 11th, 2019, 9:18 pm

Darka wrote:I've been thinking of selling Unilever (3% yield) and moving the money to an IT, possibly City Of London (4.3% yield) or maybe Henderson Far East Income Ltd (5.8% yield) which would not only give me a higher income but also more diversification.

Another share I could do the same with is BAE systems (4.1% yield)…

I think it's a good idea, but I can't decide if I should do it?

IMHO you haven't given us sufficient information for a sensible reply. If at one extreme your portfolio consists of just the holdings in Unilever and BAE Systems, I'd say it's undoubtedly a good idea (though not necessarily the best idea) - you're seriously underdiversified and you can make big improvements to both its diversification and its income. If at more-or-less the opposite extreme your portfolio consists of 200 holdings with 0.5% in each, two of those holdings being Unilever and BAE Systems, it makes too little difference to either diversification or income to be anything other than pointless fiddling, wasting your time, effort and costs.

Of course, your portfolio is highly likely to be somewhere between those two extremes - but the two extremes lead to very different conclusions, so they show that the answer does depend a great deal on just where it lies between them, i.e. on your portfolio's current composition...

Gengulphus

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Re: Selling Unilever?

#251214

Postby Gengulphus » September 11th, 2019, 9:27 pm

Dod101 wrote:... I topped it [Unilever] when it reached £50 a share.

Sorry, could you clarify, please? Do you mean that you topped it up or that you top-sliced it? I find myself able to read it roughly equally easily in both ways, and they mean very different things!

Gengulphus

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Re: Selling Unilever?

#251222

Postby Dod101 » September 11th, 2019, 9:44 pm

I top sliced, selling about 20% of my original holding. It remains by biggest holding and is likely to remain so, I would think.

Dod


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