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New HYPer about to take the plunge

General discussions about equity high-yield income strategies
stevie1912
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New HYPer about to take the plunge

#206739

Postby stevie1912 » March 9th, 2019, 7:57 pm

Just transferred a FS pension into my SIPP believing I can more than match the income and protect my capital. Also what fun it seems to be a HYPer, having followed the boards for a good few years, although not quite sure whether this is strategies or practical?! My funds reached my account on Friday but I bottled it thinking I should put it in a few ETF trackers instead. About 5 years from when I want to retire, this HYP will be a part of my overall retirement planning.

I would really appreciate any feedback on my proposed approach...


A very high yield on average, about 40% higher than FTSE100, so perhaps too aggressive? No wonder I am having second thoughts.

88V8
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Re: New HYPer about to take the plunge

#206742

Postby 88V8 » March 9th, 2019, 8:29 pm

Classically, one buys the whole HYP in one swoop.
More wisely, one trickles in over a few months.

Of your pics.... BAE has a large pension overhang.... VOD in its current form has insufficient divi record and is widely viewed as a cut waiting to happen... GSK may also cut so I would not buy too many... NG is a utility and subject to Govt tampering..... Taylor Wimpey, housebuilders tend to be feast or famine.

You might consider including some fixed interest such as NWBD, BWRA, BOI. They will provide a solid underpinning, so long as inflation does not run away.

As regards equities, I would suggest Legal & General, Admiral, Imperial Brands (if you disapprove of fags, don't buy them, just buy the shares), and CTY would be a solid pick amongst the trusts.

Hope it all works out for you. HYP is about 60% of our income, and growing.

V8

tjh290633
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Re: New HYPer about to take the plunge

#206744

Postby tjh290633 » March 9th, 2019, 8:35 pm

I have most of your shares, the exceptions being Regional REIT, EasyJet, Direct Line, HSBC and ITV.

I did have ITV at one time as a result of Granada's short-lived merger with Compass. It was never endowed with a high enough yield to be topped up. When it stopped paying dividends it went unlamented. Since then it has had a renaissance.

My REITs are British Land and Segro. Regional never came on my radar. I have had British Airways and Stagecoach in the transport sector, but both went when dividends dried up. I am not in favour of transport shares in general. Insurers I have held are Prudential and RSA. I got rid of PRU when it proposed a massive rights issue. Brit Insurance replaced it, was soon taken over and in its turn replaced by Aviva. RSA had problems and was replaced with Admiral. I added Legal and General to the mix later.

I held Lloyds-TSB for a long time and got Halifax when it demutualised. Halifax became HBOS and was dumped when the financial crisis erupted and they had a rights issue doomed to failure. Cattles replaced HBOS, which was not my cleverest move. LLOY has been hung onto and added to in the rights issue and open offer during the crisis. I felt it was the best bank to stick with.

You have a good selection of shares there. No guarantee that future problems may not arise, but that is always a risk with shares. I had GEC/Marconi, Cattles, Mapeley and Carillon, all of which did an oozlum bird impersonation. You live and learn. That is why diversification is so important.

Be vigilant and good luck.

TJH

stevie1912
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Re: New HYPer about to take the plunge

#206747

Postby stevie1912 » March 9th, 2019, 8:48 pm

Thank you so much for your thoughts. Many possible pitfalls, and I really appreciate that the more diversified I am the better.

I should mention I had GVC and Imperial Brands initially in my thoughts but was dissuaded by my better half. Marstons and BAE survived.

Also, Life Insurance is a gap, but I have exposure to this sector as an employee, so could well have added Aviva or L&G if this was not an issue. Went for Direct Line rather than Admiral due to recent price strength and lower yield of Admiral.

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Re: New HYPer about to take the plunge

#206753

Postby Dod101 » March 9th, 2019, 9:04 pm

L & G should certainly be in the mix. If you are looking for income then I also think that both tobaccos should be there. I would not buy Vodafone.

The rest? Well I would not buy all of them but that is a personal choice. Also for income you should look at Chesnara and/or Phoenix Holdings.

Dod

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Re: New HYPer about to take the plunge

#206754

Postby Alaric » March 9th, 2019, 9:06 pm

stevie1912 wrote:Just transferred a FS pension into my SIPP believing I can more than match the income and protect my capital.


As you are within sight of retirement and using the SIPP for income, how does what you will be getting in dividend income compare with what you would get in a few years time from the defined benefit scheme? That may influence your attitude to risk.

Perhaps you also need to consider whether you will want to take the 25% tax free cash as a lump, or take it out year by year as a Uncrystallised Fund Pension Lump Sum. If you want it as a lump, holding some of the transfer value back as near cash may make sense.

Dod101
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Re: New HYPer about to take the plunge

#206771

Postby Dod101 » March 10th, 2019, 8:24 am

Giving this business a bit more thought, I would first of all leave the tax free 25% in the SIPP, at least for now. My feeling is that you will need all the capital you can find. You have given up an assured income for a very insecure one, but have a few years to go before you need to start drawing down any of it.

First thing is that you need to know is what you are trying to achieve in the short term (the lead up to retirement) and then on retirement. These may be the same objective, ie a good and sustainable dividend income. In the short term you will reinvest those dividends and in the longer run you will presumably be drawing them to help with day to day living expenses. No good thinking what might have been with your FS pension, you have crossed that bridge.

Vodafone I would not touch, nor Easyjet, only on the principle that airlines tend to be feast or famine and you do not know what the outcome of Brexit will do. Taylor Wimpey and Kingfisher? You appear to be determined to get exposure to every sector . Not a good idea and if you look at my portfolio you will know what I favour. You will lose some capital at least in the short term. That is almost a given but do not exacerbate that risk by buying shares that stand a higher risk than average of cutting their dividend. You are looking long term presumably so you need the long term survivors such as Unilever, Legal & General, AstraZeneca (maybe a better bet in the short term anyway than Glaxo). As I said I would also add Phoenix Holdings.

Hope that helps.

Dod

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Re: New HYPer about to take the plunge

#206773

Postby funduffer » March 10th, 2019, 8:43 am

When I retired 5 years ago, I took a lump sum from my pension and set up a HYP, and a portfoilio of high income IT's, in a roughly 50:50 split.

If you are nervous of going all in to HYP, you could try this approach, and then at retirement, decide which one suits you best. You will find the HYP approach has plenty of dramas and the IT's are pretty boring, but overall the results are fairly similar!

I purchased my initial HYP and IT shares over about a 9 month period, to allow proper scrutiny of each purchase, which I recommend.

Having said that, I can't see anything wrong with your proposed HYP selections.

Regards

FD

Itsallaguess
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Re: New HYPer about to take the plunge

#206777

Postby Itsallaguess » March 10th, 2019, 9:05 am

funduffer wrote:
When I retired 5 years ago, I took a lump sum from my pension and set up a HYP, and a portfoilio of high income IT's, in a roughly 50:50 split.

If you are nervous of going all in to HYP, you could try this approach, and then at retirement, decide which one suits you best. You will find the HYP approach has plenty of dramas and the IT's are pretty boring, but overall the results are fairly similar!

I purchased my initial HYP and IT shares over about a 9 month period, to allow proper scrutiny of each purchase, which I recommend.


Personally, that would be the minimum single-share/IT ratio that I'd recommend too, although I would imagine that might have an impact on the overall yield of any resulting portfolio...

I too came to the conclusion long ago that the single-share-HYP approach has too many dramas generally to recommend it, and certainly where someone might be relying on such a portfolio for their retirement income.

High-yield investment trusts are likely to deliver a lower yield, generally, to some of the really quite high yields shown in the OP single-share proposals, but I would genuinely suspect that over the course of a hopefully long and healthy retirement, such a single-share HYP would see enough 'single-company-drama' to actually lower that HYP portfolio yield to something much closer to that which might regularly and more steadily be achieved with a wider proportion of income investment trusts....

The difficulty there is that if there's been any level of 'yield anchoring', where someone can convince themselves that the income from a single-company-HYP portfolio yield of 6% is achievable over the long term without such single-company drama, then I imagine it might be difficult to walk down that yield requirement into some IT collectives that are likely to bring that initial portfolio-yield down somewhat, but that position would only be valid if the single-company HYP yield of around 6% is actually deliverable over the very long term...

Cheers,

Itsallaguess

Raptor
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Re: New HYPer about to take the plunge

#206780

Postby Raptor » March 10th, 2019, 9:32 am

I started out as put it all in one strategy HYP follower and brought a 15 share protfolio of High Yield shares (this did include 2 I already held, SLA and CNA). I made mistakes and overtime learned and modified my criteria. But if you do not try you do not know what suits you. I was then in the building phase and could use "new" cash and dividend re-investment to level the portfolio. Then 4 years ago there was a great thread over on TMF about what to do if you no longer could or wanted to manage the portfolio. That coincided with my semi-retirement and law changes on pensions. So I got all my pension pots transferred to Hargreaves (I did take the 25% as I had some work I wanted to do to the house. I had no history of ITs myself so decided to 50:50 this SIPP between ITs and HYP shares. Best idea I ever had, Since then have "tweaked" my portfolio (ok sold and bed & isa a lot). My aim was to have a 66% HYP and 34% IT of income producing shares (that has now been achieved).I now have 20 HYP Shares and 7 IT's (I aim to buy at least one other IT, technology). So over the last 4 years I can see the following



I have another 3 shares with dividends due this month, so HYP figures will improve and I reckon they will match the ITs. Not a great deal of history to go on but does make me tyhink I have made the right choice. Time will tell, as they say.

I will be posting my year end results next month over on "portfolio review" forum.

Raptor.

Raptor.

IanTHughes
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Re: New HYPer about to take the plunge

#206781

Postby IanTHughes » March 10th, 2019, 9:33 am

stevie1912 wrote:Just transferred a FS pension into my SIPP believing I can more than match the income and protect my capital. Also what fun it seems to be a HYPer, having followed the boards for a good few years, although not quite sure whether this is strategies or practical?! My funds reached my account on Friday but I bottled it thinking I should put it in a few ETF trackers instead. About 5 years from when I want to retire, this HYP will be a part of my overall retirement planning.

I would really appreciate any feedback on my proposed approach...

Don’t berate yourself for “bottling it”, investing in a one-shot HYP as a first step does take a bit of courage! I do have experience and in my case it was with money belonging to a family member, so as you can imagine, I was pretty nervous! All I will say is don’t be fooled into believing that it will always be “better" to invest in pieces over time. If the market goes up during that period it would of course be "worse". Do you know for sure that the market is not going to go up?

I have rejigged your selections into the following table showing the concentration that would be invested within each Sector and Industry. This is because the diversification recommended for an HYP within these two groupings is as important in my view as that for an individual holding. Personally I put a limit of 12% by value for any one Sector and 22% for any one Industry and others may use lower limits than that. So, using my own Industry and Sector groupings I come up with the following:



As you can see, using my limits, the only “overweighting” is the 22.22% within Customer Services. Looking at the individual holdings that make up that figure I personally would take out the General Retailer, Kingfisher PLC (KGF) – yield 4.60% - and replace it with one of the Tobaccos. Imperial Brands PLC (IMB) currently yields 7.19% while British American Tobacco PLC (BATS) yields 6.59%. In point of fact, I would take in both Tobaccos and, as well as KGF, I would take out one of the Industrials. Smith(DS) PLC (SMDS) only yields 4.50% while IMI PLC (IMI) only yields 4.20%. If you are fundamentally opposed to investments in Tobacco, I would still take of KGF and replace it with something from another Industry – British Land Company PLC (BLND) or Land Securities Group PLC (LAND) would be my choice in those circumstances.


Apart from the foregoing I cannot see anything majorly wrong with your choices. I would be a bit uneasy about EasyJet PLC (EZJ) – pun definitely intended :D – I would replace it with one of the aforementioned Property Companies. I might also suggest the higher yielding Aviva PLC (AV) in place of Direct Line PLC (DLG), but these would be minor changes in my view, your choices look fine. At the end of the day, it is your portfolio, with your money and your retirement!

Anyway, I hope that I have helped. Do let us know what you eventually decide, whether HYP or not, and best wishes for your new investment venture.


Ian

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Re: New HYPer about to take the plunge

#206783

Postby Arborbridge » March 10th, 2019, 9:41 am

Raptor wrote:I started out as put it all in one strategy HYP follower and brought a 15 share protfolio of High Yield shares (this did include 2 I already held, SLA and CNA). I made mistakes and overtime learned and modified my criteria. But if you do not try you do not know what suits you. I was then in the building phase and could use "new" cash and dividend re-investment to level the portfolio. Then 4 years ago there was a great thread over on TMF about what to do if you no longer could or wanted to manage the portfolio. That coincided with my semi-retirement and law changes on pensions. So I got all my pension pots transferred to Hargreaves (I did take the 25% as I had some work I wanted to do to the house. I had no history of ITs myself so decided to 50:50 this SIPP between ITs and HYP shares. Best idea I ever had, Since then have "tweaked" my portfolio (ok sold and bed & isa a lot). My aim was to have a 66% HYP and 34% IT of income producing shares (that has now been achieved).I now have 20 HYP Shares and 7 IT's (I aim to buy at least one other IT, technology). So over the last 4 years I can see the following



I have another 3 shares with dividends due this month, so HYP figures will improve and I reckon they will match the ITs. Not a great deal of history to go on but does make me tyhink I have made the right choice. Time will tell, as they say.

I will be posting my year end results next month over on "portfolio review" forum.

Raptor.

Raptor.


In board terms, then, what you are showing is that ITs dividends are growing faster than HYP dividends? In fact your income per unit for the HYP seems to have decreased which is unfortunate.
That seems to agree with my own results over nearly ten years. I'll be updating my figures to find the lactest position at the end of this quarter...... I feel another chart coming on.
Income OEICS have also performed very well, although the income is more volatile than ITs as one would expect.


Arb.

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Re: New HYPer about to take the plunge

#206785

Postby jackdaww » March 10th, 2019, 10:04 am

stevie1912 wrote:

Also what fun it seems to be a HYPer, having followed the boards for a good few years, although not quite sure whether this is strategies or practical?!




========

PLEASE be careful not to be sucked in / seduced by some of the cosy chat on the HYP practical board.

the original PYAD HYP idea is fine for many , the practical board has taken on a (hotly debated) life of its own .

.

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Re: New HYPer about to take the plunge

#206787

Postby Raptor » March 10th, 2019, 10:10 am

Arborbridge wrote:
In board terms, then, what you are showing is that ITs dividends are growing faster than HYP dividends? In fact your income per unit for the HYP seems to have decreased which is unfortunate.
That seems to agree with my own results over nearly ten years. I'll be updating my figures to find the lactest position at the end of this quarter...... I feel another chart coming on.
Income OEICS have also performed very well, although the income is more volatile than ITs as one would expect.


Arb.


Based on the "divi per unit" I agree. However, I have over that same period inherited a HYP portfolio when my Mum died, sold over £85K of shares to pay for my extension, "bed & isa" nearly £50K and stopped re-investing dividends in my ISA and dealing account, which is why I am still waiting for a longer, more settled, period to make that assumption. I also did not want to start a debate of ITs good HYP bad on this thread.

I still believe that starting out the HYP route is good to help you "learn", but along the way a move into ITs just for ease is worthwhile. I would always keep a HYP as I still get a "buzz" with day to day (or in my case month on month :D ) portfolio management.

I am now at that point of trying to make up my mind (to steal a word, PICKERING) whether to fully retire in May when I get my state pension. There is one person at work who I would gladly take a contract on, who is generally loathed but keeps pulling the disabled/union card to keep her job and I cannot deal with it anymore. OTT I know.

I await your chart with anticipation and excitment :P

Raptor.

88V8
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Re: New HYPer about to take the plunge

#206788

Postby 88V8 » March 10th, 2019, 10:16 am

Arborbridge wrote:In broad terms, then, what you are showing is that ITs dividends are growing faster than HYP dividends? In fact your income per unit for the HYP seems to have decreased which is unfortunate.
That seems to agree with my own results over nearly ten years.


Are you suggesting that them thar professionals are outperforming us amateurs? Egad !!!

V8

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Re: New HYPer about to take the plunge

#206809

Postby jackdaww » March 10th, 2019, 11:31 am

not a bad selection .

i suggest l&g , phoenix , chesnara , astrazeneca , , glaxo , bhp , rio , sdrc sla.

also IT's mrch cty smt myi hfel .

i dont have utilitys , banks or builders.

vodafone is very controversial , i still hold - well underwater .

bae , easyjet and iag i hold but not convincingly .

:)

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Re: New HYPer about to take the plunge

#206821

Postby Arborbridge » March 10th, 2019, 12:31 pm

88V8 wrote:
Arborbridge wrote:In broad terms, then, what you are showing is that ITs dividends are growing faster than HYP dividends? In fact your income per unit for the HYP seems to have decreased which is unfortunate.
That seems to agree with my own results over nearly ten years.


Are you suggesting that them thar professionals are outperforming us amateurs? Egad !!!

V8


Not so way off what I have always maintained. People on the boards sometimes express that they dislike professional managers owing to the fees, and that is one of the big advantages of "DIY" HYPing. But I've never been of that opinion. The way I've put it previously is that I believe it is quite hard for an amateur to outrun a good manager. Or perhaps I should qualify it by saying it's difficult for me to do so.

With whatever technique or scheme I've tried, I concluded in the end that my performance as a manager is somewhere in the lower "cautious managed" sector. If my HYP income does not increase as quickly as my IT income, then that is the final blow for HYP - even though I enjoy running one.

Arb.

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Re: New HYPer about to take the plunge

#206852

Postby stevie1912 » March 10th, 2019, 3:22 pm

Really appreciate the feedback and suggestions, and thank you Ian for the analysis.

It is clear to me that because I have swapped a guaranteed income, and the pitfalls of single share strategies, that I do not want to allocate all the fund to a HYP. But I do want the enjoyment of topping up, adding new shares, fretting about the next CLLN, etc.

I have agonised long enough about whether to use passive / active and whether to use fund / individual shares. So will try variant of all with no regrets...

45% in amended HYP - no EZJ (not a favourite here!). No VOD or ITV - see below. That takes it to classic round 15. Yield 5.9%

9% in original Johnson Fry HY5 - this moment's picks from FT30 for next 12 months are VOD, SLA, BT.A, EMG, ITV - this is a nod to my first PEP which got me into investing in the first place, and am glad it is method driven as average yield is 7.7%!

22.5% in LYXOR DOSH - passive method for quality dividends - I am a sucker for back-testing as I was for HY5. Yield 4.5%

22.5% in ishares World Quality Dividend (WQDS). Yield 3.1%

Overall yield - 5.1% which is still over 60% higher than the equivalent yield of my FS pension. And would hope and expect over the very long term that the growth in yield will exceed CPI. No guarantees but there is no going back!

Thank you for all your thoughts and encouragement.


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