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Running out of sectors where there are FTSE 100 high dividend paying shares

General discussions about equity high-yield income strategies
Wizard
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Running out of sectors where there are FTSE 100 high dividend paying shares

#323667

Postby Wizard » July 4th, 2020, 10:11 am

starter wrote:This is interesting. I've realised that I should sort out my holdings* been buying a lot of shares recently and I'm coming to the odd situation that if having not exactly run out of FTSE 100 high dividend paying shares, I'm running out of sectors where there are FTSE 100 high dividend paying shares and am considering whether to buy FTSE 100 shares that have suspended dividends, those that are in the FTSE250 or foreign large cap dividend payers.

This is not exactly the subject of the original question, I realise.

My thought is to look into the suspended dividend payers to find force majeur while ignoring those that have used this as an opportunity to in effect cut the cost of equity capital.


It is definitely not possible to discuss one of the three options you suggest on HYP-P and IMHO deeply strange to be discussing one of the other two as well, so better to discuss here.

I guess in part it depends on what your time horizons are. As you posted on HYP-P I guess you are focussed on income, but are you using that income now or reinvesting it at the moment? If you are using the income now then I would have thought buying 0% yielders would not be your favoured option. If you are buying looking for a share price bounce and therefore a capital gain when dividends resume I can see the logic, I have bought some shares for that reason recently, but that is definitely not in HYP-P territory as far as I can see (though I can see why recent discussions on that board seem to be giving the impression it may be).

My personal experience of 'dipping down' to smaller shares has generally been pretty bad, but then some of the HYP shares I bought as FTSE100 constituents are in to FTSE250 territory following spectacular share price falls. It is also the case that there have been about the same proportion of cutters in the FTSE250 universe as the FTSE100, so choice will be more limited there as well. Sorting the FTSE250 by yield and scanning down it does not through out obvious quality high yield candidates as far as I can see. But you mention sector limitation rather than share limitation, so it would help to know which sectors that are not represented in dividend paying shares in the FTSE100 are you thinking you can find payers for in the FTSE250? More generally are there particular sectors you do not have shares in you may want to cover?

Personally I would be seriously considering overseas shares, you mention it as an option but don't then say why you are favouring buying non-paying UK shares instead. Clearly this gives you the option to get extended geographical diversification which I would see as a benefit. COVID-19 is global, but even so the economic impact will not be the same everywhere, but there are also other UK specific matters such as the end of the Brexit Transition Period, so IMHO avoiding putting all of your eggs in the UK listed basket is not a bad thing.

Looking outside the UK also opens up other sectors that are not easily filled with UK listed companies. UK banks are not paying dividends currently, but Canadian ones are so even after the 15% withholding tax payable if you hold the shares in a SIPP they are still looking pretty attractive. What about US technology companies, no tax in a SIPP and 15% in an ISA IIRC, you could look at IBM yielding 5.5% and a long track record of increases, or CISCO which while yielding less at 3.1% (probably still around FTSE100 average) has a very strong growth record. Both of those have a market cap north of US$100bn so solidly in the big cap space that you won't find if looking for technology options for UK listed companies. Other options IMHO include Coca Cola which is currently paying 3.6%, Pepsico at 3.1% or Catapillar at 3.3%.

Some overseas markets are more difficult to access through direct holdings, but what about asian exposure through the IT Henderson Far East Income which is currently offering a 6.9% yield?

None of these options are guaranteed to keep paying at the current level. But looking outside the UK listed universe gives many, many more options.

All just suggestions to further research and not recommendations, I hold some but not all of the above. As ever DYOR.
Moderator Message:
Split off of Smith (DS) - smoke and mirrors thread, where it was off-topic (despite the quoted text deriving from an HYP-P thread about DS Smith. - Chris
Last edited by csearle on July 4th, 2020, 1:09 pm, edited 1 time in total.

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