Arb HYP, ITs and OEICs

[Wizard]

I now post some more information at the half year stage, which shows the more short term picture. Rather than looking at the numbers over 12 months, here they are over 6months :-

in pence per unit      June 30 2019         June 30 2020        change
HYP                       3.61                  2.54             -29.6%
incITs                    3.59                  3.80             + 5.8%
OEICs                     3.48                  3.21             - 7.7%

6 month change in unit price

price of income unit    Dec 30 2019               June 30 2020       change
HYP                         135.68                   115.56           -14.8%
incITs                      185.51                   144.35           -22.1%
OIECs                       172.38                   141.96           -17.6%

I generally prefer the 12 month rolling figure if only because I sometimes make changes myself which alter the distribution of dividends, and these changes are less significant on the longer scale. However, the 6 month figures do show more dramatically the initial effect of the Covid crisis.
Arb.

Posted here to allow discussion, rather than just a passing mention, of the non-HYP components

I find these numbers very interesting as it is a real world example. If I understand it correctly for both HYP and OIECs the income has dropped and so has the capital value, but for ITs the capital value has dropped but the income has actually increased year-on-year. Presumably this means a fairly significant change in relative yields. Unfortunately with the mismatching dates we cannot calculate the actual impact from the above, but using an assumption to illustrate...

Taking the June 2019 income and assuming that was exactly half the annual income would give for each basket a trailing yield as at 31st December as follows:
HYP 3.61 x 2 = 7.22 / 135.68 = 5.3%
inc ITs 3.59 x 2 = 7.18 / 185.51 = 3.8%
OIECs 3.48 x 2 = 6.96 / 172.38 = 4.0%

Assuming the June 2020 income and again assuming it is half of the annual income would give for each basket a trailing yield as at 31st December as follows:
HYP 2.54 x 2 = 5.1 / 115.56 = 4.4%
inc ITs 3.80 x 2 = 7.60 / 144.35 = 5.2%
OIECs 3.21 x 2 = 6.42 / 141.96 = 4.5%

Now the numbers above are no doubt not right as the 50:50 income split is I am sure not correct, but the direction of travel is. The question I have Arb is, what does this mean for asset allocation in the short term? Are you now putting more surplus funds in the direction of the ITs for an immediate bigger 'bang for the buck' or are you sticking with the past split, working on the basis that either HYP shares will increase their dividends again quickly or that ITs and OIECs will have to cut their pay outs?

[Alaric]

I find these numbers very interesting as it is a real world example. If I understand it correctly for both HYP and OIECs the income has dropped and so has the capital value, but for ITs the capital value has dropped but the income has actually increased year-on-year.

We know that ITs will if necessary use cash balances, sell or borrow to maintain dividends within the limits of the accounting rules on the maintenance of IT status. As regards a comparison between a portfolio of directly held shares and OEICs, there's a timing difference. A cancelled dividend will show up in a directly held portfolio as soon as it happens, whilst the effect of the same share on an OEIC distribution might be deferred for several months. ETFs by virtue of paying quarterly are already showing the effect of cuts.

[tjh290633]

What you have not taken into account is the time lag with ITs and OEICs or ETFs. As the effect on dividends has only been apparent since dividends which should have been paid from 1st May onwards in my portfolio, it will only be fully apparent in collective investments which next report their results for the 3 month period from then. Let's say that they are reporting 3-monthly, then their accounts to 30th June would not come out until late July, judging by Alliance Trust as an example.

So because they often try to make equal payments for a number of quarters, the effects might not show until December or even March 2021 for the full year.

What shows up immediately in a portfolio of individual shares will be at least 3 month's delayed in a collective investment.

TJH

[Wizard]

What you have not taken into account is the time lag with ITs and OEICs or ETFs. As the effect on dividends has only been apparent since dividends which should have been paid from 1st May onwards in my portfolio, it will only be fully apparent in collective investments which next report their results for the 3 month period from then. Let's say that they are reporting 3-monthly, then their accounts to 30th June would not come out until late July, judging by Alliance Trust as an example.

So because they often try to make equal payments for a number of quarters, the effects might not show until December or even March 2021 for the full year.

What shows up immediately in a portfolio of individual shares will be at least 3 month's delayed in a collective investment.

TJH

You may be right, but...

...

is there a more pronounced geographic spread regarding where the IncITs and OEICs are invested compared with the HYP?

...may also be a relevant consideration. I have heard mention that the general level of dividend cuts has been more significant for UK listed shares than many other markets.

I guess Arb can't really go into detail on the geographic profile of his ITs and OEICs on HYP-P, but he could on here if he wants to.

[OhNoNotimAgain]

What you have not taken into account is the time lag with ITs and OEICs or ETFs. As the effect on dividends has only been apparent since dividends which should have been paid from 1st May onwards in my portfolio, it will only be fully apparent in collective investments which next report their results for the 3 month period from then. Let's say that they are reporting 3-monthly, then their accounts to 30th June would not come out until late July, judging by Alliance Trust as an example.

So because they often try to make equal payments for a number of quarters, the effects might not show until December or even March 2021 for the full year.

What shows up immediately in a portfolio of individual shares will be at least 3 month's delayed in a collective investment.

TJH

Unless the collective distributes monthly.

[Bagger46]

What you have not taken into account is the time lag with ITs and OEICs or ETFs. As the effect on dividends has only been apparent since dividends which should have been paid from 1st May onwards in my portfolio, it will only be fully apparent in collective investments which next report their results for the 3 month period from then. Let's say that they are reporting 3-monthly, then their accounts to 30th June would not come out until late July, judging by Alliance Trust as an example.

So because they often try to make equal payments for a number of quarters, the effects might not show until December or even March 2021 for the full year.

What shows up immediately in a portfolio of individual shares will be at least 3 month's delayed in a collective investment.

TJH

Unless the collective distributes monthly.

Hello Nothim alias Rob,

You mean like this marvellous so called smart fund(which is quite the opposite imho), which you have mercilessly plugged on the boards, and not that 'subliminably' either, which has, since launch in 2007 turned £1 of capital into a miserable 73p, while delivering mundane income(easy to get without losing your capital at all, even indexed, by a variety of other, and much better, approaches, like staying awake basically), and which over the next year or so will have at least 40% less to distribute, being over heavy in cutters left right and centre.

Bagger