What to top up and HYP strategy going forward

[dealtn]

Is anyone buying or thinking of buying BT which has fallen so low it must be a possible takeover target? The share also has a current dividend yield of 9.5%.

Yes.

Ironically I gave my reasons on a Board I rarely frequent, multi-rec'd, and have just been "dismissed" from.

Feel free to search.

(I question your yield calculation though!)

[Gengulphus]

Is anyone buying or thinking of buying BT which has fallen so low it must be a possible takeover target? The share also has a current dividend yield of 9.5%.

Some sort of historical dividend yield of 9.5%, maybe. But the dividends that a HYPer buying now can expect in the foreseeable future are explained in https://investegate.co.uk/bt-group-plc- ... 00062096M/:

"Final dividend suspended for 2019/20 and all dividends for 2020/21 to create capacity for value-enhancing investments and managing confidently through the Covid-19 crisis; expect to resume dividends in 2021/22 at an annual rate of 7.7 pence per share"

At the current share price of 104.65p, and with the first dividend for BT's 2021/22 financial year expected to be an interim paid in February 2022, that's a yield of 0.00% for the next year and a half, then one of 7.4% if the company resumes dividends as they say they expect. Of course, 7.4% is still a high yield, but nothing like as high as 9.5%, and the long delay before starting to receive it and the uncertainty that must exist about whether the company will find that things are worse than they thought take a lot of the shine off it.

Gengulphus

[Itsallaguess]

So can I do the industry-sector analysis on a "UK Equity Income" IT, find out what percentages each industry sector represents of its underlying investments, define its sector to be e.g. "IT - 7% Pharmaceuticals, 6% MIning, 5% Banks, 5% Insurance, 4% Housebuilders, ..., 1% Information Technology", and have HYPTUSS automatically attribute those percentages of the holding's value to each of the sectors? Or preferably, since the weightings of the IT's underlying investments will vary over time, get HYPTUSS to automatically do the industry-sector analysis as well?

No, that's a level of granularity that the tool isn't capable of, and to be honest is not something that we'd be looking to develop.

Hopefully the steps for improvement in this area that we have carried out are still useful for anyone owning these types of income-generating investments.

Cheers,

Itsallaguess

[88V8]

A most worthy enhancement to HYPTUSS.

But in buying income ITs, I ignore the doubling up.
What I'm buying is their reserves to see me past the divi drought.

In time I may reduce my direct holdings and increase the ITs, so the doubling up will diminish.

Meanwhile, they also bring diversity, as they have holdings I do not and would not.
Would not; another problem for them as likes to delve into detail.
Embrace tactical ignorance.

V8

[Wizard]

If, as Arb says, an HYP as described by PYAD or the TLF rules cannot include multiple ITs, why would HYPTUSS include ITs as an option to be tracked? Maybe to allow for the Breelander Convetion, but surely that does not need the now provided AIC sectoral granularity. I therefore formally object to the use of the name HYPTUSS, from now on that tool can only be called hypTUSS or HYTUSS. Alternatively, as we now have PYADic or pure HYP and TLF HYP I insist we also add HYPTUSSHYP to the lexicon, as it seems the parties behind the so called HYPTUSS believe ITs should be included in an HYP. Why else would they provide the functionality to allow it?

Please take this in the light hearted way it is intended

[Wizard]

My strategy going forward is to top up shares that are still producing dividend and ignore the cutters. They will remain in the portfolio as I lack the ability to know if they will start paying dividend in the future. My basic knowledge of economic times like this, is that dividends return quickly and hence leaving these cutters in my portfolio may be my best option....

I agree with the comment made previously, I do not think blind faith in a return to paying will be rewrded particularly well. Rather I think a share-by-share approach is required. At the outset of the dividend cuts I said I suspect many companies would take the opportunity to 'rebase' their dividends and I see no reason to change my view on this. Far easier for Shell to cut the dividend for the first time since WWII when so many others are stopping paying altogether.

If income is your only focus I would take a close look at each share that is currently not paying or has cut its dividend. But I suspect this is not the case as you also mention investing for growth. In which case there needs to be a two stage approach, review for income recovery and if a share does not pass consider capital recovery. I appreciate you say you lack the ability to foresee recovery, but in some cases it does not need you to do anything other than read what the comapny has said, e.g. BT will not be paying any time soon.

[TUK020]

Is anyone buying or thinking of buying BT which has fallen so low it must be a possible takeover target? The share also has a current dividend yield of 9.5%.

The two main direct holdings I topped up at the end of March were a large stake in L&G (bought at below 150) and a smaller top up in BT. The rest of the reserves went into ITs.

Stake in BT was on the basis that it's core business was unlikely to be affected much by a 'work from home' crisis, and that the major millstone (pension liabilities) would not be adversely affected by a pandemic that killed off older folk.

I had been hoping that things would be starting to recover on BT's sp by now.....still hanging in there and chewing my nails.

[Gengulphus]

What I'm buying is their reserves to see me past the divi drought.

If you want reserves to see you past the dividend drought, I'd recommend putting them into a bank or building society account, or some near-cash investment such as Premium Bonds. That way, they get released to you by your decision made in the light of your financial circumstances...

Gengulphus

[Dod101]

Re BT I do not hold but surely they announced no dividend for the next couple of years? No dividend is currently being paid. Mike88 tells us that it has a dividend yield of 9.5%. I wish. As this is the High Yield Strategies Board discussion of BT is surely OT?

Nor do I understand 88V8's comment re reserves.

Dod

[88V8]

Nor do I understand 88V8's comment re reserves.

The comment that 'I'm buying their reserves' ?

Well, if I buy MUT at 4.5% yield, as I did in a top-up on Thursday, I'm confident that they will use their reserves to continue paying me 4.5% or thereabouts. So I regard it as buying access to their reserves.

Yes, as Gen says, I could just keep the cash, but then I receive no income. It's not that I need the income, but it's nice to have, eh, what?

V8

[Dod101]

Nor do I understand 88V8's comment re reserves.

The comment that 'I'm buying their reserves' ?

Well, if I buy MUT at 4.5% yield, as I did in a top-up on Thursday, I'm confident that they will use their reserves to continue paying me 4.5% or thereabouts. So I regard it as buying access to their reserves.

Yes, as Gen says, I could just keep the cash, but then I receive no income. It's not that I need the income, but it's nice to have, eh, what?

V8

Sorry I did not go back to your full post to see the context. You were discussing ITs and I can see your point now. I too hold Murray Income. I listed it in my suggestion for the OP in the thread 'Restarting mu HYP.

Dod

[Mike88]

Re BT I do not hold but surely they announced no dividend for the next couple of years? No dividend is currently being paid. Mike88 tells us that it has a dividend yield of 9.5%. I wish. As this is the High Yield Strategies Board discussion of BT is surely OT?

Nor do I understand 88V8's comment re reserves.

Dod

I googled BT dividend yield and got this:

9.5%
With the fall in share price following the update, BT's dividend yield is at 9.5%. This makes it one of the highest dividend yielding stocks in the FTSE 100, after EVRAZ, Centrica, and Imperial Brands.

As I understand it the dividend has only been suspended for 1 year but the advertised yield makes it a very appropriate share for a discussion on a High Yield Strategies Board and can hardly be described as OT as alleged above. However, I accept the Yield might be suspended again for a second year but, as I haven't a crystal ball, I cannot foresee the future.

[Alaric]

However, I accept the Yield might be suspended again for a second year but, as I haven't a crystal ball, I cannot foresee the future.

You can see two years into the future that the dividend return to investors in BT is likely to be zero. I don't make that a good choice for investors looking to invest a lump sum and get income from it over the next two years. Longer term, perhaps, but that's where crystal balls come in.

[Wizard]

Re BT I do not hold but surely they announced no dividend for the next couple of years? No dividend is currently being paid. Mike88 tells us that it has a dividend yield of 9.5%. I wish. As this is the High Yield Strategies Board discussion of BT is surely OT?

Nor do I understand 88V8's comment re reserves.

Dod

I googled BT dividend yield and got this:

9.5%
With the fall in share price following the update, BT's dividend yield is at 9.5%. This makes it one of the highest dividend yielding stocks in the FTSE 100, after EVRAZ, Centrica, and Imperial Brands.

As I understand it the dividend has only been suspended for 1 year but the advertised yield makes it a very appropriate share for a discussion on a High Yield Strategies Board and can hardly be described as OT as alleged above. However, I accept the Yield might be suspended again for a second year but, as I haven't a crystal ball, I cannot foresee the future.

Well, whoever wrote that is not to be believed or maybe it is a very old comment. BT has cancelled the dividend and is not restarting any time soon. You need to read what the company said itself.

[Dod101]

I googled BT dividend yield and got this:

9.5%
With the fall in share price following the update, BT's dividend yield is at 9.5%. This makes it one of the highest dividend yielding stocks in the FTSE 100, after EVRAZ, Centrica, and Imperial Brands.

As I understand it the dividend has only been suspended for 1 year but the advertised yield makes it a very appropriate share for a discussion on a High Yield Strategies Board and can hardly be described as OT as alleged above. However, I accept the Yield might be suspended again for a second year but, as I haven't a crystal ball, I cannot foresee the future.

BT's dividend yield is nil however you want to look at it. From BT's website, you will get the following:

The Final Dividend for the year to 31 March 2020 has been suspended as have all dividends for the following year to 31 March 2021. They then plan to resume paying dividends for the following year, 2021/2022 but will 'rebase them to a more sustainable level'.

With respect you are deluding yourself and others if you think that that amounts to a, presumably current, dividend of 9.5%.

A nil yield cannot be described as a High Yield Share even in these strange times and it therefore seems very odd to be discussing it on this Board.

Dod

[Wizard]

I googled BT dividend yield and got this:

9.5%
With the fall in share price following the update, BT's dividend yield is at 9.5%. This makes it one of the highest dividend yielding stocks in the FTSE 100, after EVRAZ, Centrica, and Imperial Brands.

As I understand it the dividend has only been suspended for 1 year but the advertised yield makes it a very appropriate share for a discussion on a High Yield Strategies Board and can hardly be described as OT as alleged above. However, I accept the Yield might be suspended again for a second year but, as I haven't a crystal ball, I cannot foresee the future.

BT's dividend yield is nil however you want to look at it. From BT's website, you will get the following:

The Final Dividend for the year to 31 March 2020 has been suspended as have all dividends for the following year to 31 March 2021. They then plan to resume paying dividends for the following year, 2021/2022 but will 'rebase them to a more sustainable level'.

With respect you are deluding yourself and others if you think that that amounts to a, presumably current, dividend of 9.5%.

A nil yield cannot be described as a High Yield Share even in these strange times and it therefore seems very odd to be discussing it on this Board.

Dod

However, if you want to discuss BT you can do so on HYP-P if you widh to as has been done with other shares that have suspended their dividends such as DS Smith

[Alaric]

A nil yield cannot be described as a High Yield Share even in these strange times and it therefore seems very odd to be discussing it on this Board.

There is the Unilever precedent whereby it was established that a low yielding share could be discussed on the notoriously rule bound HYP-P board on the grounds that it had qualified at some time in the past.

[Dod101]

I must say that whether or not BT should be discussed on this or the other Board is much less important I think than correcting the misleading statement that its yield is 9.5% or indeed anything more than nil. I should not have mentioned the other point as it detracts from this important message.

Dod

[Wizard]

A nil yield cannot be described as a High Yield Share even in these strange times and it therefore seems very odd to be discussing it on this Board.

There is the Unilever precedent whereby it was established that a low yielding share could be discussed on the notoriously rule bound HYP-P board on the grounds that it had qualified at some time in the past.

Yes, but there is an important distinction between HYP-P and HYS&S. On HYS&S we should only be discussing high yielding instruments whether equities or others, but on HYP-P one can discuss only discuss equities, but they can be high yield equities, formerly high yield but now less high yield equities or no yield because we live in strange times and I reckon it will start paying again soon equities.

[Gengulphus]

Nor do I understand 88V8's comment re reserves.

The comment that 'I'm buying their reserves' ?

Well, if I buy MUT at 4.5% yield, as I did in a top-up on Thursday, I'm confident that they will use their reserves to continue paying me 4.5% or thereabouts. So I regard it as buying access to their reserves.

Yes, as Gen says, I could just keep the cash, but then I receive no income. It's not that I need the income, but it's nice to have, eh, what?

Just to clarify, you said (with my bold) "What I'm buying is their reserves to see me past the divi drought." and my response was about keeping the cash (possibly as near-cash investments) for that reason. If you think there's a good chance you'll need cash in the short term (i.e. the next year or two), keep it in cash (which is why most income investors who are in the 'drawdown phase' rather than the 'build phase' keep a cash reserve), as shares (even IT shares) have quite a high chance of delivering capital losses that exceed the dividend income they deliver. If you're investing for the longer term, buying shares because you think they'll give you a good return makes sense - and I agree ITs' income reserves are one of the reasons one might think that.

Gengulphus