Re: HYP for comment please

[moorfield]

Hi Moorfield,
Yup. It will form part of my retirement income. I'm looking at a long-term, buy and hold HYP in my SIPP with top ups to keep the weighting balanced.

I thought it might have been. Apologies that was a leading question which is why I am replying here. I can point you immediately to two equity income ITs which yield greater than your overall HYP yield and have been able to continue steady payments through the Covid pandemic - AEI, CHI. IAAG posts some hugely useful tables here from time to time, reading them might make you feel like a small child in the reliable income sweetshop!

Also read IAAGs super post here
viewtopic.php?p=189951#p189951

And then ask yourself:

Am I building a HYP for the sake of building a HYP, or the serious business of a steady reliable retirement income?

[BullDog]

Good question.

[1nvest]

Hi Moorfield,
Yup. It will form part of my retirement income. I'm looking at a long-term, buy and hold HYP in my SIPP with top ups to keep the weighting balanced.

I thought it might have been. Apologies that was a leading question which is why I am replying here. I can point you immediately to two equity income ITs which yield greater than your overall HYP yield and have been able to continue steady payments through the Covid pandemic - AEI, CHI. IAAG posts some hugely useful tables here from time to time, reading them might make you feel like a small child in the reliable income sweetshop!

Also read IAAGs super post here
viewtopic.php?p=189951#p189951

And then ask yourself:

Am I building a HYP for the sake of building a HYP, or the serious business of a steady reliable retirement income?

As part of pondering that question one should also ask whether they have the temperament. HYP IMO takes a certain nature or set of circumstances. Owning a home and having decent additional inflation adjusted state/occupational pensions. Without those, renting, no pension other than your own SIPP that's fully loaded into a HYP and discomfort can be high at times, potentially leading to capitulation. Many who opine that they can ride the dips when put into practice can falter/fail.

2008 financial crisis and TJH HYP accumulation data indicates the portfolio value near halved. When you're also drawing perhaps 4%/year as income/dividends that pulls is down further, factor in inflation and !!! Imagine retiring one day and a year or two later seeing perhaps a former £1M retirement portfolio value having shrunk down to the £400K's level.

Or in other cases, such as 5 years of -16% nominal accumulation data as per 1987, further reduced by inflation and withdrawals/dividends. Again perhaps half your original pension pot gone after a handful of years.

It is those sorts of times when you'll tend to see expressions of anger and proclamations of HYP being a failure. As can also arise out of individual bad luck by having selected a particular choice of HYP stocks that collectively lagged the broader average.

Much of what you see/hear is based on survivorship, those for whom the HYP worked out well.

[moorfield]

I would appreciate your thoughts and comments on this list which currently gives a trailing yield for the portfolio of 6.2%.

F3nlander, this is a rather experimental post, I have taken the liberty of replacing 9 of these lower yield selections with AEI Abrdn UK Equity Income Trust at yield 6.90%. At 9/15ths weight that increases overall portfolio yield to 7.5%, ie boosts next twelve months forecast income by +20%.

AEI looks like a sound choice - it has increased its dividend for 22 years, and its dividend growth and cover figures through the Covid pandemic have been impressive, see: https://www.hl.co.uk/shares/shares-sear ... /dividends

Now one may not want to hold such a weighting, but I think it raises an interesting debate: that the de facto meaning of "high yield" in the HYP saloon is higher than practitioners may think. It is after all difficult to ignore the likes of AEI when undertaking the serious business of building a retirement income, isn't it? I'd say doubly so once one starts trawling through IAAGs tables.

EPIC | Name                      | Yield | Rank (#) | Mkt Cap (£M) | My Comment                                           
MNG  | M&G                       | 9.71% |       78 |        4,766 | Agreed                 
PHNX | Phoenix Holdings          | 9.18% |       75 |        5,537 | Agreed                 
BATS | British American Tobacco  | 8.71% |        8 |       59,263 | Agreed                 
SEQI | Sequoia Economic Infra    | 8.33% |      206 |        1,380 | Mkt Cap Too Small      
CBG  | Close Brothers            | 7.03% |      200 |        1,423 | Mkt Cap Too Small      
PHP  | Primary Health Properties | 6.78% |      213 |        1,311 | Mkt Cap Too Small      
RIO  | Rio Tinto                 | 7.92% |        7 |       64,300 | Agreed                 
NG.  | National Grid Transco     | 5.26% |       14 |       38,769 | Agreed                 
SSE  | SSE                       | 5.38% |       29 |       19,599 | Agreed                 
MONY | MoneySupermarket          | 4.24% |      191 |        1,482 | Mkt Cap Too Small      
TEP  | Telecom Plus              | 4.73% |      211 |        1,345 | Mkt Cap Too Small      
MNDI | Mondi                     | 4.73% |       68 |        6,319 | Agreed                 
TSCO | Tesco                     | 4.19% |       31 |       18,664 | Higher Yield - 4.60% - available from Sainsbury (SBRY)
GAW  | Games Workshop            | 2.86% |      105 |        3,746 | Yield Too Low
DCC  | DCC                       | 4.05% |       85 |        4,561 | Higher Yields Available
AEI  | Abrdn Equity Income       | 6.90% |

[BullDog]

I would appreciate your thoughts and comments on this list which currently gives a trailing yield for the portfolio of 6.2%.

F3nlander, this is a rather experimental post, I have taken the liberty of replacing 9 of these lower yield selections with AEI Abrdn UK Equity Income Trust at yield 6.90%. At 9/15ths weight that increases overall portfolio yield to 7.5%, ie boosts next twelve months forecast income by +20%.

AEI looks like a sound choice - it has increased its dividend for 22 years, and its dividend growth and cover figures through the Covid pandemic have been impressive, see: https://www.hl.co.uk/shares/shares-sear ... /dividends

Now one may not want to hold such a weighting, but I think it raises an interesting debate: that the de facto meaning of "high yield" in the HYP saloon is higher than practitioners may think. It is after all difficult to ignore the likes of AEI when undertaking the serious business of building a retirement income, isn't it? I'd say doubly so once one starts trawling through IAAGs tables.

EPIC | Name                      | Yield | Rank (#) | Mkt Cap (£M) | My Comment                                           
MNG  | M&G                       | 9.71% |       78 |        4,766 | Agreed                 
PHNX | Phoenix Holdings          | 9.18% |       75 |        5,537 | Agreed                 
BATS | British American Tobacco  | 8.71% |        8 |       59,263 | Agreed                 
SEQI | Sequoia Economic Infra    | 8.33% |      206 |        1,380 | Mkt Cap Too Small      
CBG  | Close Brothers            | 7.03% |      200 |        1,423 | Mkt Cap Too Small      
PHP  | Primary Health Properties | 6.78% |      213 |        1,311 | Mkt Cap Too Small      
RIO  | Rio Tinto                 | 7.92% |        7 |       64,300 | Agreed                 
NG.  | National Grid Transco     | 5.26% |       14 |       38,769 | Agreed                 
SSE  | SSE                       | 5.38% |       29 |       19,599 | Agreed                 
MONY | MoneySupermarket          | 4.24% |      191 |        1,482 | Mkt Cap Too Small      
TEP  | Telecom Plus              | 4.73% |      211 |        1,345 | Mkt Cap Too Small      
MNDI | Mondi                     | 4.73% |       68 |        6,319 | Agreed                 
TSCO | Tesco                     | 4.19% |       31 |       18,664 | Higher Yield - 4.60% - available from Sainsbury (SBRY)
GAW  | Games Workshop            | 2.86% |      105 |        3,746 | Yield Too Low
DCC  | DCC                       | 4.05% |       85 |        4,561 | Higher Yields Available
AEI  | Abrdn Equity Income       | 6.90% |

I agree with moorfield here. A kind hybrid approach to generating a good income like this, I find quite hard to seriously criticise. I would also point out the arbit portfolio threads as more information about how a hybridised approach to a portfolio can work well.