Imperial Brands (IMB)

[Dod101]

Maybe we should have a zombie tobacco company. It would build up a portfolio of traditional tobacco brands and run them down like a life insurer. That would leave the new vaping and other developments in separate companies which are sharper and more entrepreneurial.

The former would be truly for income seekers and they might be better valued by the market; the latter would simply in the early years be a consumer of capital, but would behave like a start up which is essentially what they are. There are different mindsets needed for each type of business and it would not be the first time that value might be recognised by splitting up a business.

Dod

[idpickering]

Imperial Brands is a prime example of the folly of ignoring capital. There is no point whatever in getting a nice yield and increasing cash dividends if the share price itself tanks. Down 9% as I write this.

The tobaccos have been on my 'for sale' list for some time if only the price would recover a bit. A takeover would rescue me, although as I have held Imperial for upwards of 20 years I think I am still well on the positive side overall, although that is not much comfort at the moment.

The CEO might be looking for a job soon.

Dod

Agreed on all accounts Dod. I'm a bit stunned to see my IMB holdings down overall in capital value terms, at - 28%, with an average purchase price since first purchase on 17 Aug 2010, of 2584p per share. I'm not going to panic, but hold, and watch closely. On a plus note, I don't hold Pearson, who're performing even worse today. Apologise to holders of PSON. Back to IMB though, as a HYPer, when does SI become just I?

Ian.

[monabri]

Strange that BATS is "only" down by ~1.5% today with IMB down a full 11%?

[moorfield]

Imperial Brands is a prime example of the folly of ignoring capital. There is no point whatever in getting a nice yield and increasing cash dividends if the share price itself tanks.

Another illustration of how adopting a "yield ceiling" as a simple selection criterion might help HYPsters curb their predelictions for pretty yields. IMB (like VOD earlier this year) has run consistently above twice*FTSE100 yield for the last few months, which has automatically excluded them for me. But I might top up now though if a cut comes (as I did VOD after its dividend cut).

An idea that gets routinely panned when I dare to raise it over on HYP Practical.

[monabri]

Imperial Brands is a prime example of the folly of ignoring capital. There is no point whatever in getting a nice yield and increasing cash dividends if the share price itself tanks.

Another illustration of how adopting a "yield ceiling" as a simple selection criterion might help HYPsters curb their predelictions for pretty yields. IMB (like VOD earlier this year) has run consistently above twice*FTSE100 yield for the last few months, which has automatically excluded them for me. But I might top up now though (as I did VOD after its dividend cut).

An idea that gets routinely panned when I dare to raise it over on HYP Practical.

The logic there escapes me? You weren't buying when the yield was above "2x FTSE" but today you might top up..when the yield on offer has effectively increased?

Or is it a case, that the yield on offer has just got too pretty and you just can't refuse ?

[77ss]

Imperial Brands is a prime example of the folly of ignoring capital. There is no point whatever in getting a nice yield and increasing cash dividends if the share price itself tanks.

Another illustration of how adopting a "yield ceiling" as a simple selection criterion might help HYPsters curb their predelictions for pretty yields. IMB (like VOD earlier this year) has run consistently above twice*FTSE100 yield for the last few months, which has automatically excluded them for me. But I might top up now though if a cut comes (as I did VOD after its dividend cut).

An idea that gets routinely panned when I dare to raise it over on HYP Practical.

No point wasting your ideas on that board!

[moorfield]

Sorry monabri I was editing my post as you wrote that to add if a cut comes. For the foreseeable future, I am continuing to not touch IMB.

[tjh290633]

Just out of interest I checked the share price performance of IMT and IMB over the last few calendar years:

Year End Date  Share Price  Change
31/12/13       2338               
31/12/14       2836         21.30%
31/12/15       3586.5       26.46%
31/12/16       3542.5       -1.23%
31/12/17       3166        -10.63%
31/12/18       2377        -24.92%
26/09/19       1851        -22.13% to date

I suspect a lot of knees jerked this morning.

TJH

[monabri]

Sorry monabri I was editing my post as you wrote that to add if a cut comes. For the foreseeable future, I am continuing to not touch IMB.

No, apologies on my part, looks like I dived in a bit too soon.!!

[monabri]

Just out of interest I checked the share price performance of IMT and IMB over the last few calendar years:

Year End Date  Share Price  Change
31/12/13       2338               
31/12/14       2836         21.30%
31/12/15       3586.5       26.46%
31/12/16       3542.5       -1.23%
31/12/17       3166        -10.63%
31/12/18       2377        -24.92%
26/09/19       1851        -22.13% to date

I suspect a lot of knees jerked this morning.

TJH

Like June 2019 all over again at this price.

[Dod101]

Just out of interest I checked the share price performance of IMT and IMB over the last few calendar years:

Year End Date  Share Price  Change
31/12/13       2338               
31/12/14       2836         21.30%
31/12/15       3586.5       26.46%
31/12/16       3542.5       -1.23%
31/12/17       3166        -10.63%
31/12/18       2377        -24.92%
26/09/19       1851        -22.13% to date

I suspect a lot of knees jerked this morning.

TJH

I have been consoling myself over the last several months that all that has happened to the tobaccos (BAT and Imps) is that the irrational exuberance of 2015/16 has evaporated or as we could say the froth has subsided. I see no sign that the dividends of either company are in danger and so what is the problem? Growth has pretty well gone but they are both likely to be churning out cash profits for some time to come.........aren't they?

But to be well below the price they were nearly 6 years ago indicates that something is wrong and you have shown me nothing to suggest that ignoring capital values whilst enjoying a rising dividend is not folly. You are with respect sticking your head in the sand. Every time we get a further downward slide someone can be relied upon to tell us it is mere knee jerking or similar. They are ex growth and they seem not to be able to find a suitable substitute at least in the medium term anyway.

Dod

[idpickering]

They are ex growth and they seem not to be able to find a suitable substitute at least in the medium term anyway.

Dod

I agree Dod. I must admit, that I thought vaping would've been the saviour of fag companies, as tobacco itself got more and more frowned upon, by the general public and regulators alike. With the bad press regarding vaping, and the dangers it poses to the users to health becoming better known, it seems I've been naïve in thinking so.

I'm still not going to panic though, and am happy to ride this wave out whilst the dust/tide settles. Anyone a buyer of IMB here?

Ian.

[IanTHughes]

Imperial Brands is a prime example of the folly of ignoring capital. There is no point whatever in getting a nice yield and increasing cash dividends if the share price itself tanks.

Another illustration of how adopting a "yield ceiling" as a simple selection criterion might help HYPsters curb their predelictions for pretty yields. IMB (like VOD earlier this year) has run consistently above twice*FTSE100 yield for the last few months, which has automatically excluded them for me. But I might top up now though if a cut comes (as I did VOD after its dividend cut).

An idea that gets routinely panned when I dare to raise it over on HYP Practical.

I am monitoring the portfolio selected by pyad earlier this year which I have named the "PYAD Stockopedia Drawdown Portfolio" the reports on which can be seen here: viewtopic.php?p=225865#p225865

A quick look at the Capital Profit/Loss for the constituents of this portfolio, sorted by the Yield at the date of purchase, shows the following:

EPIC  |  Buy Yield  |  P/L (£)     |  Total Div (£)  |  Overall +/- (£)  |  Overall +/- (%)
VOD   |      9.00%  |   1,408.89   |        375.37   |        1,784.26   |           11.90%
IGG   |      8.61%  |   1,870.98   |        835.22   |        2,706.20   |           18.04%
SLA   |      7.97%  |     537.32   |      1,188.63   |        1,725.95   |           11.51%
AV    |      7.32%  |    -631.84   |      1,100.18   |          468.34   |            3.12%
IMB   |      7.16%  |  -4,250.18   |        355.34   |       -3,894.84   |          -25.99%
WPP   |      7.13%  |   2,617.33   |        663.94   |        3,281.27   |           21.88%
HSBA  |      6.32%  |     109.48   |        384.85   |          494.33   |            3.30%
ITV   |      6.25%  |    -434.08   |        629.20   |          195.12   |            1.30%
RDSB  |      6.00%  |    -198.53   |        231.68   |           33.15   |            0.44%
BP    |      5.63%  |    -516.57   |        221.08   |         -295.49   |           -3.94%
LAND  |      5.33%  |    -510.20   |        190.17   |         -320.03   |           -4.27%
BLND  |      5.26%  |    -174.49   |         98.65   |          -75.84   |           -1.01%
BHP   |      5.11%  |    -364.38   |        528.19   |          163.81   |            1.09%
GSK   |      5.05%  |   1,099.26   |        357.58   |        1,456.84   |            9.71%
GNK   |      5.05%  |   4,161.98   |        552.90   |        4,714.88   |           31.44%
BA    |      4.53%  |   2,471.62   |        401.67   |        2,873.29   |           19.16%
SMDS  |      4.34%  |     -11.24   |        224.12   |          212.88   |            1.42%
CCL   |      3.84%  |  -1,236.43   |        312.16   |         -924.27   |           -6.17%
IBST  |      3.73%  |  -1,230.92   |        859.79   |         -371.13   |           -2.47%

As one can see, the three shares bought at the three highest yields at purchase have all experienced capital gains, two quite substantial. Which of these three would you say should have been excluded from the portfolio, simply because of the high yield? Meanwhile, the three shares bought at the three lowest yields at purchase have all experienced capital losses, two quite substantial.

Now, this portfolio is quite new and I am not going to suggest for one minute that such evidence "proves" that investing in high yielders will produce the biggest capital gains - I leave that kind of "knee jerk reaction" to the less experienced amongst us - for one thing, the rest of the table shows different results.

However, I am curious as to the evidence you yourself must have trawled through in order to make your claim that HYPers should be "adopting a "yield ceiling" as a simple selection criterion" in order to improve capital outcomes. Would you be kind enough to share such evidence with the board?


Ian

[moorfield]

However, I am curious as to the evidence you yourself must have trawled through in order to make your claim that HYPers should be "adopting a "yield ceiling" as a simple selection criterion" in order to improve capital outcomes. Would you be kind enough to share such evidence with the board?

Ian

I don’t claim that HYPers should be doing this. I wrote in my post above that it might help curb yield chasing, by which I mean over-committing ones capital into the highest yields on offer. The evidence I can share is that of my own experience.

Buying Carillion (CLLN) while its yield continued to rise. It went bust.
Buying REA Prefs (RE.B). It has suspended the dividend.
Buying Centrica (CNA) while its yield continued to rise. It might still go bust, get nationalized, or get taken over.

Back to IMB. I cannot divine an opinion I’m completely confident of about the sustainability of the dividend from its reports (nor could I of VODs), but mindful of my previous experiences I have since become wary of high yields relative to the FTSE. The “yield ceiling” suggestion is a means of packaging those experiences into a simple mechanism that I can reapply consistently in the future.

[IanTHughes]

However, I am curious as to the evidence you yourself must have trawled through in order to make your claim that HYPers should be "adopting a "yield ceiling" as a simple selection criterion" in order to improve capital outcomes. Would you be kind enough to share such evidence with the board?

I don’t claim that HYPers should be doing this. I wrote in my post above that it might help curb yield chasing, by which I mean over-committing ones capital into the highest yields on offer.

Surely you realise that HYP is a strategy that selects the "highest yields on offer", subject of course to proper diversification and checking, as far as one can, that the dividend is sustainable?

The evidence I can share is that of my own experience.

Buying Carillion (CLLN) while its yield continued to rise. It went bust.
Buying REA Prefs (RE.B). It has suspended the dividend.
Buying Centrica (CNA) while its yield continued to rise. It might still go bust, get nationalized, or get taken over.

Does that mean that, in coming to your conclusions, you have never considered those holdings bought at high yield that have gone on to increasing dividend and capital values? There must be some surely?

I am sorry but, although I would never "pan" any such idea as you claim has happened on the "High Yield Portfolios (HYP) - Practical" board, if no serious analysis has been done to back up such an idea, is it really that surprising to you that it is given short shrift? Especially when stacked up against the evidence from multiple portfolios that clearly show that such a "limit" on the yield is not only unnecessary but may also damage the overall results of an HYP Portfolio.

Back to IMB. I cannot divine an opinion I’m completely confident of about the sustainability of the dividend from its reports (nor could I of VODs), but mindful of my previous experiences I have since become wary of high yields relative to the FTSE. The “yield ceiling” suggestion is a means of packaging those experiences into a simple mechanism that I can reapply consistently in the future.

I am no fortune teller but, if I was forced to make a prediction it would be that, starting next year, the IMB dividend will be held. Of course I may be wrong and the dividend is cut. But who knows, maybe a cut would give a jump to the share price as of course it has so far done to Vodafone Group (VOD).


Ian

[dspp]

Moderator Message:
REPEAT
Moderator Message:
This board is for discussing Imperial Brands company news not for discussing investing techniques. Please respect our attempt to maintain a board structure and post on the most appropriate board, or if you can't, not at all. If you wish to reply to an off-topic post please report it and request that it be moved first. Thanks - Chris

CLARIFICATION
I can see some people are seeking Mod clarification, including various alerts, so try this. If you go off and chat about this on the HYP-P board, which is for purely HYP-P discussion purposes, then you will only be having a limited conversation regarding whatever is the 'news' of the day (e.g. whether cannabis is more or less prevalent, and is something that will/will not affect IMB's business, etc etc). It is up to you where you go and who you chatter with, but at least on this board you will be able to have the widest possible conversation with the maximum number of investors, who are coming at this share (or whatever other share) from multiple different directions, and all of whom may have something worthwhile to say. If however you go direct to the HYP-P board you will be choosing to have a more limited conversation with a more limited number of people.

However if you wish to have a debate about the merits of HYP-P as an investing strategy can we gently encourage you NOT to do it on these news discussion areas.

regards, dspp

[monabri]

When you see that BATS finished "up" today, It's a puzzle that IMB fell so much - almost 13% in one day?

The trading statement wasn't that bad was it?

The forecasts were for modest EPS growth over the next 5 years but -as we've seen today - that f'casts are ...just that. However, I feel that the dividend should be safe but the increases that we've seen will be moderated.

[Dod101]

Imperial Brands ended the day at £17.98, down 12.9% on the day. Quite a knee jerk, to quote TJH.

That is down nearly 25% on the year to date. The market must surely think that the dividend is in danger. I doubt that the CEO will be there for much longer because however sympathetic we may be to a 'stalwart' HYP share, to go from a 10% increase in the dividend year upon year to removing that (in itself not a surprise) and then issue a profit warning will be infuriating more than Mr Woodford.

They said in February that they were seeking a new chairman and as far as I know they have not yet announced one but I imagine he will take a look at the current execs pretty closely.

Dod

[TheMotorcycleBoy]

I guess shareholders are grim about several things. One thing I mentioned right here:

viewtopic.php?p=245740#p245740

Investor support for tobacco business Imperial Brands is crumbling with big shareholders pushing for parts of the company to be sold off and changes to the leadership team after the share price halved in three years.

Personally, I'm annoyed I bought this share. We aren't HYPers but considered fags+vapes+hash to be some "diversification". Since we bought IMB I've become more interested and spent more time on Fundamental Analysis (stable/horse/bolted on this one). IMB seem to exhibit dire £££ management. Their retained earnings column is negative, and got slightly more negative from FY17 to FY18. Which says to me they've been increasing their divs. without the necessary reserves. Their recent bout of share buybacks seems crackers too - would interested in comparing the £££ recovered from asset sales VS that spent on the buybacks.

After Trumpy started moaning about vapes+lung disease a few weeks, I decided to cut this position by 40% (SP was about £22.20 then). Now we only have about £1100 of market value left, so I'll probably leave as is.

Matt

[ReformedCharacter]

We aren't HYPers but considered fags+vapes+hash to be some "diversification".
Matt

How times change...

RC