New HYP shares

[kempiejon]

If you don't often follow the market or run screens when previously unHYPables slip into range you might miss the chance; I'm pleased to have picked up Diageo, Reckitt Benckiser, Unilever, Compass and London Stock Exchange. I don't think they'd often beat the FTSE100 but all made their way into my portfolio. We will have to see how that pans out with WPP and Essentra my two more recent rarely at this level picks.

[CryptoPlankton]

When the occasional plodder starts to falter, it's inevitable that one should look around and see what else is out there. For example, as shares like Pearson trip over, or UBM turns into Informa- two recent examples of my own - one looks around to see what one is missing.

The answer may be "not much" but it's worth asking!

I don't disagree, but also don't believe it is necessary to look any further than the "usual suspects" to maintain a perfectly adequate HYP.

If you don't often follow the market or run screens when previously unHYPables slip into range you might miss the chance; I'm pleased to have picked up Diageo, Reckitt Benckiser, Unilever, Compass and London Stock Exchange. I don't think they'd often beat the FTSE100 but all made their way into my portfolio. We will have to see how that pans out with WPP and Essentra my two more recent rarely at this level picks.

Again, I absolutely don't disagree with that approach. I suppose it partly depends on how you build your HYP, but also what you consider "usual suspects". I have picked up DGE and ULVR myself at opportune times (also held RB. for a long time, but sold when the temptation to lock in more income elsewhere became too much!). I would still consider these shares as usual suspects as their sound credentials make them widely coveted by HYPers - unfortunately, they nearly always have an alibi. Similarly, BAE Systems doesn't qualify at the moment, but I would certainly categorise it as a usual suspect.

I personally would consider the following to be "usual suspects", based on my perception of appearances in reported HYPs (didn't someone post some stats on that once?):

BA.
NG., UU., SSE, SVT
BP, RDSB
GSK, AZN
IMB, BATS
LLOY, HSBA
RIO,BLT,AAL
VOD
BT.A
AV.,LGEN
ADM,DLG
ITV, WPP
PSN, BDEV
SBRY, MKS, NXT
RMG
BLND
and the aforementioned ULVR, DGE and possibly RB.

(Apologies for using the tickers, but it hardly seemed necessary to give full names...)

I'm sure there are a few more that I have missed, and others' opinions may differ, but I doubt there is ever a need to look much further to create a well-diversified HYP. I have Inmarsat, IG Group and City of London Investment Group (not CTY IT!), but they aren't really necessary - just a legacy of my journey. To be honest, having had over 30 holdings at one point, I would be very comfortable whittling away the current 23 to a portfolio of 18-20 from the above list.

I suppose my original point was that there's no need to go fishing too far from the pond with the big fish in it. I may have been talking cross purposes with the notion that not all the big fish are visible all the time and I certainly wasn't saying that it is wrong to be patient and ready if an elusive one should bite. Perhaps I should just find something else to do in the lull between all the great sport I've been watching this summer...

[idpickering]

I don't disagree, but also don't believe it is necessary to look any further than the "usual suspects" to maintain a perfectly adequate HYP.

I personally would consider the following to be "usual suspects", based on my perception of appearances in reported HYPs (didn't someone post some stats on that once?):

BA.
NG., UU., SSE, SVT
BP, RDSB
GSK, AZN
IMB, BATS
LLOY, HSBA
RIO,BLT,AAL
VOD
BT.A
AV.,LGEN
ADM,DLG
ITV, WPP
PSN, BDEV
SBRY, MKS, NXT
RMG
BLND
and the aforementioned ULVR, DGE and possibly RB.

(Apologies for using the tickers, but it hardly seemed necessary to give full names...)

I'm sure there are a few more that I have missed, and others' opinions may differ, but I doubt there is ever a need to look much further to create a well-diversified HYP. I have Inmarsat, IG Group and City of London Investment Group (not CTY IT!), but they aren't really necessary - just a legacy of my journey. To be honest, having had over 30 holdings at one point, I would be very comfortable whittling away the current 23 to a portfolio of 18-20 from the above list.

I suppose my original point was that there's no need to go fishing too far from the pond with the big fish in it. I may have been talking cross purposes with the notion that not all the big fish are visible all the time and I certainly wasn't saying that it is wrong to be patient and ready if an elusive one should bite. Perhaps I should just find something else to do in the lull between all the great sport I've been watching this summer...

I agree wholeheartedly with your post CP, and hold all of the above except SVT, AAL,BDEV, MKS and NXT.

Ian.

[Gengulphus]

I personally would consider the following to be "usual suspects", based on my perception of appearances in reported HYPs (didn't someone post some stats on that once?):

BA.
NG., UU., SSE, SVT
BP, RDSB
GSK, AZN
IMB, BATS
LLOY, HSBA
RIO,BLT,AAL
VOD
BT.A
AV.,LGEN
ADM,DLG
ITV, WPP
PSN, BDEV
SBRY, MKS, NXT
RMG
BLND
and the aforementioned ULVR, DGE and possibly RB.

Without going into details of any of those companies, or researching whether they qualify for HYP purchases (beyond the fact that I already know far too well that the "aforementioned ULVR, DGE and possibly RB" currently don't under this board's guidance!), that is dependent on the HYPer's personal views about sectors and diversification. For example, one who felt that Defence and Tobacco were off-limits for ethical reasons, that fixed-line and mobile telecoms were too close together to really be different sectors, and that life and non-life insurance were similarly too close together would only count your list as 12 sectors.

Note I'm not trying to raise the question of what views HYPers ought to have about sectors, let alone start a discussion about ethics or the details of sector distinctions. I'm just pointing out that HYPers' views do vary on the subject and so one wants to find a reasonable margin of safety over the 15-sector standard to be reasonably certain that it's achievable for most HYPers.

FWIW, I would personally regard that list of EPICs as presenting me with 14 sectors - that's as a result of some of the views I've listed about sectors, not having others, and having further ones I haven't listed. I would only have to go a little way down into the FTSE 250 to find a few more, though...

Gengulphus

[CryptoPlankton]

I personally would consider the following to be "usual suspects", based on my perception of appearances in reported HYPs (didn't someone post some stats on that once?):

BA.
NG., UU., SSE, SVT
BP, RDSB
GSK, AZN
IMB, BATS
LLOY, HSBA
RIO,BLT,AAL
VOD
BT.A
AV.,LGEN
ADM,DLG
ITV, WPP
PSN, BDEV
SBRY, MKS, NXT
RMG
BLND
and the aforementioned ULVR, DGE and possibly RB.

Without going into details of any of those companies, or researching whether they qualify for HYP purchases (beyond the fact that I already know far too well that the "aforementioned ULVR, DGE and possibly RB" currently don't under this board's guidance!), that is dependent on the HYPer's personal views about sectors and diversification. For example, one who felt that Defence and Tobacco were off-limits for ethical reasons, that fixed-line and mobile telecoms were too close together to really be different sectors, and that life and non-life insurance were similarly too close together would only count your list as 12 sectors.

Note I'm not trying to raise the question of what views HYPers ought to have about sectors, let alone start a discussion about ethics or the details of sector distinctions. I'm just pointing out that HYPers' views do vary on the subject and so one wants to find a reasonable margin of safety over the 15-sector standard to be reasonably certain that it's achievable for most HYPers.

FWIW, I would personally regard that list of EPICs as presenting me with 14 sectors - that's as a result of some of the views I've listed about sectors, not having others, and having further ones I haven't listed. I would only have to go a little way down into the FTSE 250 to find a few more, though...

Gengulphus

In my defence, I did go on to say that I was sure the list wasn't exhaustive and also that "I doubt there is ever a need to look much further to create a well-diversified HYP". I believe that is true and doesn't preclude looking outside the usual suspects for one or two shares to complete the "15-sector standard" if someone finds it necessary.

Having said that, I know you didn't want to start a discussion about sector distinctions, but I'd just say your examples (telecoms and insurers) illustrate the slightly arbitrary nature of that standard and how views on diversification risk can potentially impact the degree of exposure to "size" (smaller caps) risk. Interesting, but veering OT...

And I certainly don't want to start a debate about ethics either - it is a very personal thing and I wouldn't presume to try to influence anyone's views (or appreciate having mine questioned!).

I consider myself fortunate, as I am satisfied that I have achieved sufficient diversification in my "HYP" from investing in FTSE 100 companies alone (I see arguably 18 to 20 discrete and acceptable sectors in that list!). I fully understand others may need to cast the net a little wider for diversification but, based purely on personal experience, it is my humble view that there is little to be gained by straying any further than is necessary from the usual suspects. That's really all I was trying to say.

[micrographia]

All but one of my HYP purchases since the end of 2015 have been top-ups of existing shares, the sole exception being TW, itself a sector top-up as I already held PSN. As noted by others most of this will be down to my HYP being quite mature now, so I already hold the usual suspects. I'm finding myself revisiting holdings that have been overlooked for some years; my last 3 buys were TATE, VOD and GSK. All on yields north of 5% though, so I'm not complaining about a lack of new HYP candidates just yet.

EEM

[tjh290633]

In the last 5 years I have made 5 disposals of complete holdings.

Vodafone was sold in 2014 to avoid getting Verizon, and I then bought back into VOD after the split.

RSA was sold when it stopped paying dividends in the same year, Admiral (ADM) was its replacement, with a starting yield of 6.6%.

Rexam was taken over in 2016, and was replaced by Rio Tinto (RIO) with a starting yield of 6.1%, then Premier Farnell was taken over and replaced by Legal and General (LGEN), with a starting yield of 6.7%.

Finally I got rid of Indivior a few weeks ago and used the proceeds to help pay for a cruise.

Other than those transactions, all of mine have been topping up existing shares. I have forgotten Carillion, which vanished like the Oozlum Bird. So just three new shares in 5 years.

TJH

[PinkDalek]

In the last 5 years I have made 5 disposals of complete holdings.

You sound like a year trader.

Finally I got rid of Indivior a few weeks ago and used the proceeds to help pay for a cruise.

So much for LTB&H.

Hope you enjoy the cruise and report back at the Travel Lounge.

[tjh290633]

You sound like a year trader.

Finally I got rid of Indivior a few weeks ago and used the proceeds to help pay for a cruise.

So much for LTB&H.

Hope you enjoy the cruise and report back at the Travel Lounge.

These things seem to be a bit like buses. Suddenly two come along together. Two in 2014 and two in 2016.

I left it a bit too long to dump INDV.

I don't usually frequent the Travel Lounge. Maybe I should.

TJH

[PinkDalek]

I don't usually frequent the Travel Lounge. Maybe I should.

It might pay dividends.

[Wasron]

To get this board back on track I was wondering if anybody had spotted a share that had drifted into the HYP selection criteria recently that isn't one of the usual suspects.

Is there anything left unloved that is just getting on with it we don't know about?

How about Lancashire Holdings (LRE)?

As a catastrophe insurer they are likely to have a weak correlation to the rest of a HYP. The have a syndicate in Lloyd’s of London and return excess profits to shareholders rather that diversify away from their underwriting niche.

The yield will show on a screen as around 2%, but that’s because they pay large specials to reflect the feast and famine nature of their business.

I’ve held them since Jan 2014 after valuemargin highlighted them on TMF. In that time my annual dividends have been 98p, 107p, 71p and 12p. Last year’s storm season meant no special last year, but given the current price of 550p these are hefty dividend payments.

I intend to run my HYP in retirement with a cash buffer so this lumpiness doesn’t bother me.

Regards

[minerjoe]

I certainly agree with some of this - I do, at times find this board very stale. Conversation is often kept very tight around "the usual suspects" and yet people post about RB (and its 2% yield, hardly High) with narry a battered eyelid.

I would like to know what constitutes a suitable share when the boundaries are so blurred they are often fuzzy. HYP stands for High Yield Portfolio and I see many happy to discuss big market cap low yields vs low market cap higher yields.

Today I did a screen and pulled up RPC group - 3bn market cap, just under 4% yield, 2.5 cover, 10 P/E ratio, 25 year rising history and 14.6% CAGR over 10 years - I've never seen it mentioned here and I fear thats because often we refuse to look beyond the usual 15-20 shares.

Food for thought, interested how this plays out *watches with popcorn

[PinkDalek]

…

Today I did a screen and pulled up RPC group - 3bn market cap, just under 4% yield, 2.5 cover, 10 P/E ratio, 25 year rising history and 14.6% CAGR over 10 years - I've never seen it mentioned here and I fear thats because often we refuse to look beyond the usual 15-20 shares. ...

RPC Group plc have been mentioned on this board a fair number of times. I know of one holder in particular but that's by the by.

Easily found by using the search box, which can be made board specific if needed.

They also get discussed at Share ideas. Here's a thread from there at the start of this year:

viewtopic.php?p=99870#p99870

[monabri]

I'm considering Jupiter Fund Mgt (JUP).

The yield last night at 442.8p was 3.86%. With the share price drop today to 424p and the increase of the interim divi by 16%, the effective yield is 4.28% (see below).

(Note - I'm not including any potential "special" divi in the calcs).

History - Eight years of increasing dividends.

https://www.dividenddata.co.uk/dividend ... y?epic=JUP

- No debt
- dividends covered (reported as x2 by SimplyWall Street but please check on digital look)


workings:

https://www.dividenddata.co.uk/dividend ... y?epic=JUP

(17.1p +1.1p)/ 442.8p = 4.1% (where 17.1p was the 12 month trailing dividend ; 1.1p the announced increase in the interim : 442.8p closing price)

Then we have 442.8p/424p x 4.1% = 4.28%.

[Davidsb]

Hi monabri -

I considered JUP last month, when deciding on a home for the proceeds of my UBM disposal.

At the time, a slightly higher yield than SLA, but with a higher P/E ratio.

The thing that swung it for me was the relative market caps, with SLA at c£10bn or some 5 times the size of JUP. So SLA got the vote. Fortunately, when I ran my screen SLA's share price was over 360p, but by the time I got around to the actual purchase, the price had slipped to 310p.

However, I agree with you that JUP is definitely one to watch closely.

Good luck, whatever you pick.

[floyd3592]

I personally would consider the following to be "usual suspects", based on my perception of appearances in reported HYPs (didn't someone post some stats on that once?):

BA.
NG., UU., SSE, SVT
BP, RDSB
GSK, AZN
IMB, BATS
LLOY, HSBA
RIO,BLT,AAL
VOD
BT.A
AV.,LGEN
ADM,DLG
ITV, WPP
PSN, BDEV
SBRY, MKS, NXT
RMG
BLND
and the aforementioned ULVR, DGE and possibly RB.

Great post CP. If one was going to set up a HYP from scratch using only these 'usual suspects' as a basis, are there any that are currently considered to be avoided as they are too expensive or conversely 'must haves' as they are currently considered good value?

[tjh290633]

I personally would consider the following to be "usual suspects", based on my perception of appearances in reported HYPs (didn't someone post some stats on that once?):

BA.
NG., UU., SSE, SVT
BP, RDSB
GSK, AZN
IMB, BATS
LLOY, HSBA
RIO,BLT,AAL
VOD
BT.A
AV.,LGEN
ADM,DLG
ITV, WPP
PSN, BDEV
SBRY, MKS, NXT
RMG
BLND
and the aforementioned ULVR, DGE and possibly RB.

Great post CP. If one was going to set up a HYP from scratch using only these 'usual suspects' as a basis, are there any that are currently considered to be avoided as they are too expensive or conversely 'must haves' as they are currently considered good value?

You should follow the normal procedure. That is to say, you list them in descending order of yield. Starting at the top you pick them in succession, avoiding duplicating a sector as long as you can.

You should look at all the recent market information for each share, to see if anything nasty is in the woodshed, like a forthcoming merger or demerger, or a significant sale or acquisition. For example, you might wish to avoid SSE until after the retail side has been spun off.

It would be normal to exclude any shares whose yield is currently lower than the market average, but watch out for any occasion if they come into range, probably by moving down when the market moves up.

Initially you buy equal monetary amounts of each share. If you later add another share, do so at the then median or average holding value. If you start duplicating sectors, avoid the temptation to overdo it.

That's about it. There is always the question of smell, and if a share doesn't smell right to you, avoid it.

TJH

[SlickMongoose]

Bought some Pets at Home (PETS) recently. Yield is 6.1% currently, with a dividend cover of 1.7.

Retail, but the pet industry probably holds up better in a downturn than most other types of retail. Their share price has been falling a long way recently due to lowering their prices to compete with online retailers, and this has obviously hit their margins significantly. They've stated that the price cuts are pretty much coming to an end this year, and they've just released solid revenue growth numbers. They also have good long term growth prospects through their maturing vets business.

They're also the 2nd most shorted share on the market, after Carillion, so maybe not for the faint of heart!

[Walrus]

I just ran a screen on Digitallook:

market Cap > £1Bn
Yield > 5%
Div growth >2% over last 4 years
Cover > 1.5

It threw up a few new ones besides MicroFocus:

Crest Nicholson (builder) 8.4% (yield)
Playtech (software) 6%
Dunelm ( home furnishings) 5%
Polymetal International (precious metal mining) 5%

All are rather low-cap, and I do not profess to know much about them, but some new names at least.

Playtech is one I've had my eye on for a little while now. Looks like it's recovering a touch from its recent lows. It's a new sector for me, and I've struggled to get comfortable enough to pull the trigger on mainly due to my lack of understanding around the barriers to entry and potential regulatory risks. That been said I suspect there is some decent growth potential on top of the current yield with new European markets etc. Will have another look at it, just not convinced it's a LTBH and keep your eyes closed, maybe more of a value bet

[CryptoPlankton]

I personally would consider the following to be "usual suspects", based on my perception of appearances in reported HYPs (didn't someone post some stats on that once?):

BA.
NG., UU., SSE, SVT
BP, RDSB
GSK, AZN
IMB, BATS
LLOY, HSBA
RIO,BLT,AAL
VOD
BT.A
AV.,LGEN
ADM,DLG
ITV, WPP
PSN, BDEV
SBRY, MKS, NXT
RMG
BLND
and the aforementioned ULVR, DGE and possibly RB.

Great post CP. If one was going to set up a HYP from scratch using only these 'usual suspects' as a basis, are there any that are currently considered to be avoided as they are too expensive or conversely 'must haves' as they are currently considered good value?

You should follow the normal procedure. That is to say, you list them in descending order of yield. Starting at the top you pick them in succession, avoiding duplicating a sector as long as you can.

You should look at all the recent market information for each share, to see if anything nasty is in the woodshed, like a forthcoming merger or demerger, or a significant sale or acquisition. For example, you might wish to avoid SSE until after the retail side has been spun off.

It would be normal to exclude any shares whose yield is currently lower than the market average, but watch out for any occasion if they come into range, probably by moving down when the market moves up.

Initially you buy equal monetary amounts of each share. If you later add another share, do so at the then median or average holding value. If you start duplicating sectors, avoid the temptation to overdo it.

That's about it. There is always the question of smell, and if a share doesn't smell right to you, avoid it.

TJH

Hi floyd

I was only trying to illustrate that it is possible to create (at least most of, if you are restricted by ethical concerns or a narrower view of sectors than some) a well diversified HYP without having to look beyond a fairly well established group of large caps from the FTSE 100. I am hesitant about recommending or advising against any of the shares for several reasons:

1) I no longer tend to research them in any depth as my "HYP" has been pretty complete for some time

2) I have no more investing skill than the next man/woman

3) The list was pretty much off the top of my head and others may disagree with some choices and think other companies should be included (in retrospect, I think I do myself!)

4) Ultimately, you need to buy shares that YOU feel comfortable holding

I think TJH has given a pretty good summary of how to go about it. I would start by looking at the whole of the FTSE 100 rather than just those listed - the following site summarises the yields:

https://www.dividenddata.co.uk/dividend ... et=ftse100

As TJH implies, it is important not to assume the dividends will continue at the same levels and you should investigate any companies that make your short list further before choosing them (this is where you have to choose your own "safety" criteria such as dividend cover, years of rising dividend, debt, whatever makes you comfortable - as well as the market news and "smell" that TJH speaks of).

FWIW, looking at the above list, this is how I personally would start off:

Firstly, as the FTSE 100 average yield is currently about 4%, I would disregard AZN, DGE, ULVR, RB., BA., ADM, SBRY and NXT.

That would leave the following shares as the highest yielders in their sectors (as I see sectors, you may feel differently), with the next highest, where applicable, in brackets:

HSBA 5.54% (LLOY 5.04)
RDSB 5.73% (BP 5.67)
IMB 5.97% (BATS 4.70)
GSK 5.11%
RIO 6.32% (AAL 4.84)
VOD 7.38%
SSE 7.45% (NG. 5.61)
BT.A 6.85%
LGEN 5.91% (AV. 5.67)
DLG 6.39%
UU. 5.38% (SVT 4.38)
BLND 4.71%
RMG 5.15%
PSN 9.50% (BDEV 4.75)
WPP 4.86% (ITV 4.67)
MKS 6.18%

So, on the face of it, the "usual suspects" (as scratched together fairly haphazardly by me) are offering quite a juicy HYP spanning 16 sectors at the moment! Of course, it isn't quite as simple as that and more work should go into deciding a final selection. Would BATS be a better pick than IMB, given their histories and market news? Would NG. be a safer bet than SSE now for the reason TJH gave? Are BT. in a position to maintain that dividend? PSN's yield is 9.5% - that surely needs investigating - and so on...

It isn't a precise science, and we all need to apply our personal priorities and do our own research to satisfy ourselves that we are happy to invest in each company - and never accept that somebody else's opinion is any better than our own. Some people may be well informed and pass on useful information and advice, but the ultimate decision is our own. The only reason I suggested that we needn't look much further than the usual subjects is that it helps reduce the risk associated with investing in smaller companies but, if you are happy that the risk in adding one or two of those to your portfolio is acceptably low, then I'm certainly not saying it's wrong or you shouldn't - I have!

Good luck.

CP (a very average private investor)