Unilever 3rd Quarter Trading Statement

[Arborbridge]

It is the sort of share that should be in almost every portfolio, if that is you are looking for long term sustainability. It will never shoot the lights out of course.

Dod

I do agree, but I also tend to worry when someone says: "It is the sort of share that should be in almost every portfolio".
I've heard it before: been there and done that - and lost out heavily! Nothing, it seems in the stock market, is for ever or above suspicion.

The general point is that we depend on the portfolio effect to protect us against such long term major changes when companies fail, and so it's done that moderately well for me.

[idpickering]

Thanks for that Arb. I’m not saying I will never buy back in though.

Ian

My memory may be faulty but haven't you previously sold and bought back in?

RC

Fair comment. You're right, I can be fickle sometimes.

Ian.

[moorfield]

The yield may be sub par but of course Arb knows as well as most on these Boards why Unilever is an attractive HYP share. Currently it may not quite meet the yield desirability for a HYP share but it certainly meets the dividend sustainability one and even more so in recent years anyway, the increasing one. There are not that many shares which have managed that, and it kept the increases up right through the crisis of 2007/8.

It is the sort of share that should be in almost every portfolio, if that is you are looking for long term sustainability. It will never shoot the lights out of course.

ULVR currently contributes ~3.6% of my overall income, and at current yield I am unlikely to be topping up for the foreseeable future as I do favour more bang for my newly minted buck, so that will dilute further over time to the extent its contribution to my retirement income (~15 years forward) may well become negligible.

It's a great pity the taking of such low(er) yield shares when your HYP has a high yield overall is not encouraged more here. That would help resolve the perennial conundrum of using them to provide for a long term sustainable retirement, which is the end-game we all seek, right?

[Dod101]

[I do agree, but I also tend to worry when someone says: "It is the sort of share that should be in almost every portfolio".
I've heard it before: been there and done that - and lost out heavily! Nothing, it seems in the stock market, is for ever or above suspicion.

I totally accept that. On another thread I was commenting on two excellent shares, circa 1995. One was that conservatively run Scottish bank, RBS (or the even more conservative Bank of Scotland which of course became part of HBOS) and the other GEC, with its pile of cash and run by that arch conservative, Arnold Weinstock. So no share is forever, and LTBH does not mean Buy and Hold Forever.

We must be ever on our guard, but so far Unilever has met most of my criteria.

Dod

Moderator Message:
Edited to add correct formating to quote. Raptor.

[vrdiver]

It's a great pity the taking of such low(er) yield shares when your HYP has a high yield overall is not encouraged more here. That would help resolve the perennial conundrum of using them to provide for a long term sustainable retirement, which is the end-game we all seek, right?

Indeed.
It's a High Yield Portfolio. Discussing shares that will give you a future high yield on their current purchase price (and growing both dividend and capital) has always been of interest to me, provided it's backed up with a decent track record (dividend CAGR over 5 and 10 years or more if possible) and a health warning about the past vs future etc.

Discussing Unilever being "on sale" seems worth mentioning when it happens, same as for other quality* companies.

Speaking of ULVR being on sale or not, I'd suggest anything north of 3.5% would be worth a long hard look at; current yield is 3.36%: https://www.dividenddata.co.uk/dividend ... ?epic=ULVR

I'm aware that investors starting their portfolio might prefer initial shares with higher yields, but for those with longer-term horizons or who have filled their initial sector diversification, I'd suggest adding "quality" not just quantity.

VRD


*No, I'm not going to define "quality"!

[IanTHughes]

Speaking of ULVR being on sale or not, I'd suggest anything north of 3.5% would be worth a long hard look at; current yield is 3.36%: https://www.dividenddata.co.uk/dividend ... ?epic=ULVR

I'm aware that investors starting their portfolio might prefer initial shares with higher yields, but for those with longer-term horizons or who have filled their initial sector diversification, I'd suggest adding "quality" not just quantity.

*No, I'm not going to define "quality"!

The problem is, in order to select as low a yield as is offered by Unilever PLC (ULVR), one first of all has to reject the many "Quality" shares with higher yields on offer. So what you are actually suggesting is the "Rejection of Quality" not its selection, and I will not do that.


Ian

[ayshfm1]

Plus I would struggle to select anything that yielded less than VUKE or CTY, the pooled investments in my mind have less risk than an individual share does and hence a selected share has to justify the extra risk (and that justification is bigger dividend).

[tjh290633]

The problem is, in order to select as low a yield as is offered by Unilever PLC (ULVR), one first of all has to reject the many "Quality" shares with higher yields on offer. So what you are actually suggesting is the "Rejection of Quality" not its selection, and I will not do that.


Ian

You may already hold all the other "Quality Shares" on offer, and be looking for an additional holding.

You have worked down the list, included FTSE250 shares, and still the next suitable share is ULVR.

TJH

[IanTHughes]

The problem is, in order to select as low a yield as is offered by Unilever PLC (ULVR), one first of all has to reject the many "Quality" shares with higher yields on offer. So what you are actually suggesting is the "Rejection of Quality" not its selection, and I will not do that.

You may already hold all the other "Quality Shares" on offer, and be looking for an additional holding.

I would top up one of my higher-yielding "Quality" holdings. My HYP is not a stamp collection, I do not need to hold everything. But the fact remains that in order to select Unilever PLC (ULVR), I would have to "reject" investing in a perfectly suitable higher yield share. Why would I do that?


Ian

[moorfield]

Plus I would struggle to select anything that yielded less than VUKE or CTY, the pooled investments in my mind have less risk than an individual share does and hence a selected share has to justify the extra risk (and that justification is bigger dividend).

... and if you would struggle to select, would you struggle to continue holding ?

[moorfield]

But the fact remains that in order to select Unilever PLC (ULVR), I would have to "reject" investing in a perfectly suitable higher yield share. Why would I do that?

Any number of reasons. For example, if you like to run a "tight ship" and restrict the number of holdings you are building (like me - 20), you might choose to top up ULVR rather than bloating your portfolio even more and establishing yet another new position.

[IanTHughes]

But the fact remains that in order to select Unilever PLC (ULVR), I would have to "reject" investing in a perfectly suitable higher yield share. Why would I do that?

Any number of reasons. For example, if you like to run a "tight ship" and restrict the number of holdings you are building (like me - 20), you might choose to top up ULVR rather than bloating your portfolio even more and establishing yet another new position.

I do not have a holding of ULVR to top up. ULVR has never qualified for my HYP since start up in 2012 and it still does not qualify. Why has it never qualified? Because it is not and never has been high yield. High Yield is an essential for my High Yield Portfolio (HYP).


Ian

[CryptoPlankton]

Speaking of ULVR being on sale or not, I'd suggest anything north of 3.5% would be worth a long hard look at; current yield is 3.36%: https://www.dividenddata.co.uk/dividend ... ?epic=ULVR

I'm aware that investors starting their portfolio might prefer initial shares with higher yields, but for those with longer-term horizons or who have filled their initial sector diversification, I'd suggest adding "quality" not just quantity.

*No, I'm not going to define "quality"!

The problem is, in order to select as low a yield as is offered by Unilever PLC (ULVR), one first of all has to reject the many "Quality" shares with higher yields on offer. So what you are actually suggesting is the "Rejection of Quality" not its selection, and I will not do that.


Ian

I'm glad this subject is being given some latitude as I think it's something that most HYPers will have wrestled with at some time or other. The likes of Unilever and Diageo are widely seen as solid companies and I'm sure most of us would like to snap them up if and when they offer an inviting yield. Personally, I think they still have something to offer even at sub-optimal yields because of their long-term (and so apparently sustainable) dividend growth rates - ULVR and DGE have both consistently achieved about 7% over various timescales. I think it does depend to a large extent on an individual's priorities and objectives, but to investigate the effect of having such so-called "quality" shares in a HYP I made up the following example, saddo that I am:

Say we have £11000 invested in each of two mini HYPs, both with a company "unit size" of £2000.

HYP A: This has five and a half units invested in steady 5% yielding companies (with a dividend growth rate of 2%) so has an income of £550 per annum growing at 2%.

HYP B: This has four units invested in similar shares to HYP A, but one and a half units in one or two "quality" shares paying 3.33% (with a dividend growth rate of 7%) so has an income of £500 per annum [(4 x £100) + (1.5 x £66)] initially growing at 3%.

If each company's growth rate remains constant then the annual incomes reach approximate parity after 8 years ((HYP A = £643pa, HYP B = £640pa). However, at this point, the income from HYP A is still growing at 2%, but the income from HYP B is growing at about 3.3%.

Of course, the holding sizes will become very unbalanced and it takes 8 years before HYP B starts to steam ahead (and there is no dividend reinvestment), but it does, rather simplistically, show the effect a relatively small proportion of low yielding (fast dividend-growing) companies can have on the overall income growth rate of the portfolio.

We all have different requirements and preferences and I don't believe there is a right or wrong approach. FWIW, I have some ULVR and DGE in my "HYP" - they reassure me by giving some relatively reliable impetus to the growth in the overall income it provides. Others see it differently and that's fine - we should all do what we feel most comfortable with...

[IanTHughes]

The problem is, in order to select as low a yield as is offered by Unilever PLC (ULVR), one first of all has to reject the many "Quality" shares with higher yields on offer. So what you are actually suggesting is the "Rejection of Quality" not its selection, and I will not do that.

Say we have £11000 invested in each of two mini HYPs, both with a company "unit size" of £2000.

HYP A: This has five and a half units invested in steady 5% yielding companies (with a dividend growth rate of 2%) so has an income of £550 per annum growing at 2%.

HYP B: This has four units invested in similar shares to HYP A, but one and a half units in one or two "quality" shares paying 3.33% (with a dividend growth rate of 7%) so has an income of £500 per annum [(4 x £100) + (1.5 x £66)] initially growing at 3%.

If each company's growth rate remains constant then the annual incomes reach approximate parity after 8 years ((HYP A = £643pa, HYP B = £640pa). However, at this point, the income from HYP A is still growing at 2%, but the income from HYP B is growing at about 3.3%.

I am afraid this tells me nothing. I could just as easily "create" a scenario where it takes twice as long for HYP B's income to catch up. But both scenarios are simply guesswork based on assumptions carefully chosen to show favour to one's own strategy. I can tell you that my HYP's income growth rate is well over HYP A's 2%, which is a value I would not be very impressed with. I suspect that 8 years for HYP B to catch up is wishful thinking and it still leaves HYP B short on total accumulated income for even more years. Also, if you are re-investing dividends - in the building phase rather than drawdown - HYP A is able to buy more earlier, which in itself will stretch out the under performance years for HYP B.

We all have different requirements and preferences and I don't believe there is a right or wrong approach. FWIW, I have some ULVR and DGE in my "HYP" - they reassure me by giving some relatively reliable impetus to the growth in the overall income it provides.

I am happy that it works for you, but please, do not try to persuade me that ULVR is a choice for an HYP. It is not and never has been, at least not since 2012 when I started my HYP.

By the by, my HYP did not include a Tobacco share for quite a while, as none was the highest suitable yield available. Then one day Imperial Brands (IMB) became a high yield share and I certainly grabbed it. One day maybe ULVR will be available too, we shall see, but if so it will be bought at "High Yield".


Ian

[moorfield]

I think it does depend to a large extent on an individual's priorities and objectives, but to investigate the effect of having such so-called "quality" shares in a HYP I made up the following example, saddo that I am:

On that note, here's another - exaggerated - example.

HYP A: 1000 shares of ULVR.

HYP B: 1000 shares of ULVR.

One of these has been held for several years, and lauded for being "a fine looking HYP". The other was bought yesterday, a trade which will no doubt will be panned by some here. Yet both, obviously, will produce the same income over the next decade.

Can you spot which is which ?

Moderator Message:
Folks, can we drag this back to the topic at hand? Namely ULVR's Q3 results? And can we please establish as received wisdom that ULVR was once a permissable HYP share? You don't have to go back that many years -- honest! MDW1954

[MDW1954]

I am happy that it works for you, but please, do not try to persuade me that ULVR is a choice for an HYP. It is not and never has been, at least not since 2012 when I started my HYP.
Ian

IanTHughes,

I have posted above, as a moderator, that ULVR was indeed a HYP share, contrary to your repeated assertions. In July 2011, TMF's "Dividend Edge" service recommended it on a trailing yield of 3.7%, comfortably above the FTSE All-Share's then average yield of 3.0%. At the time, the prospective yield was 4.1%.

The current price was 1,954p.

MDW1954

[CryptoPlankton]

...do not try to persuade me that ULVR is a choice for an HYP. It is not and never has been, at least not since 2012 when I started my HYP.

Ian

I made it very clear I wasn't trying to persuade anyone about anything, I was just expressing my thoughts in case anyone was interested. (Something I feel less and less inclined to do on this site these days - it only takes a few...)

[IanTHughes]

I am happy that it works for you, but please, do not try to persuade me that ULVR is a choice for an HYP. It is not and never has been, at least not since 2012 when I started my HYP.
Ian

IanTHughes,

I have posted above, as a moderator, that ULVR was indeed a HYP share, contrary to your repeated assertions. In July 2011, TMF's "Dividend Edge" service recommended it on a trailing yield of 3.7%, comfortably above the FTSE All-Share's then average yield of 3.0%. At the time, the prospective yield was 4.1%.

I think you will find that July 2011 is before 2012!

Also, I personally do not select HYP shares based on whether they are offering a yield greater than any particular benchmark. Instead I invest in what I believe is the highest sustainable yield on offer - subject of course to Market Cap, Diversification etc considerations.

Of course there are folks that will have ULVR in their HYP, I have no problem with that. I certainly do not agree that it is a share that "should not be discussed" on this the HYP Practical board. What I do say is that at the moment, and for the last 6 years, an HYPer would only select ULVR if he/she first of all "rejected" other perfectly acceptable higher yield shares.

Now, some people will say that "the higher historical dividend growth rate" makes it an acceptable chooice. To that argument I was pointing out that the time period for "catching up" a higher starting yield may be rather longer than an HYPer might want. There are also others that say "an HYP should always include shares like ULVR". That is of course an asinine argument so it does not need a response.

But yes, ULVR is on my watchlist. If it does become high yield, it will be in my HYP, but bought at "High Yield".


Ian

[IanTHughes]

...do not try to persuade me that ULVR is a choice for an HYP. It is not and never has been, at least not since 2012 when I started my HYP.

I made it very clear I wasn't trying to persuade anyone about anything, I was just expressing my thoughts in case anyone was interested. (Something I feel less and less inclined to do on this site these days - it only takes a few...)

You put up a scenario that was indicating, to me at least, that the selection of ULVR as an HYP candidate could be accommodated, despite the low yield, based on the anticipated dividend growth. Presumably you believe that this growth makes up for the low yield on offer at purchase. I was simply responding to that view by pointing out certain drawbacks to what you were proposing and yes, I disagreed with your analysis.

Since my response I notice that you have decided to "UnThank" the few posts of mine that you originally believed were worthy of a "Thank You". Oh well, I guess some people just do not enjoy debate.

Ian

[CryptoPlankton]

...do not try to persuade me that ULVR is a choice for an HYP. It is not and never has been, at least not since 2012 when I started my HYP.

I made it very clear I wasn't trying to persuade anyone about anything, I was just expressing my thoughts in case anyone was interested.

You put up a scenario that was indicating, to me at least, that the selection of ULVR as an HYP candidate could be accommodated, despite the low yield, based on the anticipated dividend growth. Presumably you believe that this growth makes up for the low yield on offer at purchase.

Actually, you presume wrongly, I was talking about the effect on the portfolio. I was simply explaining what suited me and my objectives i.e. a greater overall long-term income growth rate from the portfolio at the cost of a slightly lower starting income, but I acknowledged at the same time that other people have different requirements and priorities.

Since my response I notice that you have decided to "UnThank" the few posts of mine that you originally believed were worthy of a "Thank You".

Not all of them, only the ones I have changed my mind about. I probably dish them out too liberally anyway, but you still have at least three "thanks" that I definitely won't retract so it could be worse!

Oh well, I guess some people just do not enjoy debate.

Ian

I enjoy a civil discussion. You said earlier that your HYP has a dividend growth rate well in excess of 2%, can you give it a figure? Is the underlying dividend growth rate (excluding new money and dividend reinvestment - which will presumably cease when in drawdown) comfortably above inflation? If so, this won't be with any great thanks to several of the large cap "usual suspects" to be found in many HYPS. All the following companies have 5 year compound annual dividend growth rates failing to keep up with current CPI (2.4% in September): HSBA, BP., RDSB, GSK, AZN, NG., BA., SSE and CNA - and those failing to do so over 10 years include BT., AV., BLND and UU. Fortunately, there are some high yielders with decent dividend growth (like RIO, IMB, LGEN) and these appear to be very important to have in a well diversified portfolio if it is to outstrip inflation.

I am fortunate enough to be satisfied with the income generated by my "HYP" shares and the most important thing to me now is that it keeps up with inflation. To that end, having the likes of ULVR and DGE make it more comfortable (for me) than relying on just a small proportion of "growers" like IMB and LGEN. I understand you are a strict adherent to HYP "rules" and don't accept that they have any place in a portfolio, even at previously higher yields that others agree were acceptable . That's absolutely fine, I'm not trying to persuade anyone otherwise and I hope I haven't overstepped the mark by explaining how they work for me.

Anyway, that's all from me for a while. Good luck with your investments.

CP