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Diageo plc share repurchase programme

Practical discussions about equity High-Yield Portfolios (HYP) for income
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YeeWo
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Re: Diageo plc share repurchase programme

#159068

Postby YeeWo » August 12th, 2018, 7:33 pm

ADrunkenMarcus wrote:I'd rather Diageo buy back shares at lower prices. Ah, well.
I agree Mark. It must be said though Diageo is a beaut of a business and well worth holding for TR over time. I've held since 12 Jan 11 (£12.65) initial purchase and factoring in some buying & selling over the last 7 years plus the regular dividend credits, I've enjoyed an XIRR of 11.90%. Diageo is 4.6% of my Pot and in the event of it being on-sale I'd happily add.

ADrunkenMarcus
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Re: Diageo plc share repurchase programme

#159079

Postby ADrunkenMarcus » August 12th, 2018, 8:14 pm

Bouleversee wrote:Arb -

Try working out what the current dividend equates to in terms of yield on your original purchase price and you'll feel a lot better. I can understand your not wanting to top up at today's price but can't see any reason to sell.


A purchase in October 1998 would result in the starting dividend yield of about 3.3% rising to almost 12% today. :D In real terms, it's still very impressive. And the total dividends paid are in excess of the cost of the shares.

Best wishes

Mark.

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Re: Diageo plc share repurchase programme

#159087

Postby Bouleversee » August 12th, 2018, 8:47 pm

So why would anyone want to swap it for something with a higher yield just because the s.p. had fallen, usually for good reason?

Perhaps someone would kindly let me know when the sale begins. I always seem to be otherwise engaged when there are bargains to be had.

ADrunkenMarcus
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Re: Diageo plc share repurchase programme

#159090

Postby ADrunkenMarcus » August 12th, 2018, 8:57 pm

Bouleversee wrote:So why would anyone want to swap it for something with a higher yield just because the s.p. had fallen, usually for good reason?


I'll let others speak to that. I've held for 20 years and will continue to do so unless it gets taken over! Steady, moderate consistent growth over a long period can win the day for me. My investment in Diageo has reached the stage where the compounding is really getting going: a 50% increase in today's share price nets me a 153% increase on my book cost.

Best wishes

Mark.

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Re: Diageo plc share repurchase programme

#159098

Postby Breelander » August 12th, 2018, 9:08 pm

Bouleversee wrote:Perhaps someone would kindly let me know when the sale begins. I always seem to be otherwise engaged when there are bargains to be had.


When's Brexit due? A market panicking in the face of imagined fears is a good time to buy. The last such time was 2011 in the aftermath of the financial crisis.

Breelander (07/08/2011) wrote:For my 1,000th post I'd like to offer some reflections of a seasoned and battle-scarred HYP investor in the hope that it is of help and encouragement to those fledgling HYP's that are facing their first crash...

...the FTSE100 has fallen around 10% in a week...

For bargains I would be looking to those shares that only occasionally drift into HYP teritory. Solid blue chips that in all but yield would be worthy candidates may briefly be marked down enough to make them HYPable. Fire up your screeners!
https://web.archive.org/web/20161111174 ... 30169.aspx


PS: my 1,000th post on TMF, eh? Well I'm nearly double than now here on TLF. Some way to go to match the 10,000 odd posts I clocked up before TMF closed, though...

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Re: Diageo plc share repurchase programme

#159105

Postby Bouleversee » August 12th, 2018, 10:20 pm

I'll try to hold off investing till post Brexit then. I have a fair sum of accumulated dividends and nothing that grabs me as a screaming buy at the moment and more than enough dead or dying ducks in my p/fs.

Arborbridge
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Re: Diageo plc share repurchase programme

#159110

Postby Arborbridge » August 12th, 2018, 10:55 pm

Bouleversee wrote:Arb -

Try working out what the current dividend equates to in terms of yield on your original purchase price and you'll feel a lot better. I can understand your not wanting to top up at today's price but can't see any reason to sell.


To make it clear: I was nowhere near seriously contemplating selling DGE. As far as I'm concerned it's a "keeper" - but in general, the further any share gets from my required yield, the more I have to question whether it is earning its keep, or should be replaced by something else. One of the factors I throw into the mix is XIRR, which DGE would score well on, as well as the reliability of dividend payments.

If and when DGE's forecast yield goes well below 2%, than I'll have some rationlising to do in order to keep it :cry:

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Re: Diageo plc share repurchase programme

#159111

Postby Arborbridge » August 12th, 2018, 11:05 pm

Walrus wrote:
You could probably construct a similar argument when looking at any share in isolation, that you'd be better off with an investment trust no?. Whereas the reality it is forming part of a portfolio, and I'm guessing providing a decent anount of diversification


Absolutely - and I do argue that. If one decides one would be better off - or safer - with an IT of a similar yield, then one would have to work hard to justify keep such a share.

I don't go along with the idea that one should buy a lower yield in order to obtain diversification. That's never been central to building a HYP - if a share does not pass the threshold, then it does not get into the portfolio. Naturally, once bought, one has to have some tolerances applied to the yield variations which naturally occur otherwise one would be trading too much. Thus TJH's suggestion of 2% or half the market yield.

If one is in fact saying that one would tolerate low starting yields to achieve diversification, then I think one probably could just substitute an IT giving, say 3.5%. The advantage of a HYP is it's higher than market average yield, and if it isn't doing that, one might as well give up.

Arb.

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Re: Diageo plc share repurchase programme

#159116

Postby Breelander » August 12th, 2018, 11:22 pm

Bouleversee wrote:I'll try to hold off investing till post Brexit then..


The more likely scenario IMHO is panic and uncertainty increasing as Brexit draws ever nearer, followed by a relief rally post Brexit when it turns out not to be so bad after all.

idpickering
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Re: Diageo plc share repurchase programme

#159129

Postby idpickering » August 13th, 2018, 6:15 am

Arborbridge wrote:When the yield on DGE becomes as low as it is now - or one might even say "as low as it usually is" - I begin to have self doubts. Would I better off topping up some of my ITs with a similar or higher yield? Why invest in an admittedly excellent company when I can spread the risk over 40 or 50 companies?

Well, one answer is that you'd have to buy an IT with a really low yield to get a similar capital performanace, say, one of Nick Train's or Law Debenture or SMT.

Not only that, I'm one for leaving something alone if it has been working well, so I'm not inclined to overthink it!

Arb.


Me to Arb. I'm all for 'running my winners', and Diageo are certainly one of them for me. A hold for me, and I comfort myself by having Marston's, another alcohol type share, but a higher yielder, on board my HYP too.

Ian.

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Re: Diageo plc share repurchase programme

#159185

Postby kempiejon » August 13th, 2018, 11:34 am

Arborbridge wrote:
To make it clear: I was nowhere near seriously contemplating selling DGE. As far as I'm concerned it's a "keeper" - but in general, the further any share gets from my required yield, the more I have to question whether it is earning its keep, or should be replaced by something else. One of the factors I throw into the mix is XIRR, which DGE would score well on, as well as the reliability of dividend payments.

If and when DGE's forecast yield goes well below 2%, than I'll have some rationlising to do in order to keep it :cry:


Once one has bought a share, forget the yield either on cost or currently, look at the increase or not of the dividend. This HYP is about an increasing income after all. Yes one could swap a lower yielder for a higher yielder and increase income that way but a now lower yielding share bought originally at a higher yield that has increased dividends at about 6% annually for over a decade looks like a dream pick. Until it doesn't of course.

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Re: Diageo plc share repurchase programme

#159200

Postby Arborbridge » August 13th, 2018, 12:23 pm

kempiejon wrote:
Once one has bought a share, forget the yield either on cost or currently, look at the increase or not of the dividend. This HYP is about an increasing income after all. Yes one could swap a lower yielder for a higher yielder and increase income that way but a now lower yielding share bought originally at a higher yield that has increased dividends at about 6% annually for over a decade looks like a dream pick. Until it doesn't of course.


Quite agree. Another way I've put it here in the past is: "If I was satisfied with the £n in dividends initially provided by this share, why am I not satisfied with that income stream now?"*
The current yield is only relevant if it has fallen to an intolerable level and one feels the income could be reliably "racheted up", as Terry would say.

*assuming it has increased with inflation or more.

Arb.

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Re: Diageo plc share repurchase programme

#159700

Postby johnstevens77 » August 14th, 2018, 10:34 pm

ADrunkenMarcus wrote:I'd rather Diageo buy back shares at lower prices. Ah, well.

Best wishes

Mark.


Buying back shares at the high end of the price range seems to be what companies do, I would rather they gave us the money instead.

I bought in July 2006 @920.8p. and still hold.

john

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Re: Diageo plc share repurchase programme

#159734

Postby ADrunkenMarcus » August 15th, 2018, 6:57 am

There is an argument for that, John. If buybacks are done in a very measured, specific way with clear guidance as to the valuation method used and the long-term benefits of the buyback, and are demonstrably good for long term shareholder value then all's well. Most fail that test.

As well as Diageo, Domino's Pizza Group has also been buying back shares recently with a P/E in the 20s. :x

Held since 553p! So a 70p dividend in 2019 would see my yield on cost hit 12.7%. :D

Best wishes

Mark.


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