The Lemon Fool

Some people may remember my post at the old board from this time last year entitled "HYPertension". It was posted mainly as an attempt to inject a little seasonal cheer into the board:

http://boards.fool.co.uk/hypertension-13308582.aspx

Anyway, it could be argued that the portfolio was selected on slightly dodgy criteria. The companies were chosen from the FTSE 100, were fairly well diversified and generally had decent yields (though no regard was given to cover or dividend history). However, the most important factor in their selection, which I accept many may disagree with, was that each company offered the opportunity for one or two cheesy puns.

Despite this, part of the motivation for posting was also to show how relatively stress-free this HYP lark should be. So I thought it would be vaguely interesting to monitor how such an amateurishly selected HYP performs. Although it was essentially a joke, I did suspect that you couldn't go too far wrong with a diverse collection of large caps. Well, we shall see, but here is its performance after one year (a notional £5000 spent on each of the 15 companies, SP's used are closing prices on 18th Dec each year):



In the same period, the FTSE 100 is up 15.7%. So it hasn't performed quite so well (total return of 12.7%), but as a generator of income, which it is meant to be, it seems to be off to a reasonable start. If I had invested in it for real, I certainly wouldn't have lost any sleep!

Well, probably a completely pointless exercise, but at least I've learnt how to do tables here! I'll probably do the same next year - just out of curiosity. Of course, things could get complicated with corporate actions and the like, but so far it really does seem to support the notion that this is a very simple and low-stress way of generating an income.

HYPpy Christmas to you all!

CP

In your linked TMF post you forecast a 5.1% yield, your figures have delivered 5.2% on the notional £75K, 4.9% on the current £80k value. Are your dividend amounts actuals based on purchase timings or reported totals for each company for the year? I'd have expected to see dividend lag on year one reducing that £3972 annual income.

kempiejon wrote:In your linked TMF post you forecast a 5.1% yield, your figures have delivered 5.2% on the notional £75K, 4.9% on the current £80k value. Are your dividend amounts actuals based on purchase timings or reported totals for each company for the year? I'd have expected to see dividend lag on year one reducing that £3972 annual income.

Hi kemplejon

I meant to post this at the weekend, but have struggled to find the time so things were forgotten and it was less of a post than intended - thank you for reminding me of that point! You are quite right, some of the companies would have been bought after their ex-dividend date and I meant to say that the quoted dividends were the totals for the year - the reason being that I wanted to make sure the comparison with next year measured the percentage increase/decrease in the total yearly payout by the companies. So the actual amount received by an investor would indeed have been less than quoted (I could go back and find that figure if really wanted, but it wasn't the focus of my attention). I also meant to mention there was a special from GSK that accounted for £74.80.

Thanks again, and sorry I wasn't more thorough

CP

I hold 13 of the 15 shares in your demo portfolio, the exceptions being Royal Mail and Berkeley.

Total Return over a similar period for the 13 shares held is 16.22%, but I have traded during the year and British Land wasn't added until April. My annualised total return for these shares works out at 18.62%.

My HYP portfolio as a whole with 30+ shares has produced a 10.63% total return over this period. Income is up 13% year on year (with the reinvestment of dividends and additional capital)

Over the longer 11 years or so term of the portfolio, the total return has been an annual 6.5%. (The portfolio got off to a bad start with the financial crisis).

Snorvey wrote:
.....In the same period, the FTSE 100 is up 15.7%.

Plus dividends?

Yes...?

kempiejon wrote:In your linked TMF post you forecast a 5.1% yield, your figures have delivered 5.2% on the notional £75K, 4.9% on the current £80k value. Are your dividend amounts actuals based on purchase timings or reported totals for each company for the year? I'd have expected to see dividend lag on year one reducing that £3972 annual income.

I couldn't let it go so a quick check suggests that the actuals would amount to £3444, which would be about 4.6% on the £75K and 4.3% on the current value - so a significant lag as you say. Clearly this is the correct figure, but for (any remote) usefulness in assessing the future performance of the portfolio I will stick with the total payouts for the year...

CryptoPlankton wrote:Some people may remember my post at the old board from this time last year entitled "HYPertension". It was posted mainly as an attempt to inject a little seasonal cheer into the board:

http://boards.fool.co.uk/hypertension-13308582.aspx

Well worth being able to look at it again this time next year! So I've archived it (in whole-thread form) on the Wayback Machine:

https://web.archive.org/web/20161222114 ... sort=whole

Gengulphus

CryptoPlankton wrote:I couldn't let it go so a quick check suggests that the actuals would amount to £3444, which would be about 4.6% on the £75K and 4.3% on the current value - so a significant lag as you say. Clearly this is the correct figure, but for (any remote) usefulness in assessing the future performance of the portfolio I will stick with the total payouts for the year...

Thanks for coming back with the actuals, that does, as expected, confirm my thoughts. You say it improves usefulness by taking the virtual figures but if this was a real life portfolio that dividend lag would be a real effect. Over the years it'll become irrelevant as you'll mostly want to see income increases year on year, such that year one recedes into the distance. Still, looks like your timing was lucky as 4.6% is still a pretty good income yield. If one's buy timing is such that one misses out on most of the final dividends it could more than halve the pay-out in year one.

Gengulphus wrote:

CryptoPlankton wrote:Some people may remember my post at the old board from this time last year entitled "HYPertension". It was posted mainly as an attempt to inject a little seasonal cheer into the board:

http://boards.fool.co.uk/hypertension-13308582.aspx

Well worth being able to look at it again this time next year! So I've archived it (in whole-thread form) on the Wayback Machine:

https://web.archive.org/web/20161222114 ... sort=whole

Gengulphus

Thanks for that, Gengulphus! Though the link doesn't seem to work for me...?

kempiejon wrote:

CryptoPlankton wrote:I couldn't let it go so a quick check suggests that the actuals would amount to £3444, which would be about 4.6% on the £75K and 4.3% on the current value - so a significant lag as you say. Clearly this is the correct figure, but for (any remote) usefulness in assessing the future performance of the portfolio I will stick with the total payouts for the year...

Thanks for coming back with the actuals, that does, as expected, confirm my thoughts. You say it improves usefulness by taking the virtual figures but if this was a real life portfolio that dividend lag would be a real effect. Over the years it'll become irrelevant as you'll mostly want to see income increases year on year, such that year one recedes into the distance. Still, looks like your timing was lucky as 4.6% is still a pretty good income yield. If one's buy timing is such that one misses out on most of the final dividends it could more than halve the pay-out in year one.

Actually, I think the timing was slightly unlucky! There were 40 dividends in the year, so an average of 3 or 4 a month. I don't know what the true figure is, but I'm guessing the average time between the ex-dividend date and the pay date is about a month? In the event, the portfolio missed out on 6 dividends, with two companies' ex-dividend dates falling on the day before the purchase date! The effect was moderated by the fact that 4 were smaller interims and one was a quarterly.

CryptoPlankton wrote:Actually, I think the timing was slightly unlucky! There were 40 dividends in the year, so an average of 3 or 4 a month. I don't know what the true figure is, but I'm guessing the average time between the ex-dividend date and the pay date is about a month? In the event, the portfolio missed out on 6 dividends, with two companies' ex-dividend dates falling on the day before the purchase date! The effect was moderated by the fact that 4 were smaller interims and one was a quarterly.

You may wish to look more closely at that XD-Payment Gap. I have 37 holdings, with potentially 94 dividends.

The number of days are:

Even worse if you look at the delay between announcement and payment:


TJH

tjh290633 wrote:

CryptoPlankton wrote:Actually, I think the timing was slightly unlucky! There were 40 dividends in the year, so an average of 3 or 4 a month. I don't know what the true figure is, but I'm guessing the average time between the ex-dividend date and the pay date is about a month?

You may wish to look more closely at that XD-Payment Gap. I have 37 holdings, with potentially 94 dividends.

The number of days are:

Code: Select all

Max       71 (VOD)
Min       19 (BLT)
Mean   41.60


Well, I did say I didn't know what the true figure was (a month, as stated, was a guess - with a question mark). The answer derived from your sample seems reasonable, but it still suggests a probability that only 41/365 x 40 = 4.5 dividends would be missed - so 6 is still erring on the side of slightly unlucky by my reckoning.

"Even worse if you look at the delay between announcement and payment..."

But what is the relevance of that?

I appreciate that things posted here need to stand up to scrutiny, but I never claimed this was anything other than some casual musing. I have explained what I have set out to do and really can't be "pink marshmallowed" (I like that!) to reply to any more nitpickicking - none of which seems to have invalidated my original intention. To be honest, I wish I hadn't bothered posting in the first place...

Good luck with the board and Merry Christmas and a prosperous New Year to everyone.

CP

CryptoPlankton wrote:

tjh290633 wrote:
"Even worse if you look at the delay between announcement and payment..."

But what is the relevance of that?

Just that there are some inordinately long delays between announcement of a dividend and its payment.

As you say, not relevant to missing dividends because you bought a share XD.

TJH