Expansion of HYPish portfolio

[Plutus]

Good morning.

I have some accumulated cash that I can use to top-up an existing HYP portfolio, or to add another sector or 2. The portfolio does contain one investment trust (Blackrock World Mining) as I didn't want to pin my hopes onto one mining company.

I have ran a stock screener and conducted a small amount of further research and the one possible new candidates is Stagecoach (SGC) as it appears to have a rising, well covered dividend. Data from londonstockexchange.com

Other potential candidates such as Tate and Lyle (TATE) failed on at least one of the search metrics.

The portfolio with weightings by current value is:



Thank you for any comments or suggestions. If I decide not to buy Stagecoach then I'll top up some of the existing sectors.

[funduffer]

i bought Stagecoach (SGC) recently based on its good yield and cover, but rather nervously, and at half weight. It is a new sector for me, and I do need more diversification, so I took the plunge, but it is early days, so cannot say yet whether it is successful or not.

I think this sector (Transport/Leisure) has had more than its fair share of disasters in the past (Eg Go-ahead group).

I suspect it is one that Dod avoids!

FD

[the0ni0nking]

I have a soft spot for SGC as it's one of my early major success stories back in the early 2000s when I bought in around 30p, watched it fall down as low as 12p before recovering all of that and then significantly more to the extent that it, together with Dana Petroleum enabled me to buy my 1st house.

I'd see them as similar in ilk to the utilities sector - each having a largely predicable steady cashflow which is probably slightly more immune to downturns in the economy.

SGC got into the mire by over expanding back in the day with it's ill-fated acquisition of Coach USA (only the Americans would have the balderdash to call their company something like that) and Porterbrook (train leasing) I think.

Prior to moving into financial services a few years ago, I worked in the transport industry - not having looked at yield, P/E and the various value metrics, my only observation from my time there would be to pick a company which has the lowest involvement on passenger rail (freight rail is fine although DBS, Freightliner and GB Railfreight are all non-UK based so maybe Stobbart IIRC) as the vagaries of political involvement and the associated media circus can make a good investment a bad one on the back of politicians decisions rather than management decisions.

Cheers,
0inK

[Plutus]

Thank you for the replies, I'm not restricted to a particular sector, I'm aiming for one company per sector though.

The stock screen may have been too strict but I was aiming for yield of between 4 and 6%, covered x2, rising dividends etc. etc. I was also hoping for P/E less than 15 or 16 but this could be flexible.

RDSB ruled out as dividend yield may be unsustainable and I hold some index tracker funds so I'll overall own them anyway.

[idpickering]

Thank you for the replies, I'm not restricted to a particular sector, I'm aiming for one company per sector though.

The stock screen may have been too strict but I was aiming for yield of between 4 and 6%, covered x2, rising dividends etc. etc. I was also hoping for P/E less than 15 or 16 but this could be flexible.

RDSB ruled out as dividend yield may be unsustainable and I hold some index tracker funds so I'll overall own them anyway.

Hi Pluto,

I respect your right to apply whatever criteria you see fit whilst investigating potential purchases, but I do think one has to be a bit flexible on this. It does seem strange seeing a HYP without RDSB or BP. on board IMHO, even more so when one might be considering Stagecoach for instance? Each to their own though I guess.

Other candidates may be, BT.A, and PFG. I hold these two.

Regards,

Ian.

[idpickering]

Thank you for the replies, I'm not restricted to a particular sector, I'm aiming for one company per sector though.

The stock screen may have been too strict but I was aiming for yield of between 4 and 6%, covered x2, rising dividends etc. etc. I was also hoping for P/E less than 15 or 16 but this could be flexible.

RDSB ruled out as dividend yield may be unsustainable and I hold some index tracker funds so I'll overall own them anyway.

Hi Pluto,

I respect your right to apply whatever criteria you see fit whilst investigating potential purchases, but I do think one has to be a bit flexible on this. It does seem strange seeing a HYP without RDSB or BP. on board IMHO, even more so when one might be considering Stagecoach for instance? Each to their own though I guess.

Other candidates may be, BT.A, and PFG. I hold these two.

Regards,

Ian.

My apologise, that's Plutus, not Pluto. Sorry.

[Plutus]

...

I respect your right to apply whatever criteria you see fit whilst investigating potential purchases, but I do think one has to be a bit flexible on this. It does seem strange seeing a HYP without RDSB or BP. on board IMHO, even more so when one might be considering Stagecoach for instance? Each to their own though I guess.
..

Hello Ian.

My aim is to be able to independently apply a screening and selection methodology that I can repeat if I ever lose the option to ask others!

RDSB fails on various metrics, including cover and EPS growth. Data from LSE site again:

[idpickering]

Hello Ian.

My aim is to be able to independently apply a screening and selection methodology that I can repeat if I ever lose the option to ask others!

Thanks for your reply Plutus. I do get where you're coming from with the likes of RDSB, and the failure on a number of metrics. For me, I can stomach that risk, and am happy to invest in the stock. Either way, you seem to have a good view of your aims, and I wish you well with them.

Regards,

Ian.

[tjh290633]

Of your two choices I would prefer TATE to SGC, having held the latter and exited in 2008 when it had risen so far that the yield had fallen to 1.65%, after which it had a relapse, and a gradual recovery. I decided to avoid airlines after a nasty experience with the shares of BAY, when they stopped paying dividends in 2001. I am also unhappy to put more money into rail operators, given the various political overtones and also possible changes to bus service licensing or franchising.

Tate, on the other hand, has served me well since 1999, despite periods of stagnant dividends. I have trimmed it back on 4 occasions, in 2002, 2006, 2006 again and in 2011. I added back in 2003, 2007, 2009, 2014 and 2015, and my IRR is about 14%. I think there are worse shares to hold.

Here is a brief summary of my sector holdings, which may give you some ideas:

Sector      Weight    Income    Cost      Yield    Shares              
Banks/Fin     2.47%     2.45%     8.69%    4.97%   LLOY                
Bldg          5.50%     8.77%     9.31%    7.11%   TW.      CLLN       
Eng           6.30%     5.08%     1.99%    3.54%   BA.      IMI        
Food          7.72%     5.51%     5.09%    3.13%   TATE     ULVR   RB. 
Leisure       7.81%     7.39%     7.90%    4.13%   WMH      DGE    MARS
Insur         9.22%    11.68%     9.12%    5.64%   AV.      ADM    LGEN
Media         2.81%     4.08%     5.20%    6.39%   PSON                
Mining        5.16%     3.19%     9.14%    1.79%   BLT      S32    RIO 
Oil/Gas       6.43%     8.46%     7.88%    5.79%   BP.      RDSB       
Pharm         8.67%     8.49%     7.07%    4.38%   AZN      GSK    INDV
Property      5.70%     5.17%     8.43%    3.99%   SGRO     BLND       
Retail        6.55%     5.65%     9.54%    3.31%   MKS      TSCO   KGF 
Support       6.08%     3.68%    -1.16%    2.69%   CPG      SMDS       
Telecom       5.48%     5.88%     4.13%    4.69%   BT.A     VOD        
Tobacco       5.34%     4.71%    -0.62%    3.90%   IMT      BATS       
Utils         8.75%     9.80%     8.28%    4.92%   UU.      NG.    SSE 
                                                                       
Totals:     100.00%   100.00%   100.00%    4.40%       16     14      7
Medians:      6.19%     5.58%     7.89%    4.26%                       
                                          Total:       37

TJH

[Ivyrobert]

Hello Plutus,
I bought back into Stagecoach last year when it's price dipped into view. In my experience it is well a well run, workaday transport group. Yes, it is susceptible to government policies and it might not have Brian Souter's guiding sense at some stage ahead, so dyor. However, I would also agree with Ian regarding " Wot no Shell" in an HYP portfolio.
But, as with all of us, you are on your own journey!

[Dod1010]

IRDSB fails on various metrics, including cover and EPS growth:

Which just goes to show screening tools are not very helpful. Of course they depend on the metrics you put in but you then need to use your own judgement. I do not know whether they can maintain their dividend or not but I would think it a little more likely than it was a few months ago and given the current yield surely they are worth thinking about.

As someone hinted, I am not at all sure about Stagecoach. If they stuck to what they know which is the boring business of running UK buses I think they would be fine but they always seem to want to branch out whether geographically or with railways and they have not demonstrated much success in that. Besides, running buses is a mature business these days so they ought to be like a utility but do not behave like one.

I do not know much about Tate and would defer to TJH on that one.

Dod

[Plutus]

That's been very helpful, thanks very much to everyone who has replied.

I think where I've failed before at HYPing is the 'finger in the air, this doesn't quite smell right' esoteric (to me anyway) judgements that are made. Can a decision be made based purely on the fundamentals as any HYP suggestion could have a caveat!?

Last year I stopped building the HYP further as I wasn't comfortable with any further selections and there had been dividend cuts which I guess are inevitable at some point. This has made me investigate the use of collective investments instead of a HYP.

I'm still undecided then ...

[kempiejon]

Last year I stopped building the HYP further as I wasn't comfortable with any further selections and there had been dividend cuts which I guess are inevitable at some point. This has made me investigate the use of collective investments instead of a HYP.

If this is what helps you sleep at night then why not do that - it's not an unusal approach and is easy.
Ah yes this is the HYP practical board. In that case buy, or add to, the highest yielder(s) that matche your safety criteria without spoiling diversification limits. I'd look at SSE, Shell, HSBC, Capita, Marks, Legal and General, perhaps a housebuilder/real Estate.
To concur with TJH if it's Stagecoach or TATE I'd prefer TATE.

[Raptor]

How about Aberdeen Asset Management. Good yield, cover etc.

Of those already mentioned TATE is worth a purchase,

Raptor.

[dspp]

You might want to ask on the Passive Investing board (http://www.lemonfool.co.uk/viewforum.php?f=55) re index trackers and ETFs.

[Plutus]

Once again, thank you for all of the replies and it's definitely given me something to ponder.