New Hyp

[paullidd]

Good Morning all.

First off thanks to Bree and Gengulphus for their help with table formatting.

Below is a table produced from StepOne spreadsheet this morning sorted by highest forward yield, Div cover >=1.2, gearing max 30%, positive EPS growth, Increasing Div, No media sector, no financial services sector.

I'm not sure if I'm being sensible by filtering EPS growth, what do others think?
I have chosen no media - as this seems to currently be one of the most changing/changeable areas at the moment.
I distrust financial services (I have a legacy LLoyds holding, wrestled from negative territory to +35% on paper).



Now to look at the candidates.

1. TW F Yield 8.2% cover 1.2 P/E 10.1 and EPS Growth 12% so looks good, but is the dividend sustainable?
2. CLLN Yield 8.1% cover 1.8 P/E 6.8 and EPS Growth 32% again good, but is div sustainable - need to do more research, ie. what do they do?
3. GFRD Yield 7.1% cover 1.6 P/E 8.8 and EPS Growth 17%, so again a high yield, but I like GFRD have held before and they did well for me and they have kept on doing well in the years since, so I would be happy to hold (I don't consider them the same as TW or BOV because of their particular market and infrastructure building projects.
4. CPI Yield 6.2% cover 2 P/E 8.2 and EPS Growth 111% Duplicate sector with CLLN however growth and cover look better, good P/E (Does CLLN low P/E indicate large share sell off), again would need to research what they do?
5. LGEN Yield 6.2% cover 1.4 P/E 11.2 and EPS Growth 8%, so looking good, more research needed as I'm not confident about insurers.
6. BVS Yield 5.7% cover 2.2 P/E 7.8 and EPS Growth 9% Duplicate with TW agian low P/E and reasonable growth.
7. MARS Yield 5.6% cover 1.9 P/E 9.4 and EPS Growth 3%, have held these before and done ok, Sector says Travel and Leisure, but aren't they a brewery/pubco? - what's the future for them?
8. SGC Yield 5.6% cover 2.1 P/E 8.7 and EPS Growth 12% all looks good, but would need to do more research on them.
9. COB Yield 5.3% cover 1.6 P/E 11.8 and EPS Growth 153% looks good more research to see how reliable that 153% growth is.
10. IMB Yield 4.8% cover 1.6 P/E 13.3 and EPS Growth 152% a HYP regular with moral issues again how reliable is 152% growth.

Well that's all I have time to type at the moment, the table goes down a bit more, there are obviously duplicates which I would try to weed out. I am dubious on Travel and Leisure, would avoid fixed line telecomms, don't know enough about REITs, would check Aero/Defence on their merits and similarly for Oil Services and Mining.

Any comments on any of the above gratefully received.

Paul

[James]

AMEC FOSTER GB0000282623 AMFW 468.20 13.0 10.1 9.2% 4.4% 0.7 60.0 29% 2.2 0.3 Y 1,826 FTSE250 Oil Equipment and Services

I used to hold this in my HYP when I had one, and I'm pretty sure it cut its div by 50%, so seems odd it shows up as having a rising div.

[paullidd]

StepOne spreadsheet only compares 3 years dividend, so if the cut was pre- 2014 it wouldn't show.

[Raptor]

StepOne spreadsheet only compares 3 years dividend, so if the cut was pre- 2014 it wouldn't show.

My records show cut was in 2016? Userguide for stepone says current year in col Z not counted which maybe the reason (never looked before).

Raptor.

[Arborbridge]

The dividend was cut from 43.3 to 29p from 2014 to 2015. The interim in 2016 was 50% down on the previous equivalent.

Arb.

[the0ni0nking]

Without delving into the detail to check, I think the report is doing something strange with the gearing check (acknowledging there are slightly different ways of calculating it).

However, when I looked at CPI, I'm fairly certain it was way above 30% gearing.

Also the fact National Express has passed this test strikes me as odd - I'd expect that to be way in excess of the 30% test.

I thought maybe it had been run at 300% but then by the looks of it BAT is still higher than that and not filtered out?

Cheers,
0niK

[StepOne]

Cobham released a trading statement last week and scrapped their dividend. To be avoided.

StepOne

[StepOne]

Only other comment is that I am a big fan of 'bigger is better' . I would stick to the FTSE 100 for my first few purchases. And any FTSE 250 I would buy double the number of half-size holdings (if that makes sense) - the increased diversification would help offset the smaller size for me.

StepOne

[Gengulphus]

Here is paullidd's table, modified by removing the ISIN column, correcting one obvious typo in the Index column, and forcing the columns not to run into each other (*). This is mainly for my own benefit, to allow me to look at it on my laptop without being too distracted by my "proofreader's eye", but posted in case it helps anyone else with the same talent/affliction (it's both!). I might follow up with posts on the candidates or might not - the purpose of this is to enable me to see more easily whether I've got any...


(*) In case anyone wants to know how this is done: well, technically speaking the columns are still running into each other - I've simply inserted an extra, fairly narrow blank column between each pair of columns. To do that, I replaced all occurrences of "||" with "||  ||", where the two spaces in the middle are not ordinary spaces, but non-breaking spaces.

Gengulphus

[Instep]

(*) In case anyone wants to know how this is done: well, technically speaking the columns are still running into each other - I've simply inserted an extra, fairly narrow blank column between each pair of columns. To do that, I replaced all occurrences of "||" with "||  ||", where the two spaces in the middle are not ordinary spaces, but non-breaking spaces.

Just a quick query. I should really know already, but how can I create a non-breaking space?
Thanks.
Instep

[Gengulphus]

Rio Tinto is another company that has cut its interim and pretty clearly intends to cut the total for the year - its 2016 interim was 45c, down from 107.5c the previous year, and the interim results announcement talked about their "commitment to no less than 110 US cents per share for the full year" - which given that the 2015 total was 215c indicates that a near-50% cut is on the cards. And while the "no less than" wording allows for it being less bad than that, I wouldn't bet on it being much less bad...

There may well be other instances besides Amec Foster Wheeler and Rio Tinto of companies whose dividend records look good on a complete-historical-years basis, but which have cut subsequent interims. Due to the prevalence of companies with December 31st and March 31st year ends, whose last full-year results are typically ~11 and ~8 months ago respectively, such things can happen quite easily around this time of year...

More generally, I've found in the past one needs to be careful what things one filters on, because of the danger of errors/omissions in the data source the filter relies on. Sometimes this takes the form of 'false positives' - i.e. companies that it presents as candidates, but that shouldn't be: this matter of failing to notice dividend cuts that have affected an interim, but not yet affected a full-year total, is an example. They're reasonably easily dealt with: basically, just remember not to rely on the statistics in a filter results - give each company you select a thorough going-over before finally selecting it.

There are also 'false negatives' - companies that should have passed the filters, but didn't. Causes include missing or erroneous data, and they're somewhat harder to detect. Techniques for checking up on them include:

* Looking out for 'usual suspects' that don't turn up in the results, then investigating why not. Sometimes it's a genuine failure to pass the tests (which one might or might not find oneself agreeing to be a good reason to reject the share), sometimes it's a data problem.

* Try running the filter with each test omitted in turn, to see what companies are let in by omitting the test. Sometimes there are lots of them and few of them make any sort of sense as HYP companies, which means it's an effective test. Sometimes there are few of them and a high proportion look like decent HYP companies, in which case it's an ineffective or even counterproductive test.

Gengulphus

[Gengulphus]

(*) In case anyone wants to know how this is done: well, technically speaking the columns are still running into each other - I've simply inserted an extra, fairly narrow blank column between each pair of columns. To do that, I replaced all occurrences of "||" with "||  ||", where the two spaces in the middle are not ordinary spaces, but non-breaking spaces.

Just a quick query. I should really know already, but how can I create a non-breaking space?

In Windows, it can be obtained using the 'Character Map' accessory - it's the space just after the lower-case letters and the four characters {, |, }, ~. It's indicated at the bottom of the accessory as "U+00A0: No-Break Space" and "Keystroke: Alt+0160", which should provide a faster method of accessing it if one uses it often enough - but I don't, and firing up 'Character Map' is the method I find it possible to remember...

Gengulphus

[Instep]

Thankyou Gengulphus.
That brings back memories of old times. I've not been near the "Character Map" for years.
Regards
Instep

[monabri]

I think you can safely remove COB and PSON from your considerations!

Not a good couple of days

[ZipserSir]

paullidd, apologies for being late to your party!

My contribution is just to challenge some of your rationale for selections, which seem to be unHYPish. For example, you say...

"I have chosen no media - as this seems to currently be one of the most changing/changeable areas at the moment", yes, that seems understandable due to Pearson. Is it true of the wider sector?
"I distrust financial services (I have a legacy LLoyds holding, wrestled from negative territory to +35% on paper)" yes, I think that goes for all of us, but it does thin out your options for diversification
Ditto "5. LGEN Yield 6.2% cover 1.4 P/E 11.2 and EPS Growth 8%, so looking good, more research needed as I'm not confident about insurers."
"7. MARS Yield 5.6% cover 1.9 P/E 9.4 and EPS Growth 3%, have held these before and done ok, Sector says Travel and Leisure, but aren't they a brewery/pubco? - what's the future for them?" Does the sector matter so much as the diversification consideration?
"I am dubious on Travel and Leisure, would avoid fixed line telecomms, don't know enough about REITs, would check Aero/Defence on their merits and similarly for Oil Services and Mining." I think we would all recognise your sentiment, but the danger is that you are losing an awful lot of opportunities to diversify, which is a key tenet for a HYP.

Hope this may be helpful to you.

[paullidd]

Hi ZipserSir,

Thanks for your comments.
I probably didn't make my thinking very clear.
I have a largish legacy of lloyds shares so will not add any more banks.
Media I am not too keen on, so will probably avoid.
The other sectors I mentioned were areas for me to do more research in, as i don't enough about them.

I know that Hyp is supposed to be about reasonable diversification and that there is some benefit to strategic ignorance, however I do wish to avoid losing money and I don't think I should invest in companies I don't understand (thanks to Mr Buffet for those two pearls of wisdom).

Thanks to everyone for your input, I will post again when I get closer to purchasing.

Regards
Paul