Do you ever sell HYP low yielders?

Practical discussions about equity High-Yield Portfolios (HYP) for income
Minesadouble
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Do you ever sell HYP low yielders?

Postby Minesadouble » January 6th, 2017, 2:08 pm

I've been hyping for the last five or six years and aside from S32 and Verizon Sales, I've only jettisoned Tesco and Standard Chartered, both of which cut dividends and lost my confidence through a fairly accident prone record. Aside from those I've sold nothing and followed the LTBH approach.
A question which does occur to me is when a share has tremendous capital appreciation and resulting low yield, do others hold tight for diversification sake or switch funds into shares offering high yield. In my HYP RELX and Compass would be good examples: treble digit capital growth but now c 2% yields. I have a 30 share HYP which would still offer good diversification if it was a 28 share HYP and I could boost the overall yield by some selective switching. I'm curious to know what other HYPers do.

Raptor
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Re: Do you ever sell HYP low yielders?

Postby Raptor » January 6th, 2017, 2:23 pm

Minesadouble wrote:I've been hyping for the last five or six years and aside from S32 and Verizon Sales, I've only jettisoned Tesco and Standard Chartered, both of which cut dividends and lost my confidence through a fairly accident prone record. Aside from those I've sold nothing and followed the LTBH approach.
A question which does occur to me is when a share has tremendous capital appreciation and resulting low yield, do others hold tight for diversification sake or switch funds into shares offering high yield. In my HYP RELX and Compass would be good examples: treble digit capital growth but now c 2% yields. I have a 30 share HYP which would still offer good diversification if it was a 28 share HYP and I could boost the overall yield by some selective switching. I'm curious to know what other HYPers do.


For me it would depend what % of the total portfolio and dividend income it was and also what my CGT position would be. To be honest though I did get rid of Compass a long time ago because of the yield, but that was before I decided to try to follow the HYP principles. Just jettisoned Tesco, when the price at least gave me a bit of a profit (still hold a few shares held by the registrar as they are "bonus" shares from Tesco). I did get rid of 2 shares that, IMHO, should not have been in the HYP in the first place, Stobart (STOB) and Segro (SGRO), small profit and I brought M&S (out of the frying pan into the fire).

Raptor.

Minesadouble
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Re: Do you ever sell HYP low yielders?

Postby Minesadouble » January 6th, 2017, 2:37 pm

Raptor,
REL and CPG together represent 7% of my HYP in Capital terms and make up 4% of my 2016 HYP dividends.
Switching to say 5% yielding shares would result in my overall HYP yield moving from about 4.3% to 4.5%.
No CGT liability as all of my HYP is in my SIPP (and all my SIPP is my HYP).
I hold other portfolios though.

Itsallaguess
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Re: Do you ever sell HYP low yielders?

Postby Itsallaguess » January 6th, 2017, 2:54 pm

Minesadouble wrote:
I've been HYPing for the last five or six years and aside from S32 and Verizon Sales, I've only jettisoned Tesco and Standard Chartered, both of which cut dividends and lost my confidence through a fairly accident prone record. Aside from those I've sold nothing and followed the LTBH approach.

A question which does occur to me is when a share has tremendous capital appreciation and resulting low yield, do others hold tight for diversification sake or switch funds into shares offering high yield. In my HYP RELX and Compass would be good examples: treble digit capital growth but now c 2% yields. I have a 30 share HYP which would still offer good diversification if it was a 28 share HYP and I could boost the overall yield by some selective switching. I'm curious to know what other HYPers do.


I'll pick up on your 'hold tight for diversification sake' statement firstly, as I think by holding on to a HYP share that's seen high-enough capital appreciation to affect the yield in such a way, to then 'hold tight' onto such capital appreciation is doing the complete opposite, and would be making the diversification aspect of the HYP portfolio worse, not better....

The next question I would ask would be to wonder if there would really be a need, if you did decide that some action were required over a share that had seen such capital appreciation, to get rid of it completely? I only ask this because you talk of a 30-share HYP 'still offering good diversification if it were a 28-share HYP'.

Presumably, you'd still be able to deliver an increase in overall HYP-income if you were to just top-slice each of the two HYP shares that have seen this happen to them, diverting the top-slice funds into either topping-up some other existing holdings to achieve a better balance across the portfolio, or by purchasing new additions to the HYP, perhaps into sectors that aren't covered at the moment, if attractive options were currently available.

That way, you'd achieve better diversification across both your capital and your income, whilst potentially still maintaining an interest in a couple of HYP companies that have clearly 'done well' from a business perspective. Of course you'd have to take a view on the current yield of those companies, and if you'd expect them to continue to raise their dividends, but I wouldn't be in a mad rush to get rid of them completely, although a 2% current yield would mean that there would need to be a strong conviction from me on the above points for me to still keep an interest rather than sell them fully.

One other thing I will say is that I've recently been in a similar situation, with one of my HYP shares having grown over the past 18 months into a size of holding that I was beginning to get uncomfortable with initially, and then have real problems justifying not taking any actions. Having finally carried out a top-slice process before Christmas, shifting some of the capital into topping up existing holdings, and also bringing in a new HYP share into a sector that wasn't initially covered, and in the meantime also raising the overall HYP income in the process, I've got to say that I've been really surprised how happy I've since been, after making the initial decision to take action.

So if you're 'worried that you'll worry' that you did the right thing, if you were to take the sort of action you're contemplating, my personal view is that I feel much better for having taken a similar decision recently, so don't worry too much about that particular worry, if indeed it is one.....if you see what I mean.... :O)

Cheers,

Itsallaguess

tramrider
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Re: Do you ever sell HYP low yielders?

Postby tramrider » January 6th, 2017, 3:00 pm

Minesadouble wrote:... I've only jettisoned Tesco and Standard Chartered, both of which cut dividends and lost my confidence through a fairly accident prone record. Aside from those I've sold nothing and followed the LTBH approach.


Your comment on Standard Chartered made me look again at my holding of STAN. It was bought for a total of £3.9k during 2013 and 2014. By April 2016, the dividends had stopped, the price was 432.70p and the capital was down to £1.8k.

However, at the present price of about 694p, the holding has now gone back up to £2.6k, an increase of £0.8k during the year, much more than any past dividends.

So perhaps the low forecast yield of 0.7% is not a good reason to sell them now. :? Perhaps I should learn from the lessons of LTBH and total return.

Tramrider

idpickering
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Re: Do you ever sell HYP low yielders?

Postby idpickering » January 6th, 2017, 3:25 pm

Minesadouble wrote:I've been hyping for the last five or six years and aside from S32 and Verizon Sales, I've only jettisoned Tesco and Standard Chartered, both of which cut dividends and lost my confidence through a fairly accident prone record. Aside from those I've sold nothing and followed the LTBH approach.
A question which does occur to me is when a share has tremendous capital appreciation and resulting low yield, do others hold tight for diversification sake or switch funds into shares offering high yield. In my HYP RELX and Compass would be good examples: treble digit capital growth but now c 2% yields. I have a 30 share HYP which would still offer good diversification if it was a 28 share HYP and I could boost the overall yield by some selective switching. I'm curious to know what other HYPers do.


I tend to let sleeping dogs alone and let them be. Hany to ensure diversification. If not Unilever would've gone long ago.

Ian

Raptor
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Re: Do you ever sell HYP low yielders?

Postby Raptor » January 6th, 2017, 3:47 pm

Minesadouble wrote:Raptor,
REL and CPG together represent 7% of my HYP in Capital terms and make up 4% of my 2016 HYP dividends.
Switching to say 5% yielding shares would result in my overall HYP yield moving from about 4.3% to 4.5%.
No CGT liability as all of my HYP is in my SIPP (and all my SIPP is my HYP).
I hold other portfolios though.


The 4% dividends is reasonable to me. The 7% would ring bells, to re-balance. My own personal criteria, would be 100/number of shares X1.5 (or 5% in your case) as a "you need to keep an eye on these", that could be re-investing dividends away so as to lower that figure or to just keep a watch as we know the share prices do fluctuate. The 2nd level is 100/number of shares X2 (or 6.66% for you), this level is you really should be looking at these. But to be honest I have 4 in the 2nd scenario, Admiral (ADM), Taylor Wimpey (TW), BAE (BA) and SSE. Three of those have high forecast yield amd only BA at 3.7% would need closer looking into. I also have 3 in the 1st scenario,GSK, RIO and Carillion (CLLN).
None have any CGT problems but both TW and CLLN are above 10% of my dividend income (which does make me twitch occasionally).

At the moment I am not looking to top slice or sell any of them, but there again I do not have any "spare" cash lying around either. Now if I did and was going to top-up then maybe I would look to top slice one or more of them and use that to re-balance. So at the moment I am keeping an eye on them but it is a timing thing with me.

Raptor.

tjh290633
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Re: Do you ever sell HYP low yielders?

Postby tjh290633 » January 6th, 2017, 9:57 pm

Usually I dump a share if it rises so much that the yield falls appreciably below 2%. Some which pass their dividends I will continue to hold for recovery. Others with little hope of recovery go.

TJH

77ss
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Re: Do you ever sell HYP low yielders?

Postby 77ss » January 7th, 2017, 12:27 am

Minesadouble wrote:A question which does occur to me is when a share has tremendous capital appreciation and resulting low yield, do others hold tight for diversification sake or switch funds into shares offering high yield. In my HYP RELX and Compass would be good examples: treble digit capital growth but now c 2% yields. I have a 30 share HYP which would still offer good diversification if it was a 28 share HYP and I could boost the overall yield by some selective switching. I'm curious to know what other HYPers do.


Yes.

The clearest example was selling Reckitt when its yield fell to under 2% back in June 2016.

With 30 odd holdings, I don't worry too much about diversification these days, but I think I increased it by splitting the proceeds two ways - topping up on a 250 tracker and adding a tempting new holding (Connect).

My yield on the capital involved more than doubled - from 2% to 4.46%. Early days of course, but the capital is doing fine as well.

I should add that I don't treat the 2% yield as a fixed limit. The lowest yield I am prepared to accept from a holding depends upon the share involved (my perceptions of its solidity) and whether or not I have a good alternative home for the capital.

Gengulphus
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Re: Do you ever sell HYP low yielders?

Postby Gengulphus » January 7th, 2017, 2:52 pm

Minesadouble wrote:A question which does occur to me is when a share has tremendous capital appreciation and resulting low yield, do others hold tight for diversification sake or switch funds into shares offering high yield.

Both! I.e. I sell part of the holding and keep the rest - aka 'top-slicing'.

That way, I remain diversified (in fact, better diversified than if I kept the full holding, because overweight holdings are the big lack-of-diversification risk) and I have the chance to switch into higher-yielding shares - and quite possibly diversify further in the process.

Gengulphus

Minesadouble
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Re: Do you ever sell HYP low yielders?

Postby Minesadouble » January 7th, 2017, 3:40 pm

That seems an eminently sensible way forward and I had reached the same conclusion.

Monday will see me 'top slice' REL and CPG and redeploy resulting funds into VOD, SSE, IMB and HSBA.

Thanks everyone for responding.

NeilW
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Re: Do you ever sell HYP low yielders?

Postby NeilW » January 7th, 2017, 4:38 pm

I tend to look at the income per share rather than the value. If the income appreciation is such that the share is a rather large amount of the income base then I would probably adjust to another high yielder to give diversification.

But it has to be the same quality of share and give more income - otherwise you risk creating 'diworsification'.

And finding the same quality of share with more income is harder than it sounds.

HY generally turns out ok, but you have to remember that the high income is often because shares are perceived to have problems. If you're hit a winner where the problems turn out to be fake you're best holding the share. (CPG is a case in point).

This is one of the reason I work out income vs the original price I paid for the shares, not the current supposed value.

DiamondEcho
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Re: Do you ever sell HYP low yielders?

Postby DiamondEcho » January 8th, 2017, 9:09 pm

A parallel question might be 'Do you sell a cutter?'.

Yes, and yes. I run a HYP, rather than a waiting room or ER ward for those eligible. I also find inaction/dithering on those shares you ought to ditch comes at a material cost.

Would I buy ULVR now, no chance it's not high yield. If I inherited ULVR into my HYP would I continue to hold it? No, it's very far from high yield.

77ss
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Re: Do you ever sell HYP low yielders?

Postby 77ss » January 9th, 2017, 12:17 am

DiamondEcho wrote:Would I buy ULVR now, no chance it's not high yield. If I inherited ULVR into my HYP would I continue to hold it? No, it's very far from high yield.


Never the highest of yields, but it has a place in my HYP. I have held it for 6 years now, and it is delivering an XIRR of 13.72%. I regard this as an acceptable outcome.

The yield is getting a tad low now and if the share price rises by much more I shall give serious consideration to top-slicing.

For ULVR, the situation is complicated by exchange rates. I suspect the Q4 dividend may increase by some 25% in sterling terms. In future years, I suspect we will no longer get the benefit of the falling pound.

DiamondEcho
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Re: Do you ever sell HYP low yielders?

Postby DiamondEcho » January 9th, 2017, 4:43 pm

re: ULVR
77ss wrote: Never the highest of yields, but it has a place in my HYP. I have held it for 6 years now, and it is delivering an XIRR of 13.72%. I regard this as an acceptable outcome.


But future XIRR% post-purchase is not a criteria for a HYP purchase. I'm glad it's worked out for you; but I still find it a bit hard to understand how some HYPers are wedded to ULVR, even when at purchase it isn't a HYP stock. I wonder when it last qualified per the HYP sift-metrics? I'm not having a pop, pls don't think that, but I do sense some HYPers can make an exception for ULVR and it's not altogether clear to me the basis for that.

Breelander
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Re: Do you ever sell HYP low yielders?

Postby Breelander » January 9th, 2017, 5:05 pm

DiamondEcho wrote:... I still find it a bit hard to understand how some HYPers are wedded to ULVR, even when at purchase it isn't a HYP stock. I wonder when it last qualified per the HYP sift-metrics?


For me that was 11th March 2011. Bought ULVR on a historic yield of 3.9% at a time the Ftse All Share was yielding 3%.

tjh290633
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Re: Do you ever sell HYP low yielders?

Postby tjh290633 » January 9th, 2017, 5:20 pm

I see that I bought ULVR on 19 Feb 2010 at 1915p, with a starting yield of 3.72%, based on the first four dividends received. At the current price of 3344p, my IRR has been 11.7%. With a yield of just over 3%, I have no inclination to sell. In €uro terms, the dividend has been increasing nicely at 5.9% or more per year since I bought them.

TJH

DiamondEcho
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Re: Do you ever sell HYP low yielders?

Postby DiamondEcho » January 9th, 2017, 5:32 pm

Breelander wrote:For me that was 11th March 2011. Bought ULVR on a historic yield of 3.9% at a time the Ftse All Share was yielding 3%.


Does the model HYP sift the All-share? I thought it had a base-line requirement for Market Captln? That [last time I checked] included the FTSE-100, and a short way into the top of the '250'.

Arborbridge
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Re: Do you ever sell HYP low yielders?

Postby Arborbridge » January 9th, 2017, 5:39 pm

DE said:
Yes, and yes. I run a HYP,


How odd. I thought HYP was a question of buying and holding, and holding, and holding. The original description was full of ideas about self healing etc, nothing about selling ASAP on a cut.
The default for HYP is buying and leaving alone thereafter: you (and most of us) are running a variant. So although you are perfectly entitled to tinker in that way, you should imply that people who prefer to play by the original guidelines are not running a HYP but a "waiting room". I'd say, try telling that to Stephen Bland.

Arb.

Gengulphus
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Re: Do you ever sell HYP low yielders?

Postby Gengulphus » January 9th, 2017, 6:14 pm

For me, the main purchases of Unilever were in October 2013, at an average price of about £24.50 and on a historical yield of 3.5% (forecast yield probably a bit higher, but I haven't kept a record of what it was). That puts it marginally above the FTSE 100 yield at the time. Not enough to normally qualify for my HYP, but I will accept yield down to the FTSE 100 yield or maybe even slightly below if a share's dividend safety and growth credentials are good enough, and Unilever's were IMHO excellent.

That doesn't mean Unilever is currently a HYP purchase for me. Its yield is currently noticeably below the FTSE 100, and Brexit-related uncertainty means I'm not quite as confident about its dividend safety as I was.

But Unilever is also nowhere near a sell for me - I have quite a wide 'hold' range between my HYP buying and tinkering criteria, essentially because the narrower the range between them, the more one trades. At a certain point the capital gains and losses from the trading clearly become the dominant factor in the portfolio's success, and at that point it IMHO can no longer really be described as a HYP. Also, the HYP is supposed to be the low-effort part of my investments, and the more trading one does, the more effort one needs to put into it.

Gengulphus


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