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Arb HYP to June 30th

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Arborbridge
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Arb HYP to June 30th

#323386

Postby Arborbridge » July 2nd, 2020, 8:39 pm

Half way through a rather too exciting a year, and time for a idea of what the damage is.

12 month rolling income:

in pence per unit        June 30 2019              June 30 2020        change
HYP 7.29 6.32 -13.3%
incITs 7.36 7.69 + 4.48%
incOEICs 7.44 7.19 - 3.3%


On that basis, ITs have served me rather well owing to their reserving capability, presumably, though the surprise is that the OEIC income hasn't dropped more.

12 month change in unit price:
price of income unit in pence June 30 2019            June 30 2020      change
HYP 126.72 115.56 -8.8%
incITs 170.19 144.35 -15.1%
OEIC 168.88 141.96 -15.9%


Finally, here's the chart of my HYP unit price and forecast income per unit. Notice the income line splits near the end: the purple is uncorrected forecasts, while the new yellow line shows the effect of cancellations put in manually. The forecasting website does not do this immediately, but I would expect the two to come closer together in time as analysts come to some consensus - if they do!

Image

My HYP income hasn't yet dropped below my forecast of 2019 by more than the 20% safety margin, and I have not needed to raid either my IR or Safety Margin dividends. I am fully expecting that to happen in the next six months unless there is a rebound. This is a severe test of my HYP system, but so far it has weathered the storm without needing any modification.

Arb.

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Re: Arb HYP to June 30th

#323436

Postby idpickering » July 3rd, 2020, 3:36 am

A crackingly good post Arb, thank you.

I guess we’re all in a similar boat on the income front. I know I’m well down thus far this year.

Ian.

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Re: Arb HYP to June 30th

#323457

Postby 88V8 » July 3rd, 2020, 9:18 am

For those whose records go back that far, will be interesting to compare this year with 08/09.

My year starts on April 1st, so I have little effect thus far.

V8

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Re: Arb HYP to June 30th

#323465

Postby monabri » July 3rd, 2020, 9:55 am

That yellow curve is not nice but I think it might turn out to be the case by year end! :( I've pencilled in the yellow curve approach.

I was surprised to see that the unit price of income IT has crashed more than HYP ( almost double the percentage)..

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Re: Arb HYP to June 30th

#323507

Postby tjh290633 » July 3rd, 2020, 12:05 pm

88V8 wrote:For those whose records go back that far, will be interesting to compare this year with 08/09.

My year starts on April 1st, so I have little effect thus far.

V8

I have just checked my records. For 2008-9 the dividend per unit was 6.67p, for 2020-21 it has been 4.65p, up to 30th June in both cases. Unit price in June 2008 was £3.51, in June 2020 it is £5.05.

So approximately a halving. 2009-10 is a different matter, dividend per unit was 2.34p, with a unit price of £2.73, up to June 2009. The effects were felt more in 2009-10. 2008-9 only saw 4 cancelled dividends in the whole year. Many more in 2009-10, 8 in the first 3 months alone, with 4 more in early July.

TJH

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Re: Arb HYP to June 30th

#323715

Postby Arborbridge » July 4th, 2020, 1:57 pm

I now post some more information at the half year stage, which shows the more short term picture. Rather than looking at the numbers over 12 months, here they are over 6months :-

in pence per unit      June 30 2019         June 30 2020        change
HYP 3.61 2.54 -29.6%
incITs 3.59 3.80 + 5.8%
OEICs 3.48 3.21 - 7.7%


6 month change in unit price
price of income unit    Dec 30 2019               June 30 2020       change
HYP 135.68 115.56 -14.8%
incITs 185.51 144.35 -22.1%
OIECs 172.38 141.96 -17.6%


I generally prefer the 12 month rolling figure if only because I sometimes make changes myself which alter the distribution of dividends, and these changes are less significant on the longer scale. However, the 6 month figures do show more dramatically the initial effect of the Covid crisis.
Arb.

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Re: Arb HYP to June 30th

#323738

Postby funduffer » July 4th, 2020, 3:52 pm

Arb,

Useful to see your data, I might look at mine just to compare.

One point on income per unit is the concept of dividend drag. If, like me, you top up your HYP fairly frequently, then the income per unit measure is always behind the underlying income performance. This is because, when you make a top-up, the number of units increases instantaneously, but the income benefits from the top-up can take up to a year to arrive in your HYP.

Thus a regularly topped-up HYP will always look a bit worse than a a static HYP that is never topped up (all things being equal).

Unless of course you account for this in some way.

Thanks for posting

FD

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Re: Arb HYP to June 30th

#323740

Postby funduffer » July 4th, 2020, 4:03 pm

My 12 month figures, based on 12 month rolling income are:

income per unit:

HYP -12%
IT's 0% (unit drag effect as I have topped-up quite heavily in the last 12 months)

unit price:

HYP -20%
IT's -13%

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Re: Arb HYP to June 30th

#323759

Postby tjh290633 » July 4th, 2020, 5:36 pm

Arb, I don't know about you, but the first dividend not paid in my portfolio was that for DS Smith on 1st May (or thereabouts). There were 12 affected out of 27 due in the 3 months to 30th June. There are 32 due in the next quarter, and 9 affected so far, but 14 yet to report, with a lot of half yearly results due out.

Consequently it will not be until somewhat later in the year that these effects will start to trickle down to collective investments. Likewise, when the recovery comes in due course, you will see the effects earlier in your portfolio than in the collectives. With ITs and their ability to smooth out dividends, the effects will be seen in other factors in their balance sheets, like the income reserve and the capital reserve.

TJH

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Re: Arb HYP to June 30th

#323864

Postby Gengulphus » July 5th, 2020, 12:18 pm

Arborbridge wrote:I now post some more information at the half year stage, which shows the more short term picture. Rather than looking at the numbers over 12 months, here they are over 6months :-

in pence per unit      June 30 2019         June 30 2020        change
HYP 3.61 2.54 -29.6%
incITs 3.59 3.80 + 5.8%
OEICs 3.48 3.21 - 7.7%


6 month change in unit price
price of income unit    Dec 30 2019               June 30 2020       change
HYP 135.68 115.56 -14.8%
incITs 185.51 144.35 -22.1%
OIECs 172.38 141.96 -17.6%


I generally prefer the 12 month rolling figure if only because I sometimes make changes myself which alter the distribution of dividends, and these changes are less significant on the longer scale. However, the 6 month figures do show more dramatically the initial effect of the Covid crisis.

Could I ask whether you're recording income by payment date, ex-dividend date or declaration date? My guess is payment date, since it's only then that you're completely certain of it, and that certainty has been much more relevant than normal in the COVID-19 crisis - normally, ex-dividend date and declaration date are very nearly as certain as payment date. But if so, that basically means that you're likely to only have been experiencing the COVID-19 effects on income since about the end of March / start of April, so that it really requires 3-month figures rather than 6- or 12-month figures to show the initial income effects of the crisis (such as income per income unit) fully dramatically... For capital effects (such as the income unit price), on the other hand, one really wants both the 3-month and the 6-month figures, because judging by what's happened to major stockmarket indices, they're likely to have fallen dramatically in Q1 and recovered less dramatically in Q2. So the 6-month figures on their own seem unlikely to show the full drama of the initial effects of the crisis - though for different reasons and with different timings for income per income unit and for the income unit price.

IMHO that sort of consideration means that most HYPers are unlikely to get whole-portfolio 12-month income figures based on payments that are fully affected by the initial appearance of COVID-19 for another nine months. They will be able to produce increasingly accurate estimates as those nine months go by, of course, but it's still very early days and the accuracy of such estimates is likely to be pretty low for some months to come...

Gengulphus

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Re: Arb HYP to June 30th

#323869

Postby Gengulphus » July 5th, 2020, 12:33 pm

tjh290633 wrote:Arb, I don't know about you, but the first dividend not paid in my portfolio was that for DS Smith on 1st May (or thereabouts).

For my main HYP, I'm fairly certain it was the HSBC Q4 2019 interim that had been due to be paid on April 14th, and whose cancellation was announced in their April 1st RNS.

Gengulphus

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Re: Arb HYP to June 30th

#323899

Postby mike » July 5th, 2020, 4:16 pm

Gengulphus wrote:
tjh290633 wrote:Arb, I don't know about you, but the first dividend not paid in my portfolio was that for DS Smith on 1st May (or thereabouts).

For my main HYP, I'm fairly certain it was the HSBC Q4 2019 interim that had been due to be paid on April 14th, and whose cancellation was announced in their April 1st RNS.

Gengulphus


I see your HSBC and raise you Persimmon ;) !

Persimmon didn't pay their already declared and ex-dividend 125p per share due on 2 April.

April has been the worst month for me for cancellations to date, although July will overtake tomorrow when both 2019 finals from WPP and PSN are added to what would have been HSBC's first 2020 quarterly.

A tiny glimmer of hope is that both WPP and PSN stated they were suspending/postponing their final dividends, not cancelling them. We'll see in due course !

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Re: Arb HYP to June 30th

#323993

Postby Arborbridge » July 6th, 2020, 8:35 am

funduffer wrote:Arb,

Useful to see your data, I might look at mine just to compare.

One point on income per unit is the concept of dividend drag. If, like me, you top up your HYP fairly frequently, then the income per unit measure is always behind the underlying income performance. This is because, when you make a top-up, the number of units increases instantaneously, but the income benefits from the top-up can take up to a year to arrive in your HYP.

Thus a regularly topped-up HYP will always look a bit worse than a a static HYP that is never topped up (all things being equal).

Unless of course you account for this in some way.

Thanks for posting

FD


That does make a difference, but with a mature HYP where topups are a relatively small percentage, I doubt it is distorting the figures unacceptably. The effects of changes in dividend date and my own occasional changes (sales and new holdings) might be more significant. For example, Tesco paid in June last year and July this year, and proceeds from Greene King and Informa have been reinvested into other shares with different dates to those two.

I'm calculating the dividend per unit on a daily basis, with the number of units in existence on that day. When the portfolio was growing rapidly, I crudely allowed for dividend drag by taking the number of units three months prior to the dividend payment date. I phased this method out several years ago after a year's trial against the "daily method" showed there was no difference worth worrying about.

Hope this helps,

Arb.

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Re: Arb HYP to June 30th

#323994

Postby Arborbridge » July 6th, 2020, 8:37 am

funduffer wrote:My 12 month figures, based on 12 month rolling income are:

income per unit:

HYP -12%
IT's 0% (unit drag effect as I have topped-up quite heavily in the last 12 months)

unit price:

HYP -20%
IT's -13%


Very similar to mine, although you've suffered more on the HYP capital side.

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Re: Arb HYP to June 30th

#323995

Postby Arborbridge » July 6th, 2020, 8:45 am

tjh290633 wrote:Arb, I don't know about you, but the first dividend not paid in my portfolio was that for DS Smith on 1st May (or thereabouts). There were 12 affected out of 27 due in the 3 months to 30th June. There are 32 due in the next quarter, and 9 affected so far, but 14 yet to report, with a lot of half yearly results due out.

Consequently it will not be until somewhat later in the year that these effects will start to trickle down to collective investments. Likewise, when the recovery comes in due course, you will see the effects earlier in your portfolio than in the collectives. With ITs and their ability to smooth out dividends, the effects will be seen in other factors in their balance sheets, like the income reserve and the capital reserve.

TJH


I believe my first was Persimmon. So far up to end June I've logged 6 cancellations and 2 reductions. In all, I know there are 9 cancellations and 3 reductions announced in my HYP.

Arb.

PS add one more reduction: loss of BHP special.

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Re: Arb HYP to June 30th

#323999

Postby Arborbridge » July 6th, 2020, 9:03 am

Gengulphus wrote:

Could I ask whether you're recording income by payment date, ex-dividend date or declaration date?

Gengulphus


The income per unit is calculated on the day the dividend arrives. For that purpose, I never work with XD dates or even "expected" pay dates - I wait until the payment is in my account.

Thanks for your others comments.

AAMOI the HYP income per unit change for the three months to June 2020 compared with June 2019 was -33.8%.

Arb

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Re: Arb HYP to June 30th

#324048

Postby Gengulphus » July 6th, 2020, 11:42 am

funduffer wrote:One point on income per unit is the concept of dividend drag. If, like me, you top up your HYP fairly frequently, then the income per unit measure is always behind the underlying income performance. This is because, when you make a top-up, the number of units increases instantaneously, but the income benefits from the top-up can take up to a year to arrive in your HYP.

Thus a regularly topped-up HYP will always look a bit worse than a a static HYP that is never topped up (all things being equal).

That effect and similar effects (on measures such as XIRR() values) tend to be largest in the early days of a HYP, when the top-ups are largest relative to its existing size. They tend to be small once it's been going for the year required to have built up to actually having a sensible annual income-per-income-unit, unless there is a large capital injection (e.g. from an inheritance or a major Lottery win), and are usually pretty negligible by the time the HYP can reasonably be considered to be 'mature'. But you're right that it does depress the measures a bit - it's just that it's usually a pretty small bit.

If you do want to compensate for those effects, credit dividends when they go ex-dividend rather than when they're paid. Note that if you do this, you will occasionally have to retrospectively undo such a credit, when an already-ex-dividend dividend is cancelled - this is rare in normal circumstances (I've only been affected by two such previous events in the getting on for 20 years I've been HYPing - Railtrack when it went bust and BP in the immediate aftermath of its Gulf of Mexico oil spill in 2010), but there was a bit of a burst of such cancellations as the COVID-19 pandemic really took off in late March and early April this year (I was hit by two of them, affecting British Land and HSBC (*), but know of a number of others such as Persimmon).

Or if you really want to account for them in full pedantic detail, create a fake holding of 'dividend cash entitlements' in your portfolio tracking software. When a dividend goes ex-dividend, add the amount of the dividend to the dividend cash entitlements; when it is paid, remove the amount of the dividend from the dividend cash entitlements and add it to the cash holding; when an already-ex-dividend dividend is cancelled (usually an extremely rare event) remove the amount of the dividend from the dividend cash entitlements without any compensating addition to the cash. That allows you to look at rate-of-return figures with and without dividend drag, by choosing whether to regard the dividend cash entitlements as being 'inside' or 'outside' the portfolio. But the technique does have the cost of needing to enter three transactions for every dividend payment in normal circumstances, which I'd imagine just about everyone will regard as a prohibitive cost!

(*) Note that this is just cancellations after or on the day the dividend concerned went ex-dividend - I've been hit by plenty of others... :-(

Gengulphus

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Re: Arb HYP to June 30th

#324065

Postby Gengulphus » July 6th, 2020, 12:28 pm

Arborbridge wrote:
Gengulphus wrote:Could I ask whether you're recording income by payment date, ex-dividend date or declaration date?

The income per unit is calculated on the day the dividend arrives. For that purpose, I never work with XD dates or even "expected" pay dates - I wait until the payment is in my account.

Very reasonable, though I use the official payment date stated by the company in my records. My reason, which may well not apply to you and certainly won't to any HYPer whose HYP is completely tax-sheltered, is that I use my records for my tax returns and that's the date that one becomes legally entitled to the payment (if it isn't cancelled beforehand, of course) and that therefore counts for tax purposes. A shift of that date by a day or two of course only makes a difference to tax if it shifts the payment into a different tax year, and I haven't often seen it do that - but I have very occasionally known it happen.

Thanks for the information about the last 3 months. As I suspected, it's worse than the impact for the last 6 months given in your OP, though I'm pleasantly surprised that it's only 4.2 percentage points worse. I haven't yet entered all my dividend data up to June 30th and so cannot provide any exact figure for comparison, but a very crude count of the numbers of dividends received in Q2 this year and last says I'm probably around 40% down on HYP dividend income.

Gengulphus

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Re: Arb HYP to June 30th

#324132

Postby tjh290633 » July 6th, 2020, 4:22 pm

Arborbridge wrote:
PS add one more reduction: loss of BHP special.

They last paid a special in January 2019. I don't think that you can count that as a loss.

TJH

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Re: Arb HYP to June 30th

#324226

Postby Gengulphus » July 7th, 2020, 6:20 am

tjh290633 wrote:
Arborbridge wrote:PS add one more reduction: loss of BHP special.

They last paid a special in January 2019. I don't think that you can count that as a loss.

Well, it's income lost in the 6-month comparison between the first half of 2019 and the first half of 2020, which is the comparison Arb did in viewtopic.php?p=323715#p323715, so it's not totally unreasonable. It's not lost due to COVID-19, but he didn't say that all the damage was due to COVID-19, and it's not lost in the 3-month comparison between Q2 2019 and Q2 2020, but that's an extra he supplied in response to my query rather than his main focus.

I think the more important point is that that dividend was always intended to be part of a return to shareholders of the large proceeds of the sale of its 'Onshore US Assets' (see https://investegate.co.uk/bhp-billiton- ... 57178964F/ and https://investegate.co.uk/bhp-billiton- ... 00019515F/). That was clearly a one-off event that could never reasonably have been expected to be repeated in the following year - i.e. what was lost is just a previous gain of some bonus income that had always been expected to vanish from 12-month figures a year later. And if one looks carefully at the pink unit income line in Arb's chart in his OP:

Arborbridge wrote:Image

there is a bigger-than-usual jump upwards from about 7.1p to about 7.4p between the 12/12/2018 and 12/02/2019 dates, and a similarly-sized jump downwards about a year later, which are probably due to that big special dividend entering and leaving the 12-month unit income figures. (There is also a similarly-sized jump upwards just before that jump downwards, by the way, and a similarly-sized jump downwards between the 12/08/2019 and 12/10/2019 dates - they presumably had other causes.)

The entirely-expected loss of that BHP special dividend does explain something that had been puzzling me a bit: the rather small difference between the -29.6% change to unit income in the 6-month comparison and the -33.8% difference in the 3-month comparison. I would generally expect the change between H1 of one year and H1 of the following year to be pretty close to a weighted average of the corresponding Q1 changes and Q2 changes, weighted according to the relative amounts of income received in Q1 and Q2. On the assumption that Q1's income was little changed, being just about unaffected by COVID-19, those figures would have required normal Q2 income to be about seven times normal Q1 income - and while I would generally expect Q2 income to be greater than Q1 income because of dividend seasonality, that seemed an unexpectedly big difference! The best explanation I'd thought of was just that Arb's HYP might happen to be a rather extreme outlier on that aspect of dividend seasonality - but a substantial fall in Q1 income caused by the loss of the BHP special reduces the weighting difference required to explain the small -29.6% vs -33.8% difference substantially and so makes it considerably more plausible that Arb's HYP exhibits the required amount of dividend seasonality.

Gengulphus


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