PYAD HYP 2019_04 DRAWDOWN – Year 2 Commentary

[IanTHughes]

The latest update for this HYP constructed by pyad, as recorded on this thread: viewtopic.php?f=15&t=16868&start=140

Has been posted here: viewtopic.php?p=323586#p323586

Further details of how updates are to be made to this portfolio can be found on this thread: viewtopic.php?p=218513#p218513

Comments are of course welcome although it would be appreciated if they were confined to this thread, leaving the main thread to simply record all actions taken and the progress of the portfolio.


Ian

[csearle]

The latest update...

Hi Ian, great to see you back. I was getting worried. All the best old bean. C.

[IanTHughes]

The latest update for this HYP constructed by pyad, as recorded on this thread: viewtopic.php?f=15&t=16868&start=140

Has been posted here: viewtopic.php?p=345490#p345490


Further details of how updates are to be made to this portfolio can be found on this thread: viewtopic.php?p=218513#p218513

Comments are of course welcome although it would be appreciated if they were confined to this thread, leaving the main thread to simply record all actions taken and the progress of the portfolio.

Comments on Year One can be found here: viewtopic.php?p=275000#p275000



Ian

[moorfield]

There's a lot of information to wade through on the Y1/Y2 reports ("Too many notes, dear Mozart" - Emperor Joesph II) but I found the pertinent (to me) bit: overall income has fallen some ~42% from £14.7k to £8.6k.

[IanTHughes]

There's a lot of information to wade through on the Y1/Y2 reports ("Too many notes, dear Mozart" - Emperor Joesph II) but I found the pertinent (to me) bit: overall income has fallen some ~42% from £14.7k to £8.6k.

Well it is an annual report and different strokes for different folks and all that.

Thanks for quoting the correct percentage drop in income which I erroneously stated was -36.86%! I can't think where I got that figure from as the correct figure is -41.62%.

Oh well, let's hope it is the only error


Ian

[csearle]

Thanks for quoting the correct percentage drop in income which I erroneously stated was -36.86%! I can't think where I got that figure from as the correct figure is -41.62%.

Wish I had a negative drop in income for my portfolio! C.

[IanTHughes]

Thanks for quoting the correct percentage drop in income which I erroneously stated was -36.86%! I can't think where I got that figure from as the correct figure is -41.62%.

Wish I had a negative drop in income for my portfolio! C.

Ha Ha


Ian

[Wizard]

Based on my recollection of some HYPers' posts about their income performance, this virtual portfolio appears to have performed very badly in income terms. What do people put that down to? Insufficient diversification, is the relative youth of the portfolio a factor, is it down to poor initial selection, just bad luck or something else?

[moorfield]

Based on my recollection of some HYPers' posts about their income performance, this virtual portfolio appears to have performed very badly in income terms. What do people put that down to? Insufficient diversification, is the relative youth of the portfolio a factor, is it down to poor initial selection, just bad luck or something else?

As with the French Revolution of 1789, I think it's still too early to say if it is working (Zhou Enlai).

[Wizard]

Based on my recollection of some HYPers' posts about their income performance, this virtual portfolio appears to have performed very badly in income terms. What do people put that down to? Insufficient diversification, is the relative youth of the portfolio a factor, is it down to poor initial selection, just bad luck or something else?

As with the French Revolution of 1789, I think it's still too early to say if it is working (Zhou Enlai).

But I was not looking for a view on this portfolio as a way of assessing HYP as an approach. I was looking for any views on why this portfolio suffered in terms of income drop so much more than others that have been reported on here. The relevant period for considering that is the period being reported on, in most cases the 12 month period spanning the COVID driven dividend cuts.

[Dod101]

Based on my recollection of some HYPers' posts about their income performance, this virtual portfolio appears to have performed very badly in income terms. What do people put that down to? Insufficient diversification, is the relative youth of the portfolio a factor, is it down to poor initial selection, just bad luck or something else?

As with the French Revolution of 1789, I think it's still too early to say if it is working (Zhou Enlai).

But I was not looking for a view on this portfolio as a way of assessing HYP as an approach. I was looking for any views on why this portfolio suffered in terms of income drop so much more than others that have been reported on here. The relevant period for considering that is the period being reported on, in most cases the 12 month period spanning the COVID driven dividend cuts.

I do not hold all that many of the shares held in it and apart from the cancellation of the dividends from HSBC and Carnival there may well be other cancellations. Furthermore there were savage cuts from the likes of Shell and Imperial and probably others such as BP as well. I am not inclined to go through each share to check but anyone interested could easily do that.

Dod

[IanTHughes]

I too have been pondering how this virtual portfolio has performed when compared to other HYPs. With 19 holdings, representing 17 equal value investments in different Business Sectors, I doubt it can be said to have suffered from a lack of diversification.

The Income details for the two years are as follows:

EPIC    | Company                | 05-Apr-20 | 05-Apr-21 | % Change
ITV     | ITV                    |   932.15  |     0.00  | -100.00%
IBST    | Ibstock                |   859.79  |     0.00  | -100.00%
SMDS    | DS Smith               |   698.22  |     0.00  | -100.00%
CCL     | Carnival Corporation   |   610.18  |     0.00  | -100.00%
HSBA    | HSBC Holdings          |   573.99  |     0.00  | -100.00%
WPP     | WPP                    | 1,068.00  |   178.00  |  -83.33%
RDSB    | Royal Dutch Shell      |   447.07  |   152.04  |  -65.99%
BLND    | British Land Company   |   301.87  |   106.93  |  -64.58%
AV      | Aviva                  | 1,100.18  |   537.42  |  -51.15%
LAND    | Land Securities Group  |   285.05  |   147.24  |  -48.35%
IMB     | Imperial Brands        | 1,173.31  |   782.17  |  -33.34%
BP      | BP                     |   495.46  |   344.60  |  -30.45%
GNK/PNN | Greene King/Pennon     |   812.44  |   700.72  |  -13.75%
IGG     | IG Group Holdings      | 1,193.17  | 1,193.17  |    0.00%
SLA     | Standard Life Aberdeen | 1,188.63  | 1,188.63  |    0.00%
BHP     | BHP Group              |   944.08  |   964.49  |    2.16%
BA      | BAE Systems            |   687.71  |   705.97  |    2.66%
VOD     | Vodafone Group         |   758.07  |   812.27  |    7.15%
GSK     | GlaxoSmithKline        |   536.37  |   752.80  |   40.35%

Please note:

The increase in dividend for GSK is entirely down to the original purchase being Ex-Dividend and only three of four quarterly dividends being received in the first year – ending 05 April 2020

In order to discover why other HYPs have maintained a superior income performance, assuming they did, the simple question is which of the above dividend cutters were not held and what, if anything, replaced them? If those whose HYPs performed better would provide a similar list for the same time period – 6 Apr 2019 to 5 Apr 2021 – we would be in a position to know more.

Of course, any comparison must be with HYPs that are purely Drawdown - no added capital or re-invested dividends. If not, the effect of such re-investment must be stripped out.


Ian

[Wasron]

I added ITV to my HYP in May 2017, followed by Carnival in March 2019 and Ibstock in June 2019.

Looking at my notes, ITV boosted its dividend with specials, while Ibstock and Carnival only yielded 4% when I bought them, but had been growing the dividend by around 10% a year.

So to understand why this portfolio was affected more than others... perhaps it was just timing and bad luck. If you had an established HYP and weren’t looking for new holdings these would probably have passed you all by

Wasron

[IanTHughes]

I added ITV to my HYP in May 2017, followed by Carnival in March 2019 and Ibstock in June 2019.

Looking at my notes, ITV boosted its dividend with specials, while Ibstock and Carnival only yielded 4% when I bought them, but had been growing the dividend by around 10% a year.

So to understand why this portfolio was affected more than others... perhaps it was just timing and bad luck. If you had an established HYP and weren’t looking for new holdings these would probably have passed you all by

I am sure that you are right about those three fairly recent additions to the HYP family, but surely an "established" HYP would have had HSBC Group Holdings (HSBA), or maybe some other bank share, BP Plc (BP) and/or Royal Dutch Shell (RDSB) as well as British Land Company (BLND) and/or Land Securities Group (LAND), all of which have fro some time been discussed as HYP Stalwarts! Such an "established" HYP would therefore also have experienced a not insubstantial decrease in income over the time period in question. Unless of course such failures were covered by other holdings with dividend increases.


Ian

[Dod101]

The table from ITH tells us all we need to know. It was probably just bad luck but the huge fall was down to what turned out to be a disastrous choice of shares. Of those I held only HSBC was a cancellation and Imperial and Shell as substantial cutters which is why my HYP was only down about 20% or so. They were not even the usual suspects that were chosen. British Land and Land Securities have never been on my list as stalwarts and I have not held either for a long while although I acknowledge that for some reason they appear to be popular holds (a bit like that other 'stalwart', SLA)

The question now is how long will it take to reinstate these dividends?

Dod

[monabri]

Some had genuine reasons to stop paying a dividend...example Carnival.

Others were told to ( HSBC).

Some took the opportunity to reduce the dividend because they had an excuse (Aviva).

Oil...nobody wanted it. Cuts from Shell ( especially.....versus BP) were likely justified.

However, the main reason was a global pandemic...the Lemons kept a list of dividend cutters and even the most cautious had some cuts....hard to avoid when 50% of the FTSE stops paying. A diverse HYP could not avoid selections from affected sectors.

[Arborbridge]

If those whose HYPs performed better would provide a similar list for the same time period – 6 Apr 2019 to 5 Apr 2021 – we would be in a position to know more.

Of course, any comparison must be with HYPs that are purely Drawdown - no added capital or re-invested dividends. If not, the effect of such re-investment must be stripped out.

That sounds like a labour of love, and I'm not sure how much we would really learn. I look at my income per unit overall, but it's the portfolio performance I monitor so it is not so easy to pull out individual share changes. At present, I can only say that income per unit fell by 24% YOY 31Mar19 to 31Mar21.

Maybe I'll have a look and see: if there haven't been many changes it may be possible.

Arb.

[IanTHughes]

The table from ITH tells us all we need to know. It was probably just bad luck but the huge fall was down to what turned out to be a disastrous choice of shares.

With respect, all the table shows us is how the income of this one HYP has suffered as a result of dividend cuts. For "all we need to know" we are missing the information as to why such dividend cutters should have been rejected, if at all, and what other holdings would have then replaced them? Such replacements would no doubt have supplied lower yields and It is entirely possible that, even with such replacements, the portfolio would still have endured similar income cuts, from a lower starting point to boot!

That is why it is necessary to compare these results with other HYPs over the same time period. Only then will we begin to know which holdings were required in order for income to be less impacted than has been the case with this portfolio. For what it is worth, I doubt we will find many that were both sufficiently diverse and appropriately high yield at the time this HYP was set up - March 2019 - and for which the income would have been less affected so as to make a substantial difference.


Ian

[daveh]

I think it was a bit of bad luck/ bad choice of shares) . PYAD managed to pick a high % of shares that went on to cut due to Covid. I don't keep records for my Income portfolio by tax year, just by calendar year. In cash terms I was down 30% last calendar year and my income units showed a fall of 36%. Interestingly (as posted in another thread) I'm seeing a strong rebound in income this year - My 1st qtr income is well ahead on last year and is ahead of 1st Qtr 2019 (pre covid) in cash and divi per unit terms - so far a much faster response than I was expecting.

[IanTHughes]

I don't keep records for my Income portfolio by tax year, just by calendar year.

Well, all you have to do is calculate two dividend totals as follows:

1) The total sum of dividends received between 6 April 2019 and 5 April 2020, inclusive
2) The total sum of dividends received between 6 April 2020 and 5 April 2021, inclusive

Make sure the same number of shares are used in each annual total

Now you simply calculate the difference between the two years and the percentage increase/decrease from 1) to 2)

It is not that hard


Ian