Oh alright, it’s the weekend, so let’s deal with the easy ones
Yesterday and this morning, I was updating my records for the PYAD HYP 2019_04 REINVEST portfolio last reported here:
viewtopic.php?p=323792#p323792As this exercise requires dividends to be reinvested, I rather naturally had a brief look at what might be in the frame for the next top-up, due on 10 September, when the funds should be sufficient to trigger such a top-up. The first thing I noticed was that my spreadsheet formulae has determined that none of the current constituents are currently suitable for top-up. All were rejected for one of two reasons:
- Earnings considered at risk
- Resultant Sector Value Concentration too high
The second of the above reasons is of course purely mechanical, being a limit on a Sector Value Concentration of 7.00%. However, before getting to that determination, the possible top-up must first pass the “subjective” test which, for my purposes runs off my Share Database, where of course I have recorded all those dividend cuts/suspensions in all their gory details! I further discovered that the same Share Database also rejects a number of otherwise possible new contenders for the same reason. What to do …. What to do?
Looking a bit further I discovered that, for a number of current constituents, as well as some possible new contenders, there should be some further news or account reporting before the top-up is due on 10 September. Phew, I don’t have to make a decision right now
As an aside, when I set up this exercise, I determined that a cash balance of £2,000.00 would be required before a top-up would be triggered. When setting this amount my primary concern was to avoid more than five to seven updates per year, as well as ensuring that any new holding purchased was of a reasonable size. Now I am simply grateful that it allows me more time!
Anyway, back to the thread question: “Is it possible to purchase an HYP at the moment?”. My answer is yes …… but….!
And the “but” is the fact that one would most likely have to relax one or more of what I consider to be important selection criteria for HYP as follows:
Lower Yield - HYP is about capturing the highest yield possible so, if the highest yields do not appear to offer reliable dividends, just accept a lower yield at the outset, where the dividends do look secure.
Lower Market Capitalisation - Maybe one can find a few dividend gems in the FTSE 250, or even further down the Market Cap scale – AIM shares anyone?
Less Diversification – For example, the same number of holdings – minimum fifteen - but maybe fewer Business Sectors / Industries.
Less Dividend History – Relax the historical dividend criteria. Maybe even make an assessment as to whether those cuts and suspensions may quickly reverse and once again provide a reasonable income return.
As well as the foregoing, maybe one should suspend the following of the “Time to Invest is Now!” Many people would suggest that they would always do such and I do not want to open up a discussion on that here but, for now at least, there are a number of high-yielders that do appear to have survived better than others. Buy those six/seven/eight/nine, or whatever number, and await further developments before completing one’s selections.
In reality, I suspect that one would have to fiddle with all of those selection criteria, and maybe others too, but the result would be a selected HYP.
Ian
P.S. – with the top-up due on the virtual HYP as reported above, I have now decided to research whether to relax the Value Concentration Limit. 7%. Is rather low I believe, and maybe 10% or 12% might be more appropriate. Of course, this is only relevant for a top-up to an already well-diversified HYP, not a one-shot full portfolio purchase, the latter of which is the topic of this thread.