Astra staring me out

[Arborbridge]

AZN at present has been bouncing around just under 2x my median weight, but now is persistently just above it. It's at the level where playing by my rules, I should trim, but at the moment that hardly seems a wise thing to do. Of course, their vaccine attempts might fail, and this could be the peak...

Should I just go to sleep on it, and let nature take its course - ride the wave, so to speak? That's my feeling, but I wonder what others are doing in the same position. Strict mechanics, or bring in some touchy feely?

Arb.

[kempiejon]

I empathise. Set a limit order? Astra has been getting big in my portfolio too and the sp increase has been driving the yield down to 2.x%, I can double that with a top up from my holdings so in these hardtimes for income a switch makes financial sense.
Trimming isn't disposal so you'll still capture any future gains and of course we never went bust banking a profit provided you don't recycle into something that stuffs it up.

[idpickering]

AZN at present has been bouncing around just under 2x my median weight, but now is persistently just above it. It's at the level where playing by my rules, I should trim, but at the moment that hardly seems a wise thing to do. Of course, their vaccine attempts might fail, and this could be the peak...

Should I just go to sleep on it, and let nature take its course - ride the wave, so to speak? That's my feeling, but I wonder what others are doing in the same position. Strict mechanics, or bring in some touchy feely?

Arb.

I hold AZN in my HYP, and am pleased with the nice rise in its’ sp. This rise will not alter my stance on keeping them on board my HYP, and I have no intention of selling my holdings. Any overweighting with that share will be rectified by me topping up my other holdings. I advice you do likewise Arb. Let your winners run.

Ian.

[Bubblesofearth]

AZN at present has been bouncing around just under 2x my median weight

Arb.

What % of your portfolio is it? If 2x median is 5% then hardly a worry. If it's 20% then maybe so.

BoE

[onthemove]

Of course, their vaccine attempts might fail, and this could be the peak...

I believe they've promised not to profit from the pandemic, so I'm not expecting any direct uplift to their profits from the vaccine. Though obviously the reputational benefit will be enormous if they pull it off - they're still predicting they will be able to deliver the first batches of the vaccine in September if it's approved in that timescale.

One thing I've not been able to clearly establish - who's taking the risk? Astra are pre-emptively doing the manufacturing in order to be able to predict the above (September delivery). They've also entered into numerous multi-hundred million $/£ contracts to supply the vaccine. But the wording in the media has been ambiguous, often saying 'if approved'.

Does that mean the customers (governments) only pay anything if the vaccine gets approval, and otherwise the risk is entirely on Astra? If the vaccine gets approval, Astra won't profit, but if it fails in the trials, Astra is taking the hit on vaccine manufacturing costs already sunk? That seems to be the balance of what I'm reading - though I'd struggle to understand the business logic in that - but like I say, it ain't half ambiguous though. Please tell me I've misunderstood, and the contracts (UK, US govs, etc) are taking some of the risk?

I guess the capital equipment being put into operation will have business value beyond the pandemic, for future work, even if the vaccine falls through.

I would also note, that I've seen quite a few non-pandemic related seemingly good news stories related to AstraZeneca as well. They seem to be quietly getting a number of other (non-CV19) things showing success. It's hard to judge how significant these would have been outside of the pandemic. Clearly, the bulk of the share price rise at the minute is their involvement in the Oxford vaccine trials, even though they've said they won't profit. Perhaps that a sign they're in a bubble - everyone has now heard of them, and their association with the vaccine, and will be thinking 'hey that must be a good investment'.

I'm sitting on a 200% gain (i.e. now at 3x original value) on original purchase price on these which quite frankly is a novelty for me! And that's not including dividends received, which I believe were possibly in the region of 6% on/at original purchase price (though now in the region of 2.5% I believe as far as any practical decisions *now* would be concerned).

I mention the original yield because I vaguely recall that for a long time, Astra and it's high yield was looked at unfavourably by its fair share of doomsayers (though I can't find any links now - perhaps I'm thinking back to TMF). But it just goes to show yields can drop for good reasons, not only bad reasons.

A falling yield doesn't always mean a falling income.

Moderator Message:
Off topic comment removed.
TJH

[Wizard]

With the dividend held for nearly a decade and IIRC the yield below the FTSE100 average much of the last 5 years AZN is not really the most HYP share and has not been so for a long time. It certainly does not appear to meet the criteria for purchase at the moment. But it clearly has been a good share to own from a capital perspective, hence the initial question regarding trimming it as it is somewhat overweight.

I bought in the recent crisis lows and have no plans to take any profits. One to hold on to IMHO.

[Dod101]

All of this is very unHYP like, worrying about the share price. It has certainly priced itself out of contention for a new HYP but it is presumably widely held. I will sell half if it reaches £100 and in fact have a limit order in place for that. It is beginning to behave like Scottish Mortgage.

Most commentators seem to say that it will not benefit greatly from Covid but that like Glaxo, its pipeline of drugs should do the trick over a longer period.

Dod

[tjh290633]

I trimmed Admiral, AstraZenecva and Glaxo back in March, when all three were well overweight. The proceeds went into PHP and a top-up of British Land. Those sold are now higher in price and those bought slightly lower.

ADM sold at 2,174p, now 2,374p.Up 9%.
AZN sold at 6,892, now 9,320p. Up 35%.
GSK sold at 1,463p, now 1,548p. Up 6%.

PHP bought at 152p, now 150p. Down 1.6%
BLND topped up at 380p, now 370p. Down 3.7%.

BLND subsequently paused dividends, PHP have paid 2 dividends since then.

You win some, you lose some.

TJH

[Itsallaguess]

AZN at present has been bouncing around just under 2x my median weight, but now is persistently just above it.

It's at the level where playing by my rules, I should trim, but at the moment that hardly seems a wise thing to do. Of course, their vaccine attempts might fail, and this could be the peak...

Should I just go to sleep on it, and let nature take its course - ride the wave, so to speak? That's my feeling, but I wonder what others are doing in the same position. Strict mechanics, or bring in some touchy feely?

If capital in a holding becomes overweight whilst still maintaining a good current yield, I usually treat that as a slightly different decision to one where a holding might become overweight without a good yield still being maintained, and in this particular case, AstraZeneca looks to be in that second category, rather than the first...

If the capital that you would trim can be employed in a holding with an improved yield, then even ignoring any future potential changes in the share price, you're nudging your portfolio into a more balanced capital situation at the same time as improving it's income potential.

The fact that you're only looking to trim here, rather than sell completely, and taking into account the current yield of AstraZeneca of around 2.4%, this means that you're still likely to benefit from any potential share price rise with your remaining holding, whilst taking advantage of a higher yield with the trimmed capital itself.

For me personally, these opportunities are worth taking, because I consider it the flip-side of the process we often take advantage of on the HYP purchase side, where high-yields are 'exposed' by the every-day functioning of the market, allowing us to take advantage of them for income purposes.

Similarly, and in a reflective manner such as AZN in this example, the normal functioning of the market sometimes drives share prices higher, to 'separate them away' from the underlying dividend payments in the other direction, and this then allows us to take advantage of such dislocating price-moves, and re-allocate some of that bulging capital into more productive income-generating sources...

Don't forget, you're still 'running your winners' with any un-trimmed AstraZeneca capital, but you're also potentially bagging a 'nudge-up' in underlying portfolio income by moving some of that overweight capital over to a more productive yield, and given that you'd be moving from a yield of 2.4% for that trimmed capital, you'd have no real need to 'chase yields' to get some benefit from that process, and when I've carried out such moves myself, I tend to stick to middle-of-the-road yields for any resulting purchases, as my own history has shown that chasing too-high yields with such trimmed capital does tend to spoil the whole process somewhat, more often that not, so I just see an improved yield as justification for the process, rather than looking for huge 'yield-gains' that might not actually end up being delivered over the longer term...

Ultimately though, we also sometimes need to remind ourselves that we usually come up with our own strategy rules in periods where things are settled and calm, with a view to 'protecting us from ourselves' during periods where such calmness is missing from the markets, and I sometimes think the best thing to do is to pretend you're having this conversation with the holder when 'he' devised the trimming rules, and try to convince 'him' that 'this time it's different'....

Cheers,

Itsallaguess

[Thriddle]

Onthemove wrote:
One thing I've not been able to clearly establish - who's taking the risk

This is one of the projects Bill Gates is funding:
https://thenextweb.com/hardfork/2020/06 ... d-azd1222/

[Dod101]

I trimmed Admiral, AstraZenecva and Glaxo back in March, when all three were well overweight. The proceeds went into PHP and a top-up of British Land. Those sold are now higher in price and those bought slightly lower.

ADM sold at 2,174p, now 2,374p.Up 9%.
AZN sold at 6,892, now 9,320p. Up 35%.
GSK sold at 1,463p, now 1,548p. Up 6%.

PHP bought at 152p, now 150p. Down 1.6%
BLND topped up at 380p, now 370p. Down 3.7%.

BLND subsequently paused dividends, PHP have paid 2 dividends since then.

You win some, you lose some.

TJH

But sadly with these moves you rather lost and lost. I would never have sold voluntarily in March which was when the markets were well down, although I might have bought then had I had funds which I did not. As a longtime holder of PHP you managed to buy it at just about its peak price, peak because of its perceived security at a time of maximum disruption. It will come back but it has just diluted holders again with its latest fundraising and that will probably hold back the price for a while (and any dividend increase per share)

never mind I am sure you have had a lot more gains than losers over the years.

Dod

[tjh290633]

I trimmed Admiral, AstraZenecva and Glaxo back in March, when all three were well overweight. The proceeds went into PHP and a top-up of British Land. Those sold are now higher in price and those bought slightly lower.

ADM sold at 2,174p, now 2,374p.Up 9%.
AZN sold at 6,892, now 9,320p. Up 35%.
GSK sold at 1,463p, now 1,548p. Up 6%.

PHP bought at 152p, now 150p. Down 1.6%
BLND topped up at 380p, now 370p. Down 3.7%.

BLND subsequently paused dividends, PHP have paid 2 dividends since then.

You win some, you lose some.

TJH

But sadly with these moves you rather lost and lost. I would never have sold voluntarily in March which was when the markets were well down, although I might have bought then had I had funds which I did not. As a longtime holder of PHP you managed to buy it at just about its peak price, peak because of its perceived security at a time of maximum disruption. It will come back but it has just diluted holders again with its latest fundraising and that will probably hold back the price for a while (and any dividend increase per share)

never mind I am sure you have had a lot more gains than losers over the years.

Dod

If you have a system, then you need to stick with it. Sometimes the market falls, but some stocks rise, or fail to follow the market down. That is usually an opportunity to ratchet dividend income up. Everything is relative, of course, and absolute values do not come into it, only the relative ones.

TJH

[xbigman]

As AZN is a serial disappointer in terms of dividend raises I fail to see why it is so widely held. Now its had a growth spurt that has halved the yield there is no justification for continuing to hold at all. Possibly it may go higher but that's not the reason this board or HYP exists.
At any other time moving into a higher yielding share would be the way to go but the lack of suitable shares with a secure dividend is an issue.
How about moving into shares with the same dividend but better dividend histories. Unilever and Diageo must be on similar yields (I've not looked). Could this be the time to move into some lower yielding quality shares for security?

I don't hold



Darren

[Arborbridge]

All of this is very unHYP like, worrying about the share price.
Dod

An interesting comment, but I wouldn't agree necessarily. I might be "unHYPlike" when compared with pyad's original "leave it to market trading" concept. However, he did later allow some selling in a limited range of circumstances with some distaste on his part: "if you must".

When one considers that HYP is based on equal weighting in order to reduce risk, some of us see it as by extension, being a good thing to keep within certain limits during the HYP's life time, and therefore do not see trimming as being unHYPlike. Indeed, keeping this risk mitigation factor within bounds can be see as quite HYPlike indeed.

Arb.

[Arborbridge]

As AZN is a serial disappointer in terms of dividend raises I fail to see why it is so widely held. Now its had a growth spurt that has halved the yield there is no justification for continuing to hold at all. Possibly it may go higher but that's not the reason this board or HYP exists.
At any other time moving into a higher yielding share would be the way to go but the lack of suitable shares with a secure dividend is an issue.
How about moving into shares with the same dividend but better dividend histories. Unilever and Diageo must be on similar yields (I've not looked). Could this be the time to move into some lower yielding quality shares for security?

I don't hold



Darren

Serial disappointer indeed, but there are many who have been far more disappointing! I'm not at all unhappy to have held this share which has served me rather well with a solid if static dividend and no price shocks. It's given me a return of 15.54% pa measured to the end of March (even better now, naturally) and whichever way I look at it, this is a boost to my income earning potential and has underpinned my HYP income all along.

I notice that I did trim AZN in 2014, so if she stays over 2x median for a while, another trimming is on the cards. I shall probably set a stop loss order to sell a fraction at a given price to protect my downside - easy enough to do in AJBell, in which case I can have the best of both worlds - run a winner, and protect the gains.



Arb.

Arb.

[idpickering]

As AZN is a serial disappointer in terms of dividend raises I fail to see why it is so widely held. Now its had a growth spurt that has halved the yield there is no justification for continuing to hold at all. Possibly it may go higher but that's not the reason this board or HYP exists.
At any other time moving into a higher yielding share would be the way to go but the lack of suitable shares with a secure dividend is an issue.
How about moving into shares with the same dividend but better dividend histories. Unilever and Diageo must be on similar yields (I've not looked). Could this be the time to move into some lower yielding quality shares for security?

I don't hold



Darren

I do get where you're coming from Darren, but for me at least, I look at my AZN holdings, along with GSK, as offering an almost solid base for my HYP. The added diversification they give to my HYP is welcome too. OK, a rising dividend would be better, but I'm happy to continue holding both pharmas nonetheless.

Ian.

[Dod101]

As AZN is a serial disappointer in terms of dividend raises I fail to see why it is so widely held. Now its had a growth spurt that has halved the yield there is no justification for continuing to hold at all. Possibly it may go higher but that's not the reason this board or HYP exists.
At any other time moving into a higher yielding share would be the way to go but the lack of suitable shares with a secure dividend is an issue.
How about moving into shares with the same dividend but better dividend histories. Unilever and Diageo must be on similar yields (I've not looked). Could this be the time to move into some lower yielding quality shares for security?

I don't hold

Note that the poster does not hold. AZN has not done much in terms of dividend for some time but it does not fall within the definition of a serial disappointer. I have held it for some years and in terms of dividend it has not done a lot but it has not cut either. Certainly in the last few months, the yield from AZN has reduced such that I am seriously looking to sell some. If I do sell though it is more likely to be to harvest the big capital gain than worries about the dividend. There are a number of shares which have been serial disappointers (think Aviva and BT for instance) but AstraZeneca does not fit that bill, at least in my book.

Incidentally I already hold Unilever and Diageo.

Dod

[idpickering]

Serial disappointer indeed, but there are many who have been far more disappointing! I'm not at all unhappy to have held this share which has served me rather well with a solid if static dividend and no price shocks. It's given me a return of 15.54% pa measured to the end of March (even better now, naturally) and whichever way I look at it, this is a boost to my income earning potential and has underpinned my HYP income all along.

I notice that I did trim AZN in 2014, so if she stays over 2x median for a while, another trimming is on the cards. I shall probably set a stop loss order to sell a fraction at a given price to protect my downside - easy enough to do in AJBell, in which case I can have the best of both worlds - run a winner, and protect the gains.

Arb.

We seem to be in agreement regarding the merits of holding AZN in one's HYP. Good luck with your stop loss plan, but I had to smile at your last comment "run your winner..." which is what I suggested yesterday. I have no plans to sell my AZN or GSK shares.

Ian.

[onthemove]

As AZN is a serial disappointer in terms of dividend raises I fail to see why it is so widely held. Now its had a growth spurt that has halved the yield there is no justification for continuing to hold at all.

HYP is an income oriented, predominantly long term buy and hold strategy

I've just gone back and actually checked my records rather than just going from memory (too much diversification - and extra yrs - to remember all my investment details in the way I could when I started).

I bought in 2011, and the yield at that time was 5.4%, from a dividend of 1.616p

The prior year's (from today) annual dividend was 2.152p

The latest annual dividend is 2.183p

So that's a 35% increase in income (average 3.9% increase per year with simple division) from them since I bought. I haven't checked inflation during this time, but I think that's probably outstripped inflation.

Possibly it may go higher but that's not the reason this board or HYP exists.

Generally a falling yield that's come as a result of a share price growth spurt, is usually an indication the market thinks the companies prospects have perked up; that it's prospects for further increasing the dividend in future have improved.

Like others, with the yield at 2.5% the thought has crossed my mind whether to sell half to get income greedy - superficially can buy more income now for the current value of astra. But with the current general economic situation, I'm not sure the risks are worth it - dividend cuts (or worse) could still be on the table from the pandemic.

I could also understand how others might consider top-slicing to retain balance in their portfolio, though in my case unfortunately astra was only a partial weight holding originally (paired with GSK), so the rise hasn't made it excessively out of kilter with the value of others.

But I don't recognise your claims that it's a serial disappointer.

And I don't recognise your assertion that there is "no justification for continuing to hold at all" - I don't see how such an emphatic statement about selling fits with the long term buy and hold nature of the HYP strategy.

Could this be the time to move into some lower yielding quality shares for security?

Right now, in the middle of a pandemic - a situation that is showing the value in pharmaceutical companies generally - not to mention this company being the one operating at the forefront of the current pandemic, I'm not sure that I could imagine a better 'lower yielding quality share'.

[IanTHughes]

As AZN is a serial disappointer in terms of dividend raises I fail to see why it is so widely held.

Surely, that will depend on what you are measuring – GBP or USD Dividend – and over what period.

Here is the record of the dividend “growth” data for rolling periods of 3, 5, 10 and 20 years with the GBP to the left and the USD to the right:

Year End  | GBP Div'd (*) | 3 Years | 5 Years | 10 Years | 20 Years | Year End  | USD Div'd | 3 Years | 5 Years | 10 Years | 20 Years
31-Dec-19 |   218.3000    |  -0.09% |   4.15% |    4.40% |    8.34% | 31-Dec-19 | 280.0000  |   0.00% |   0.00% |    1.99% |    7.18%
31-Dec-18 |   215.2000    |   4.51% |   4.10% |    5.07% |          | 31-Dec-18 | 280.0000  |   0.00% |   0.00% |    3.17% |         
31-Dec-17 |   202.5000    |   4.37% |   2.54% |    7.97% |          | 31-Dec-17 | 280.0000  |   0.00% |   0.00% |    4.12% |         
31-Dec-16 |   218.9000    |   7.54% |   4.52% |    9.37% |          | 31-Dec-16 | 280.0000  |   0.00% |   0.00% |    4.99% |         
31-Dec-15 |   188.5000    |   1.81% |   2.92% |    9.83% |          | 31-Dec-15 | 280.0000  |   0.00% |   1.89% |    7.97% |         
31-Dec-14 |   178.1000    |   0.49% |   4.64% |   13.48% |          | 31-Dec-14 | 280.0000  |   0.00% |   4.01% |   11.53% |         
31-Dec-13 |   176.0000    |   2.55% |   6.05% |   14.52% |          | 31-Dec-13 | 280.0000  |   3.17% |   6.43% |   13.42% |         
31-Dec-12 |   178.6000    |   7.95% |  13.67% |   15.07% |          | 31-Dec-12 | 280.0000  |   6.78% |   8.41% |   14.87% |         
31-Dec-11 |   175.5000    |  10.19% |  14.44% |   13.85% |          | 31-Dec-11 | 280.0000  |  10.95% |  10.24% |   14.87% |         
31-Dec-10 |   163.2109    |  20.15% |  17.19% |   13.25% |          | 31-Dec-10 | 255.0000  |  10.89% |  14.42% |   13.80% |         
31-Dec-09 |   141.9580    |  16.67% |  23.06% |   12.44% |          | 31-Dec-09 | 230.0000  |  10.17% |  19.60% |   12.63% |         
31-Dec-08 |   131.1838    |  21.12% |  23.67% |          |          | 31-Dec-08 | 205.0000  |  16.40% |  20.86% |          |         
31-Dec-07 |    94.0974    |  23.22% |  16.48% |          |          | 31-Dec-07 | 187.0000  |  25.77% |  21.72% |          |         
31-Dec-06 |    89.3952    |  25.38% |  13.26% |          |          | 31-Dec-06 | 172.0000  |  29.34% |  19.70% |          |         
31-Dec-05 |    73.8298    |  18.94% |   9.43% |          |          | 31-Dec-05 | 130.0000  |  22.92% |  13.18% |          |         
31-Dec-04 |    50.2981    |   1.59% |   2.73% |          |          | 31-Dec-04 |  94.0000  |  10.33% |   6.07% |          |         
31-Dec-03 |    45.3510    |  -1.22% |         |          |          | 31-Dec-03 |  79.5000  |   4.33% |         |          |         
31-Dec-02 |    43.8767    |  -0.07% |         |          |          | 31-Dec-02 |  70.0000  |   0.00% |         |          |         
31-Dec-01 |    47.9692    |         |         |          |          | 31-Dec-01 |  70.0000  |         |         |          |         
31-Dec-00 |    47.0465    |         |         |          |          | 31-Dec-00 |  70.0000  |         |         |          |         
31-Dec-99 |    43.9655    |         |         |          |          | 31-Dec-99 |  70.0000  |         |         |          |         

(*) Please note that, for the years before 2012, I have calculated the GBP amounts using the Exchange Rate prevalent at the time the dividend was declared. For 2012 until today, I have had a holding and therefore have the exact details within my records.

So, a GBP portfolio will have seen an average annual dividend rise of 4.15%, 4.40% and 8.34% over 5, 10 and 20 years respectively. But of course, you are correct about the recent past, a small drop (-0.09%) over three years. Looking at the USD measure over 20 years has seen an annual rise of 7.18%, surely a great record for a constituent of an income portfolio.

I do of course see what you mean about the last eight years though, not least because I purchased in February 2012. The then average annual dividend rises of 10.19%, 14.44% and 13.85% over 3, 5 and 10 years respectively, together with a yield in excess of 5.50%, certainly indicated a solid HYP candidate at the time. The yield I gained on purchase was 5.67% but of course the USD dividend has not increased one cent since that purchase!

Mind you, there are holdings that have done worse with dividend cuts and subsequent price drops. At least with AZN, one can say that the dividends keep rolling in and the value of the holding, although only a secondary consideration, has gone from strength to strength. For me this has resulted in an XIRR calculation for this single holding of 19.00%! Finally, at the present time during this Covid-19 crisis when so many dividends have been suspended, the AZN dividend does not appear to be in any danger, surely as solid an HYP result as one could wish for.

Now it’s had a growth spurt that has halved the yield there is no justification for continuing to hold at all. Possibly it may go higher but that's not the reason this board or HYP exists.
At any other time moving into a higher yielding share would be the way to go but the lack of suitable shares with a secure dividend is an issue.
How about moving into shares with the same dividend but better dividend histories. Unilever and Diageo must be on similar yields (I've not looked). Could this be the time to move into some lower yielding quality shares for security?

Well, first of all, HYP is a “Long-Term Buy and Hold” strategy, and secondly AZN is currently yielding 2.50%, not a high yield to be sure, but not completely out of it yield-wise. And as I said, the dividend looks solid, which one should surely be wary of jettisoning at these uncertain times. Furthermore, how can one be so sure that the dividend will not revert to the rises experienced at the time that I purchased back in 2012? By raising the price so significantly, is the market not expecting something of the kind? Please note that I have not investigated this at all, as a HYPer I simply hold and accept the dividends, but I do wonder what the market is so excited about.

No, AstraZeneca PLC (AZN) may not be a candidate for purchase right now, but I am not about to sell either!


Ian