ArbHYP January topup

[Arborbridge]

Here are the top twelve shares ranked in topup order:-



Discussion of which to topup is academic since there is a shortage of cash in two of my accounts. This limits my choice to two of the above shares: Chesnara and PHP, both of which are valid choices as far as I can see. The purchse in CSN will be limited by the fact that it is close to my 5% soft limit on income provided, but other than that I see no reason not to topup both shares tomorrow on cheap dealing day for HSDL.

Arb.

[Arborbridge]

After my topup of Chesnara and Primary Healthcare Properties, my top dozen shares look like this, in topup order:-



PHP after the topup has dropped to 17th position, so is unlikely to appear on the radar for a while. CSN is still in the top group, but probably won't receive a topup anytime soon on grounds of capital size (over 1x median) or income contribution (over 5%).

All things being equal, when there is enough cash in the account, it looks as though the nod will go to IMB.

Arb.

[88V8]

....it looks as though the nod will go to IMB.

I remember a while ago the Pickering commented that I was 'brave' for topping up IMB, but even at the fag-end of Big Tobacco I think we oldies can afford to be brave.

V8

[idpickering]

....it looks as though the nod will go to IMB.

I remember a while ago the Pickering commented that I was 'brave' for topping up IMB, but even at the fag-end of Big Tobacco I think we oldies can afford to be brave.

V8

I'm still of the opinion that those that opt for IMB are braver than I. Personally, I favour BATS in the sector. IMHO, as they're a much larger outfit, I like the perceived safety. Currently BATS dividend yield is 7.68% according to dividenddata, which is very tempting. So much so, that they're my chosen top up for next month. Each to their own, but the 9.1% yield, (dividenddata), on offer by buying IMB shares, is in the 'it looks to good to be true territory' to me. But as I said, each to their own.

Ian.

[Arborbridge]

....it looks as though the nod will go to IMB.

I remember a while ago the Pickering commented that I was 'brave' for topping up IMB, but even at the fag-end of Big Tobacco I think we oldies can afford to be brave.

V8

I'm still of the opinion that those that opt for IMB are braver than I. Personally, I favour BATS in the sector. IMHO, as they're a much larger outfit, I like the perceived safety. Currently BATS dividend yield is 7.68% according to dividenddata, which is very tempting. So much so, that they're my chosen top up for next month. Each to their own, but the 9.1% yield, (dividenddata), on offer by buying IMB shares, is in the 'it looks to good to be true territory' to me. But as I said, each to their own.

Ian.

I'm going with 8.5% from the Sharecast forecast until we know more. Basing on last year's dividend of 137.7, would give around 8.7% currently. It doesn't seem likely that we will get much of a dividend uplift. BATS is second in my table and with a slightly higher PE and lower cover, it's a moot point whether it is worth changing the running order. They will both have a topup sooner or later, I suspect.
What is more interesting, is whether I should sell off one of those and reduce my risk to the sector.

Arb.

[dealtn]

....it looks as though the nod will go to IMB.

I remember a while ago the Pickering commented that I was 'brave' for topping up IMB, but even at the fag-end of Big Tobacco I think we oldies can afford to be brave.

V8

I'm still of the opinion that those that opt for IMB are braver than I. Personally, I favour BATS in the sector. IMHO, as they're a much larger outfit, I like the perceived safety. Currently BATS dividend yield is 7.68% according to dividenddata, which is very tempting. So much so, that they're my chosen top up for next month. Each to their own, but the 9.1% yield, (dividenddata), on offer by buying IMB shares, is in the 'it looks to good to be true territory' to me. But as I said, each to their own.

Ian.

Interesting. Both look outside of what I would describe as "too good to be true" to me. How do you establish that line that shouldn't be crossed?

I'm not a dividend investor, but there isn't much between 7.7% and 9.1% when compared with a "market" dividend yield, considerably lower than both. Is there a rule you use, say double the FTSE100? It isn't obvious how using a rules based system "very tempting" merges with "too good to be true".

3 months ago the yield on BATS would have been about 8.%, closer to the "too good to be true" IMB of today than the "OK" BATS one. Did that cause concerns and possibly lead you to think the correct course of action would be to sell BATS (at a lower price than you are currently considering buying them now)?

Isn't this a case where if judgement, rather than a rule, is the decider, it is better to have a 1/2 share in both than a full share in either of the "higher" or "safer" yield?

[idpickering]

I'm still of the opinion that those that opt for IMB are braver than I. Personally, I favour BATS in the sector. IMHO, as they're a much larger outfit, I like the perceived safety. Currently BATS dividend yield is 7.68% according to dividenddata, which is very tempting. So much so, that they're my chosen top up for next month. Each to their own, but the 9.1% yield, (dividenddata), on offer by buying IMB shares, is in the 'it looks to good to be true territory' to me. But as I said, each to their own.

Ian.

Interesting. Both look outside of what I would describe as "too good to be true" to me. How do you establish that line that shouldn't be crossed?

I'm not a dividend investor, but there isn't much between 7.7% and 9.1% when compared with a "market" dividend yield, considerably lower than both. Is there a rule you use, say double the FTSE100? It isn't obvious how using a rules based system "very tempting" merges with "too good to be true".

3 months ago the yield on BATS would have been about 8.%, closer to the "too good to be true" IMB of today than the "OK" BATS one. Did that cause concerns and possibly lead you to think the correct course of action would be to sell BATS (at a lower price than you are currently considering buying them now)?

Isn't this a case where if judgement, rather than a rule, is the decider, it is better to have a 1/2 share in both than a full share in either of the "higher" or "safer" yield?

I accept what you're saying. For me, it is a judgement call. I'm not an expert, and don't profess to be. I don't really have a rule per se, but I think 9% is ott imho. I did buy more BATS last August at a slightly higher yield tbh. My reasoning on this occasion, for my next month top up of BATS, is that that'll get them to my maximum spend on any holding. Thereafter, it'll be left to do it's thing. I'm not saying I'll never buy more BATS though, but after this top up I'll look elsewhere. I have no plans to sell any of my 25 shares in my HYP currently, and am happy to let them be.

Ian.

[kempiejon]

Interesting. Both look outside of what I would describe as "too good to be true" to me. How do you establish that line that shouldn't be crossed?

I'm not a dividend investor, but there isn't much between 7.7% and 9.1% when compared with a "market" dividend yield, considerably lower than both. Is there a rule you use, say double the FTSE100? It isn't obvious how using a rules based system "very tempting" merges with "too good to be true".

3 months ago the yield on BATS would have been about 8.%, closer to the "too good to be true" IMB of today than the "OK" BATS one. Did that cause concerns and possibly lead you to think the correct course of action would be to sell BATS (at a lower price than you are currently considering buying them now)?

Isn't this a case where if judgement, rather than a rule, is the decider, it is better to have a 1/2 share in both than a full share in either of the "higher" or "safer" yield?

From an HYP perspective there's rarely any need to sell though Ian does have some history of swapping out at opportune moments - it's not for me. The vagaries of share price drives yields around and I too wonder about what makes a yield level too high. I try and judge safety to a continuing and hopefully rising dividend amount cover, debt, market cap and dividend history would inform my decision. BATS vrs IMB well last year we saw a third off from IMB.
I have seen the idea that twice the FTSE100 yield has been mentioned around these parts as too high. Historically FTSE100 is sub 3% forecast perhaps 3.5% so by that metric both baccy shares are eliminated as would Arb's Chesnara be too

[pyad]

I don't think the IMB yield is too good to be true. In an update two days ago they said:

...The dividend will grow annually from the current rebased level taking into account underlying business performance....

No guarantees but that looks encouraging to me.

[Arborbridge]

3 months ago the yield on BATS would have been about 8.%, closer to the "too good to be true" IMB of today than the "OK" BATS one. Did that cause concerns and possibly lead you to think the correct course of action would be to sell BATS (at a lower price than you are currently considering buying them now)?

Isn't this a case where if judgement, rather than a rule, is the decider, it is better to have a 1/2 share in both than a full share in either of the "higher" or "safer" yield?

I've often wondered about this with both my own purchases, and those of other people. How often I've wondered why I would consider a topup now because the yield makes the purchase look "safer" but why not at a slightly higher yield, lower price, six months ago.

There's no easy answer: one just uses the best judgement at the time. Pays yer money and takes yer pick.

Arb.

[dealtn]

3 months ago the yield on BATS would have been about 8.%, closer to the "too good to be true" IMB of today than the "OK" BATS one. Did that cause concerns and possibly lead you to think the correct course of action would be to sell BATS (at a lower price than you are currently considering buying them now)?

Isn't this a case where if judgement, rather than a rule, is the decider, it is better to have a 1/2 share in both than a full share in either of the "higher" or "safer" yield?

I've often wondered about this with both my own purchases, and those of other people. How often I've wondered why I would consider a topup now because the yield makes the purchase look "safer" but why not at a slightly higher yield, lower price, six months ago.

There's no easy answer: one just uses the best judgement at the time. Pays yer money and takes yer pick.

Arb.

I guess my enquiry was how "rules based" becomes "judgement based". My style of investing is perhaps more skewed to the judgement based end of the spectrum, but for those without the time, knowledge (or judgement) such routes might not be available, hence rules based strategies must have their place.

I think that is part of the problem with "dividend" yield based strategies. That number is the construct of a decision from a few individuals made infrequently, who might have misaligned agendas with investors (such as preserving a "no cut" record). Cashflow yields, or similar, have the benefit of being made by the "business" performance, and the aggregate of every day/week/month of trading, rather than the more artificial (at least in the short term) dividend based one.

Being practical I guess the ease of discovering the latter overcomes the shortfalls the former might help avoid. Maybe a system such as HYP relies on the fact that Directors making dividend decisions mainly don't succumb to making "inappropriate" calls, and more importantly, over a diversified portfolio, such "mistakes" aren't in aggregate costly.

[idpickering]

I don't think the IMB yield is too good to be true. In an update two days ago they said:

...The dividend will grow annually from the current rebased level taking into account underlying business performance....

No guarantees but that looks encouraging to me.

Thanks for your input Stephen. I'm not to proud or pig-headed to admit that I missed that update. As to whether that changes my opinion/mind, we'll see.

Here is the item you quoted Stephen;

A progressive dividend policy to provide a reliable, consistent cash return to shareholders. The dividend will grow annually from the current rebased level taking into account underlying business performance.

https://www.investegate.co.uk/imperial- ... 00060909N/

Ian.

[moorfield]

3 months ago the yield on BATS would have been about 8.%, closer to the "too good to be true" IMB of today than the "OK" BATS one. Did that cause concerns and possibly lead you to think the correct course of action would be to sell BATS (at a lower price than you are currently considering buying them now)?

Isn't this a case where if judgement, rather than a rule, is the decider, it is better to have a 1/2 share in both than a full share in either of the "higher" or "safer" yield?

I've often wondered about this with both my own purchases, and those of other people. How often I've wondered why I would consider a topup now because the yield makes the purchase look "safer" but why not at a slightly higher yield, lower price, six months ago.

There's no easy answer: one just uses the best judgement at the time. Pays yer money and takes yer pick.

Arb.

Close your eyes and imagine they both yield the same currently. Which one do you choose, and why? Or just both?

[monabri]

The one that didn't cut the dividend in half and, actually, raised it!

[moorfield]

The one that didn't cut the dividend in half and, actually, raised it!

Quite so. And yet Arb has just picked the wrong one.

So are top-up tables and rankings flawed and over-engineered? Should we abandon them, and go back to (HYP) basics, I wonder?

[dealtn]

The one that didn't cut the dividend in half and, actually, raised it!

I think the dividend that was cut in half was the one for 30th June 2020.

6 month share performance for the 2 candidates

IMB +13% BATS +3%

Are you sure it is as easy as you suggest? I know which of those I would have preferred to have bought at around that time (and it appears to yield more too).

[monabri]

As we are discussing on the HYP P board...

BATS Dividends



IMB Dividends

[Arborbridge]

The one that didn't cut the dividend in half and, actually, raised it!

Quite so. And yet Arb has just picked the wrong one.

So are top-up tables and rankings flawed and over-engineered? Should we abandon them, and go back to (HYP) basics, I wonder?

Er, just a moment - I haven't decided what to do yet, so I haven't picked anything. Interestingly, I've been avoiding IMB for quite some time despite it having been in the number one spot.
My previous topup of IMB in 2018, and I did say underneath my latest table: "all things being equal".
I am well known for NOT necessarily choosing the highest ranking share - for me the table is a starting point, not an end point.

Arb.

[dealtn]

As we are discussing on the HYP P board...

BATS Dividends



IMB Dividends

Really?

You don't think an important part of the equation is the price paid for the share, just the dividend measured in pence?

So a share paying 100p but costing £100 each (a yield of 1%) would be better on that measure than one paying 5p but costing £1 (a yield of 5%).

I think even on HYP-P few would recognise such an outcome as better.

So lets go back to your example of comparing a share that "cut the dividend in half" and one that "actually, raised it". That dividend cut was 6 months ago, but seeing as you want to look at full years (despite your example of having different year ends), consider.

12 months BAT -19% plus 6% dividends
12 months IMB -21% plus 7% dividends

Over 6 months IMB a clear winner, over 2 years BATS a clear winner.

Are you really sure it is easy to claim someone has "picked the wrong one"?

[moorfield]

The one that didn't cut the dividend in half and, actually, raised it!

Quite so. And yet Arb has just picked the wrong one.

So are top-up tables and rankings flawed and over-engineered? Should we abandon them, and go back to (HYP) basics, I wonder?

Er, just a moment - I haven't decided what to do yet, so I haven't picked anything. Interestingly, I've been avoiding IMB for quite some time despite it having been in the number one spot.
My previous topup of IMB in 2018, and I did say underneath my latest table: "all things being equal".
I am well known for NOT necessarily choosing the highest ranking share - for me the table is a starting point, not an end point.

Arb.

Over 6 months IMB a clear winner, over 2 years BATS a clear winner.

Are you really sure it is easy to claim someone has "picked the wrong one"?

That was a little bit of Devil's Advocacy.... IMB is the stand out high yield candidate of the FTSE imo. Agree with pyad. I filled up my boots last month. I held off buying more through most of 2018/19 while my automatic smell test (>2*CTY yield) was advising me not to, until the dividend cut eventually came. (There does come a point when a huge shift in market sentiment ie buying is needed to bring a yield back into a credible range, and the penny begins to drop that it won't ....)