Moving portfolio to HYP -- all opinions welcome!

[tickerhacker]

Hello fellow lemonfools,
I've had a lemonfool account for a good few years but been very much a lurker not a poster -- hope that's not considered bad form!

First, small pre-amble: I have one portfolio that was made up of equities that were liquid but hopefully not too volatile (and neither expecting very high returns) that was kept as a backup just-in-case-of-emergency fund should some unexpected grave situation demand more cash than I had available. It was mostly made up using certain Share Adviser recommendations.
As time moved on I came to believe that this portfolio would be better as a true HYP - a simple hands-off, large-cap, income producer. I have carefully read the various guidance from Stephen Bland's original through to many posts on this board. The issue is that there's usually the assumption of starting an HYP rather than moving to one. Essentially the question I have where I'd welcome fellow fool input concerns is whether some holdings that currently yield below the average of the FTSE100 should be dropped immediately? Obviously, I'm keen to avoid unnecessary trading costs (especially in what should be a hands-off portfolio!) but also keen to avoid any sunk-cost fallacy.

Below is a table showing the current holdings, which follows some gentle tinkering over the last few months. The yield value is simply a recent headline value from dividenddata.co.uk and the market cap value is from Google finance. (I'd struggle to find records to calculate yield at purchase price, sorry!)



There is enough cash for another purchase so presently pondering a few options:
NatWest Group - still scared of banks plus would this be diverse enough from M&G?
Kingfisher - Having recently bought a tin of paint from Tesco I'm not sure this offers diversification either.
SSE or National Grid - Likewise, with Greencoat UK Wind which I'd rather keep

Anyway, happy to receive any feedback from you good folk with so much collective experience here.

[idpickering]

Thanks for sharing your interesting HYP with us. Imho you’re well diversified. I’d have no problem in offering that both NG. and SSE would be good additions to your HYP. I hold both and UKW too.

Ian.

[Dod101]

At 19 shares I think, and about to become 20, that seems to me to be a classic HYP. Obviously at sub 3% yields some of these shares are not really in HYP territory but personally that would not bother me if you are happy with the overall portfolio yield. I think you need some growth, although maybe you have another portfolio for that?

As for a new share, I would probably go for SSE although bear in mind that it is to cut its dividend next year I think it is, in favour of releasing some funds for new investment. That is a positive i think and it has certainly done the share price no harm.

Dod

PS I see that great minds think alike and Ian has plumped for SSE and/or National Grid. I hold both .

[MDW1954]

Four comments from me:

Broadly, I agree with others' observations: there's not much wrong with the present consituents of your HYP. (And I agree with your logic re: moving to a HYP.) If I were to dump anything it would be Sage and Britvic. Better yields are available from less-focused businesses.

Second, you say:

(I'd struggle to find records to calculate yield at purchase price, sorry!)

Does that mean that your nascent HYP is in certificated form, rather than with an online broker? If so, think about changing that to (say) an ISA. If it isn't certificated, then records should be available, unless you've a history of changing brokers.

Third, I'm a fan of REITs and quasi-REITs (which is what we call the likes of Greencoat UK Wind on this board). In my view, you could increase your exposure to these. I'm sure Ian can find the list that I often trot out (of which I hold all of them).

On which note, see:

https://www.lemonfool.co.uk/viewtopic.php?f=87&t=33178

Fourth (and following on from that), I'm not grabbed by NG, and SSE seems to be flip-flopping a bit with its renewables strategy. Given your UKW weighting, you probably shouldn't increase your UKW holding, but you could consider holding (say) pure-play solar stock BSIF.

MDW1954 (full disclosure: Malcolm Wheatley in the Share Adviser world)

[moorfield]

Essentially the question I have where I'd welcome fellow fool input concerns is whether some holdings that currently yield below the average of the FTSE100 should be dropped immediately? Obviously, I'm keen to avoid unnecessary trading costs (especially in what should be a hands-off portfolio!) but also keen to avoid any sunk-cost fallacy.

Anyway, happy to receive any feedback from you good folk with so much collective experience here.

What you could do is overlay TJH's "medianic" system (*) onto your current portfolio. That will immediately signal which shares can be trimmed (due to median relative weights) and which shares ought not be topped up (due to income or cost weights); or if neither of these are possible that you should start adding new holdings. How quickly you move fully to and/or expand your HYP is up to you, I would suggest to get into the habit of one or two trades a month over time until you get there (buying on a cheap dealing day if one is available to you). I would encourage you not to start just churning trading costs now simply for the sake of it.

(*) see for example: viewtopic.php?p=491172#p491172


One question you haven't commented on yet is a Big Picture question (you are not alone, very few HYPsters seem to be able to articulate well their overall portfolio objectives in the various reviews I read about here):

What income do you want or need this portfolio to be generating, and when? And, what income is it producing now? Are you a "builder" or a "spender" of dividends?

The answers to these may help you form a longer term plan on how to manage your portfolio and influence how much you tinker with it, I have written more about that idea here viewtopic.php?p=390906#p390906 if interested.

[tickerhacker]

Sincere thanks for the prompt responses! Picking up on some of the basic questions:

I think you need some growth, although maybe you have another portfolio for that?

Yes, I have a completely separate portfolio that focusses on growth with the intention to one day in not-to-distant future fund my retirement.

Does that mean that your nascent HYP is in certificated form, rather than with an online broker? If so, think about changing that to (say) an ISA. If it isn't certificated, then records should be available, unless you've a history of changing brokers.
.
...you could consider holding (say) pure-play solar stock BSIF.
.
MDW1954 (full disclosure: Malcolm Wheatley in the Share Adviser world)

It is in an ISA and I did change brokers but only once so, you're right, I ought to be able to retrieve details of the various trades, at least back to the that change. Added to the to-do list...
BSIF sounds interesting but is not really a classic HYP equity. One for the radar never-the-less, thanks.
Appreciate the "disclosure"! and I really appreciate your articles written for TMF! (Though unsure now I've just seen a message entitled "The dangers of chasing yield". )

One question you haven't commented on yet is a Big Picture question (you are not alone, very few HYPsters seem to be able to articulate well their overall portfolio objectives in the various reviews I read about here):

What income do you want or need this portfolio to be generating, and when? And, what income is it producing now? Are you a "builder" or a "spender" of dividends?

As I mentioned, this portfolio was originally a sort-of slush-fund in shares rather holding cash. It's not a huge amount of money -- not (yet) a 6-figure sum but well over halfway there. I am a builder at present but approaching phases in my life when potential need for urgent unplanned capital withdrawal is diminishing (children finally leaving the nest!) and also when some dividend income may be a nice little supplement to other retirement income; so not a case of needing income. One strong appeal of HYP is the hands-off approach -- unfortunately I simply find it harder to concentrate in the way I used to.

Thanks again all, time to follow some of those interesting links...

[idpickering]

Third, I'm a fan of REITs and quasi-REITs (which is what we call the likes of Greencoat UK Wind on this board). In my view, you could increase your exposure to these. I'm sure Ian can find the list that I often trot out (of which I hold all of them).

And I'm very grateful for your input and guidance Malcolm.

As for a link to what you're talking about, here's one such thing;

viewtopic.php?p=438511#p438511

I'm sure tickerhacker will find it as helpful as I did. I refer back to that post often.

Ian.

[MDW1954]

BSIF sounds interesting but is not really a classic HYP equity.

If you read the guidelines for this board (top post on the HYP page), you'll see that HYP on TLF is defined as FTSE 350 companies.

So not "classic HYP" in the TMF/ Pyad sense of FTSE 100-centric companies, if that's what you meant.

Granted, BSIF isn't FTSE 350. But neither once were Greencoat UK Wind, Primary Health Properties (which you hold), and Tritax Big Box -- all of which you will see often appearing in the HYPs reported by this board's regulars.

For me, it tends to boil down to a simple question: do you buy businesses like BSIF when they're cheap, but outside the FTSE 350; or more expensive -- but inside the FTSE 350?

I know what I do.

MDW1954

[tjh290633]

I have taken the liberty of sorting by weight and indicating the % of median value:

EPIC   % Median   % Yield
ITV      51.20%     4.86%
ADM      62.60%     5.66%
RIO      70.20%    12.40%
PHNX     74.80%     8.56%
FRES     86.40%     3.58%
ULVR     95.40%     4.02%
SN.      98.00%     2.43%
MNG      99.00%     8.88%
BP.      99.60%     4.21%
SGE     100.00%     2.64%
PSN     107.40%    11.56%
RMG     108.40%     5.18%
TSCO    109.40%     3.96%
PHP     112.00%     4.61%
GSK     112.80%     2.99%
BVIC    117.80%     3.04%
UKW     121.20%     4.68%
VOD     128.00%     6.49%
BATS    147.20%     6.60%

In terms of relative weight, you are reasonably balanced by my standards, and I do not consider selling a share unless its yield falls below about half that of the market. Nothing there to frighten the horses, in my view.

TJH

[kempiejon]

A couple of posters have said no need to sell, I'd concur. If you have enough for another share a utility as their commitment to inflationary (CPIH matching) dividend increases many be welcome.

[funduffer]

I would recommend putting your portfolio into the HYP Top Up spreadsheet, available from the Financial Software board.

This would show you where to direct funds to enhance income and maintain balance.

I would not recommend selling anything unless you have identified a higher yielding alternative that maintains sectorial balance.

It doesn’t look far off a well balanced HYP to me, as TJH has shown.

FD

[tickerhacker]

I would recommend putting your portfolio into the HYP Top Up spreadsheet
FD

That seems like a good idea rather than trying to re-invent what's already been done.

I've just added the 20th share, going for National Grid, seeing as that seems a solid choice and is seen favourably here, and also over there: https://www.fool.co.uk/2022/05/24/three ... p-soundly/