moorfield wrote:
Well I would not top up a share that I would not buy into a new HYP at the same point in time.
The 'H' being high of course, neither of which HSBC, GSK, or arguably SSE (with its pre announced dividend coming....) are.
As with all things though, I think a little '
circumstantial pragmatism' goes a long way with any personal investment strategy, and having myself mentioned HSBC as a possible top-up option earlier in the thread, I think it's worth me highlighting again some of the drivers for that suggestion, because it goes right back to the initial top-slice requirement of BAE that gigha mentioned in his opening post...
Given that the primary driver for this top-up process was an initial sell-down of a BAE holding who's weighting had gone well past 'normal portfolio parameters', and especially given that, as is often the case with these relatively short-term share-price rises that sometimes drive such events, the forecast yield of BAE had also subsequently dropped to 3.3% due to that rapid price escalation, I thought it was worth fleshing things out with a particular focus on that initial driver-event...
So as the primary driver for the process is to de-weight BAE, and having been in similar positions myself over the years with similar over-weighting situations which have also been accompanied by
relative yield drops occurring at the same time, I've often been happy to ensure that so long as the de-weight process occurs, then *any* accompanying useful increase in associated dividend income that might be able to be achieved at the same time should be seen as an
additional positive benefit of that initial de-weighting process, without
necessarily driving an additional 'need' into that de-weighting process for any subsequent purchases to
always have to be of the highest yields possible...
That's really the only reason I mentioned HSBC, because I think opening your eyes to the above benefits whilst potentially broadening the scope of options available for capital re-deployment can, I think, often make these processes a lot easier than situations where carrying out the initial de-weighting sales are easy, but where the capital re-deployment might then become a bit of a mental struggle, and so given that gigha had specifically said in one of his later posts that he was '
finding this top up decision really quite difficult', then I thought it was perhaps worth pointing out a potentially more pragmatic approach with a slightly lower yield-horizon that would still achieve the following benefits -
- Achieves the initial BAE capital de-weighting exercise
- Increases previous dividend income from that de-weighted capital, so long as any potential target has a yield over 3.3%, which was BAE's yield at the time of the initial de-weighting sale
- Increases overall portfolio dividend income
- Increases the aggregate running portfolio yield
Given the initial driver was a capital de-weighting exercise, then returning to my earlier '
circumstantial pragmatism' approach mentioned earlier, I personally think that still being able to achieve all of the above
portfolio-level benefits whilst *still* being able to potentially pick more moderately yielding portfolio holdings as
recipients of some ex-BAE top-up capital certainly looks to me like being a valid approach to this issue, and certainly where gigha has clearly said that he was struggling to deliver on the round-trip using his current approach...
Cheers,
Itsallaguess
