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This from TMF - Is investing in dividend stocks a good idea?

General discussions about equity high-yield income strategies
Arborbridge
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Re: This from TMF - Is investing in dividend stocks a good idea?

#279128

Postby Arborbridge » January 22nd, 2020, 10:25 am

Dod101 wrote:I am not with you Arb. I assumed that miner1000 was quoting from my post of 17 January. As I and Lootman have illustrated, getting 6% ad infinitum is not very good and in time is going to lead to penury.

The fact is that the shares I was referring to, HSBC and Shell in particular, have done nothing on the capital front since they froze their dividends. That is what I was referring to and I am a bit fed up of simply getting around 6% income and nothing else. We are kidding ourselves if we think that is very good in itself and as I said it is far from risk free. It is not increasing with RPI nor is there any capital increase, modest or otherwise.

Overall, my HYP like yours is doing fine but that is not the point. We must always be vigilant and certainly I am for the first time in a long while wondering about reducing HSBC and Shell, but I would need to find something which is more attractive and the yield of 6% or so is seductive, no doubt about that.

Dod


Maybe we are indeed talking about different things. You are addressing the fortunes of HSBC (which you have always promoted) and Shell, someone else mentioned a TR of 6% which is what I picked up on. I'm also concerned not with a couple of shares, but the success of the whole venture, which effectively comes in under the title of this thread. And I doubt anyone actually considered 6% TR "ad infinitum". This is a decent return and may vary over the years - probably linked to inflation in general - so it's hard;y penury. Some would say we are darned lucky - we would sday we've had the courage to take the risk and that is our reward compared with those who currently settle for a risk free 1.4%.

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Re: This from TMF - Is investing in dividend stocks a good idea?

#279129

Postby Lootman » January 22nd, 2020, 10:26 am

Dod101 wrote:As I and Lootman have illustrated, getting 6% ad infinitum is not very good and in time is going to lead to penury.

The fact is that the shares I was referring to, HSBC and Shell in particular, have done nothing on the capital front since they froze their dividends. That is what I was referring to and I am a bit fed up of simply getting around 6% income and nothing else. We are kidding ourselves if we think that is very good in itself and as I said it is far from risk free. It is not increasing with RPI nor is there any capital increase, modest or otherwise.

The UK market is dominated by a fairly small number of large-cap low-growth shares with high dividend yields. Those dividends are not particuclarly well covered and so there remains the risk of static dividends or, worse, a dividend cut. A yield of three times the rate of inflation in theory allows for some contingency but then again a yield that high is also a warning sign.

So for some time I have favoured more moderate yields with a reasonable prospect of growth. The usual suspects of Diageo and Unilever fit the bill, as do a handful of others in the UK. But I mostly find what I seek outside the UK e.g. Nestles, MiscroSoft, Canadian Pacific, United Healthcare, Apple, McDonalds etc.

In fact my US portfolio has annualised 15% a year for the last decade, albeit from a low base.

The problem I have with factoring in RPI into the return numbers is that RPI represents a specific set of products and services, and what I spend my money on deviates signifiantly from that set. For example if you own your home outright, as many here do, then the housing component isn't so relevant. Even with a mortgage it seems that mortgage rates have been declining for years. Electronics has become cheaper in nominal terms whilst flying has become cheaper in real terms.

So I ignore inflation. If my portfolio is worth 10% more than a year ago then I have 10% more money. Much of it is reinvested anyway so again the RPI doesn't concern me. It might make more sense to use a "personal RPI" which reflects your own individual spending pattern.

I do own Royal Dutch as it happens. But otherwise in the energy space I favour E&P companies that are immune from geopolitical risk such as North American shale names like Sunoco and EOG. Another hiccup in Iran and those will move bigly.

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Re: This from TMF - Is investing in dividend stocks a good idea?

#279154

Postby 77ss » January 22nd, 2020, 11:30 am

Dod101 wrote:...We must always be vigilant and certainly I am for the first time in a long while wondering about reducing HSBC and Shell, but I would need to find something which is more attractive and the yield of 6% or so is seductive, no doubt about that.

Dod


I have been getting a bit uneasy about Shell for some time now, and have trimmed twice in the past two years - by about 23%.

I no longer wish to be overweight in this company, and am now just at full weight.

Replace the yield? Not so easy now, at 6.6%, but a bit easier when I trimmed (at about 6%). One is not obliged, of course, to put any proceeds into an equal or higher yielder.

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Re: This from TMF - Is investing in dividend stocks a good idea?

#279162

Postby kempiejon » January 22nd, 2020, 12:07 pm

77ss wrote:Replace the yield? Not so easy now, at 6.6%, but a bit easier when I trimmed (at about 6%). One is not obliged, of course, to put any proceeds into an equal or higher yielder.


With the bar at about 6%, BT Group, the tobaccos, Persimmon, Aviva, Glencore, Phoenix and Standard Life from the 100 index or NewRiver REIT, Hammerson, Microfocus, Petrofac, Hastings, Crest Nicholson, PLus500, Wood Group, Direct Line, IG Group, Marstons and perhaps Cineworld from the next tier might warrant further investigation for those seeking to swap.
I can see a couple of obvious clangers in there and of course your diversification might preclude some industries but I expect I could pick a couple.

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Re: This from TMF - Is investing in dividend stocks a good idea?

#279187

Postby IanTHughes » January 22nd, 2020, 1:33 pm

Lootman wrote:
Dod101 wrote:As I and Lootman have illustrated, getting 6% ad infinitum is not very good and in time is going to lead to penury.

The fact is that the shares I was referring to, HSBC and Shell in particular, have done nothing on the capital front since they froze their dividends. That is what I was referring to and I am a bit fed up of simply getting around 6% income and nothing else. We are kidding ourselves if we think that is very good in itself and as I said it is far from risk free. It is not increasing with RPI nor is there any capital increase, modest or otherwise.

The UK market is dominated by a fairly small number of large-cap low-growth shares with high dividend yields. Those dividends are not particularly well covered and so there remains the risk of static dividends or, worse, a dividend cut.

Well yes, the overall dividend of the FTSE is dominated by 10 mega-caps paying out 54% of the total dividend amount.

https://citywire.co.uk/investment-trust ... h/a1298602
Citing recent research (see table) from broker AJ Bell that Royal Dutch Shell, HSBC, BP, British American Tobacco, GlaxoSmithKline, Rio Tinto, AstraZeneca, Lloyds, BHP Group and Vodafone are forecast to generate 54% of the dividends paid by FTSE companies, Brooke and Ure said:

‘Amongst these top 10, only five have grown their dividends over the last 12 months and, although the oil majors have announced their intention to return to dividend growth, it seems increasingly likely that some of these companies may need to moderate their pay-out ratios.’

But of course, an investor seeking income from directly held shares is hardly likely, or indeed able, to "buy the FTSE"! Further, if one looks at that top-ten list:

EPIC | Company                  | Business  | Forecast | Yield | Cover
RDSB | Royal Dutch Shell | Oil & Gas | 12,167 | 5.70% | 1.23
HSBA | HSBC Group | Banking | 8,398 | 6.40% | 1.40
BP | BP Plc | Oil & Gas | 6,834 | 6.00% | 1.26
BATS | British American Tobacco | Tobacco | 4,839 | 7.10% | 1.54
GSK | GlaxoSmithKline | Pharma | 3,991 | 5.10% | 1.45
RIO | Rio Tinto | Mining | 3,943 | 5.50% | 1.66
AZN | AstraZeneca | Pharma | 2,990 | 3.30% | 1.28
LLOY | Lloyds Banking Group | Banking | 2,353 | 6.30% | 2.19
BHP | BHP Group | Mining | 2,295 | 6.10% | 1.32
VOD | Vodafone | Telecom | 2,166 | 6.50% | 0.97

It seems probable to me that a properly diversified income portfolio would only include 6 of those - 1 per Business Sector - together with a number of others - 10 minimum - also from different business sectors.

We seem to have these discussions fairly frequently on these boards and when the last one occurred on the "High Yield Portfolio (HYP) - Practical" board, I pointed out that, although there were a number of probable dividend holds within my portfolio, the portfolio dividend would probably be boosted by a number of dividend increases. The number of cuts were small by comparison.

viewtopic.php?p=268747#p268747

I have now done the same quick analysis for the "PYAD HYP 2019_04 DRAWDOWN" virtual portfolio, which was set up fairly recently. The most recent report is here viewtopic.php?p=274972#p274972

| | Last Full | Next Year
EPIC | Company | Year Div | Forecast (1)

AV | Aviva | Increased | Increase
BA | BAE Systems | Increased | Increase
BHP | BHP Group | Increased | Increase
BLND | British Land Company | Increased | Increase
BP | BP | Increased | Hold
CCL | Carnival Corporation | Held | Hold
GSK | GlaxoSmithKline | Held | Hold
HSBA | HSBC Holdings | Held | Hold
IBST | Ibstock | Increased | Increase
IGG | IG Group Holdings | Held | Hold
IMB | Imperial Brands | Increased | Increase
ITV | ITV | Increased | Hold
LAND | Land Securities Group | Increased | Increase
PNN | Pennon Group | Increased | Increase
RDSB | Royal Dutch Shell | Held | Hold
SLA | Standard Life Aberdeen | Increased | Hold
SMDS | DS Smith | Increased | Increase
VOD | Vodafone Group | Cut | Hold
WPP | WPP | Held | Hold

         | Last Full | Next Year
Movement | Year Div | Forecast

Increase | 12 | 9
Hold | 6 | 10
Cut | 1 | 0

Note (1) - My simple forecast mostly based on already declared interims. If anyone disagrees do let me know.

So yes, there does appear to be a likely increase in "Held Dividends", they will now be the majority in fact, but surely an increased portfolio dividend is on the cards nonetheless.

The dividend diversification is as follows:

EPIC | Company                | Div Amount (£) | Div Amount (%) | Forecast
AV | Aviva | 1,250.53 | 8.21% | Increase
IGG | IG Group Holdings | 1,193.18 | 7.84% | Increase
SLA | Standard Life Aberdeen | 1,188.64 | 7.81% | Increase
IMB | Imperial Brands | 1,173.26 | 7.71% | Increase
WPP | WPP | 1,068.00 | 7.01% | Hold
HSBA | HSBC Holdings | 949.30 | 6.23% | Hold
ITV | ITV | 932.16 | 6.12% | Hold
BHP | BHP Group | 855.49 | 5.62% | Hold
PNN | Pennon Group | 795.72 | 5.23% | Increase
GSK | GlaxoSmithKline | 752.80 | 4.94% | Hold
VOD | Vodafone Group | 743.00 | 4.88% | Increase
SMDS | DS Smith | 706.84 | 4.64% | Hold
BA | BAE Systems | 687.71 | 4.52% | Increase
CCL | Carnival Corporation | 589.49 | 3.87% | Increase
IBST | Ibstock | 567.35 | 3.73% | Hold
BP | BP | 540.35 | 3.55% | Hold
RDSB | Royal Dutch Shell | 445.90 | 2.93% | Increase
BLND | British Land Company | 406.46 | 2.67% | Hold
LAND | Land Securities Group | 379.96 | 2.50% | Hold

There does not appear to be any significant "over dominance" by dividend holders/likely cutters in that list


Ian

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Re: This from TMF - Is investing in dividend stocks a good idea?

#279195

Postby IanTHughes » January 22nd, 2020, 2:02 pm

IanTHughes wrote:The dividend diversification is as follows:

EPIC | Company                | Div Amount (£) | Div Amount (%) | Forecast
AV | Aviva | 1,250.53 | 8.21% | Increase
IGG | IG Group Holdings | 1,193.18 | 7.84% | Increase
SLA | Standard Life Aberdeen | 1,188.64 | 7.81% | Increase
IMB | Imperial Brands | 1,173.26 | 7.71% | Increase
WPP | WPP | 1,068.00 | 7.01% | Hold
HSBA | HSBC Holdings | 949.30 | 6.23% | Hold
ITV | ITV | 932.16 | 6.12% | Hold
BHP | BHP Group | 855.49 | 5.62% | Hold
PNN | Pennon Group | 795.72 | 5.23% | Increase
GSK | GlaxoSmithKline | 752.80 | 4.94% | Hold
VOD | Vodafone Group | 743.00 | 4.88% | Increase
SMDS | DS Smith | 706.84 | 4.64% | Hold
BA | BAE Systems | 687.71 | 4.52% | Increase
CCL | Carnival Corporation | 589.49 | 3.87% | Increase
IBST | Ibstock | 567.35 | 3.73% | Hold
BP | BP | 540.35 | 3.55% | Hold
RDSB | Royal Dutch Shell | 445.90 | 2.93% | Increase
BLND | British Land Company | 406.46 | 2.67% | Hold
LAND | Land Securities Group | 379.96 | 2.50% | Hold

There does not appear to be any significant "over dominance" by dividend holders/likely cutters in that list


Whoops! The above table in fact looks like this:

EPIC | Company                | Div Amount (£) | Div Amount (%) | Forecast
AV | Aviva | 1,250.53 | 8.21% | Increase
IGG | IG Group Holdings | 1,193.18 | 7.84% | Hold
SLA | Standard Life Aberdeen | 1,188.64 | 7.81% | Hold
IMB | Imperial Brands | 1,173.26 | 7.71% | Increase
WPP | WPP | 1,068.00 | 7.01% | Hold
HSBA | HSBC Holdings | 949.30 | 6.23% | Hold
ITV | ITV | 932.16 | 6.12% | Hold
BHP | BHP Group | 855.49 | 5.62% | Increase
PNN | Pennon Group | 795.72 | 5.23% | Increase
GSK | GlaxoSmithKline | 752.80 | 4.94% | Hold
VOD | Vodafone Group | 743.00 | 4.88% | Hold
SMDS | DS Smith | 706.84 | 4.64% | Increase
BA | BAE Systems | 687.71 | 4.52% | Increase
CCL | Carnival Corporation | 589.49 | 3.87% | Hold
IBST | Ibstock | 567.35 | 3.73% | Increase
BP | BP | 540.35 | 3.55% | Hold
RDSB | Royal Dutch Shell | 445.90 | 2.93% | Hold
BLND | British Land Company | 406.46 | 2.67% | Increase
LAND | Land Securities Group | 379.96 | 2.50% | Increase

There does not appear to be any significant "over dominance" by dividend holders/likely cutters in that list


Ian

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Re: This from TMF - Is investing in dividend stocks a good idea?

#279220

Postby Itsallaguess » January 22nd, 2020, 4:14 pm

Bagger46 wrote:
I often wonder how many investors who don’t measure such things can possibly know how they are really doing as investors.


I treat my investment returns in almost exactly the same manner as I treat the returns from the various exercises that I do -

1. I don't need to fully 'measure' calories in and out - I just 'weigh myself' every so often and check things are within acceptable 'operational parameters'..

2. I really, really enjoy the various exercise routines that I carry out. It's very difficult to quantify 'enjoyment', and pitch that against a number of 'technical return' parameters, but I do know that 'enjoyment' matter a lot to me...

3. If someone tried to convince me to carry out different exercises to the ones I really, really already enjoy doing, because the 'technical returns might improve', I would not necessarily want to achieve those 'technically improved returns' if I had to achieve them in a way that affected the enjoyment of my current routines....

4. I 'feel better in myself' for exercising, rather than simply 'not exercising'..

5. I know that, whilst there may be 'other exercise routines' that I could do, to perhaps achieve 'better technical returns', I really, really don't want to do any of those other exercises, as I really, really enjoy doing the ones I'm currently doing, and the returns are 'acceptable' to me in a way that allows me to plan for a better life in a way that I wouldn't be able to were I not doing them....

I often think the 'total-return vs income' arguments completely miss many of the above points, almost all of which mean that when it comes to investing, as with exercise, the technical-result that I 'might possibly achieve' isn't always as important as how enjoyable it's been to get the results that I'm already getting...

Cheers,

Itsallaguess

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Re: This from TMF - Is investing in dividend stocks a good idea?

#279228

Postby moorfield » January 22nd, 2020, 4:55 pm

Bagger46 wrote:I often wonder how many investors who don’t measure such things can possibly know how they are really doing as investors.


This is where XIRR can be useful and relevant, my portfolio has managed an annualized return of 10.5% over its first decade.

tjh290633
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Re: This from TMF - Is investing in dividend stocks a good idea?

#279266

Postby tjh290633 » January 22nd, 2020, 9:01 pm

Bagger46 wrote:Over the last thirty odd years, to get a real return of 6%, would have required a portfolio return of 9.2% if one takes RPI into account.

So getting just a 6% return on a HYP would mean a definite capital loss, Divis being partially funded by capital, all hidden by inflation.

As a yardstick to the UK market, the FTAS has returned 8.07% since the end of 1989, but only 4.88% net of RPI.

I often wonder how many investors who don’t measure such things can possibly know how they are really doing as investors.

Bagger

My portfolio has returned 9.97% since it started in April 1987 and 9.88% since the peak of the market in May 2007. The accumulation unit has given variable returns since the end of 1998:

Since        Acc Unit   IRR   
31-Dec-98 5.89 7.84%
30-Dec-99 6.85 7.44%
31-Dec-00 6.68 7.99%
31-Dec-01 6.43 8.68%
31-Dec-02 5.23 10.54%
31-Dec-03 6.38 9.86%
31-Dec-04 7.59 9.28%
30-Dec-05 9.69 8.08%
31-Dec-06 12.25 6.80%
31-Dec-07 12.41 7.27%
31-Dec-08 7.41 13.10%
31-Dec-09 10.24 10.87%
31-Dec-10 12.32 9.88%
31-Dec-11 13.45 9.96%
31-Dec-12 15.80 8.95%
31-Dec-13 19.56 6.68%
31-Dec-14 20.34 7.21%
31-Dec-15 21.42 7.68%
31-Dec-16 24.37 5.76%
29-Dec-17 26.70 3.97%
31-Dec-18 24.06 19.01%
31-Dec-19 28.84 5.87%
22-Jan-20 28.94

These data show the IRR since the year ends listed to the present day. As you can see, it does vary a bit as the market goes up and down. I should really have the converse listed. After a lot of sweat I have the following, which traces the IRR of my accum ulation unit to the various (near) financial year ends:

Year End    Acc Unit   IRR from start to year end
21-Apr-87 1.00
20-Apr-88 0.92 -8.13%
16-Apr-89 1.24 10.38%
11-Apr-90 1.39 10.45%
28-Mar-91 1.69 12.51%
28-Mar-92 1.75 10.69%
27-Mar-93 2.13 11.96%
22-Mar-94 2.50 12.41%
26-Mar-95 2.55 11.12%
01-Apr-96 3.13 11.96%
28-Mar-97 3.62 12.14%
28-Mar-98 5.72 14.73%
31-Mar-99 6.12 14.07%
31-Mar-00 6.13 13.07%
31-Mar-01 6.32 12.38%
31-Mar-02 6.76 12.00%
31-Mar-03 4.85 9.43%
31-Mar-04 6.56 10.50%
31-Mar-05 8.10 11.00%
01-Apr-06 10.57 11.70%
31-Mar-07 13.20 12.13%
31-Mar-08 11.21 10.89%
31-Mar-09 6.46 8.14%
31-Mar-10 10.86 9.87%
31-Mar-11 12.76 10.08%
30-Mar-12 14.19 10.08%
28-Mar-13 17.41 10.42%
31-Mar-14 18.88 10.32%
31-Mar-15 21.84 10.44%
31-Mar-16 21.91 10.11%
31-Mar-17 25.47 10.24%
30-Mar-18 24.66 9.83%
31-Mar-19 26.64 9.76%
31-Mar-20 28.94 9.76%

Hope that explains a few things.

TJH

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Re: This from TMF - Is investing in dividend stocks a good idea?

#279269

Postby Lootman » January 22nd, 2020, 9:16 pm

tjh290633 wrote:My portfolio has returned 9.97% since it started in April 1987 and 9.88% since the peak of the market in May 2007. The accumulation unit has given variable returns since the end of 1998

I'm not sure if you saw my earlier post but those results are remarkably similar to yours:

"According to this Vanguard article, the long-term returns from UK shares over the last 30 years is 9.9% annualised. Studies going back up to 100 years show a similar number. Such returns are lumpy of course, but that is why the long-term numbers are so important":

https://www.vanguardinvestor.co.uk/arti ... ut-average

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Re: This from TMF - Is investing in dividend stocks a good idea?

#279272

Postby Dod101 » January 22nd, 2020, 9:23 pm

kempiejon wrote:
77ss wrote:Replace the yield? Not so easy now, at 6.6%, but a bit easier when I trimmed (at about 6%). One is not obliged, of course, to put any proceeds into an equal or higher yielder.


With the bar at about 6%, BT Group, the tobaccos, Persimmon, Aviva, Glencore, Phoenix and Standard Life from the 100 index or NewRiver REIT, Hammerson, Microfocus, Petrofac, Hastings, Crest Nicholson, PLus500, Wood Group, Direct Line, IG Group, Marstons and perhaps Cineworld from the next tier might warrant further investigation for those seeking to swap.
I can see a couple of obvious clangers in there and of course your diversification might preclude some industries but I expect I could pick a couple.


That is an interesting list . Of those, I hold both tobaccos and Phoenix and frankly I would never hold many of the others anyway. In fact the others are distinctly second tier to me. we know the story on the tobaccos and Phoenix is always it seems, in the midst of one corporate action or another. The latest one, the takeover of Reassure is going to dilute all existing shareholders and possibly the dividend as well.

Dod

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Re: This from TMF - Is investing in dividend stocks a good idea?

#279287

Postby monabri » January 22nd, 2020, 10:46 pm

Cineworld (CINE) being the #2 most shorted company at a visible level of 14.3% (and most likely at an even higher level with sub 0.5% "bets").

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Re: This from TMF - Is investing in dividend stocks a good idea?

#279288

Postby tjh290633 » January 22nd, 2020, 10:46 pm

Lootman wrote:
tjh290633 wrote:My portfolio has returned 9.97% since it started in April 1987 and 9.88% since the peak of the market in May 2007. The accumulation unit has given variable returns since the end of 1998

I'm not sure if you saw my earlier post but those results are remarkably similar to yours:

"According to this Vanguard article, the long-term returns from UK shares over the last 30 years is 9.9% annualised. Studies going back up to 100 years show a similar number. Such returns are lumpy of course, but that is why the long-term numbers are so important":

https://www.vanguardinvestor.co.uk/arti ... ut-average

Yes, I did see it, but didn't have the opportunity to compose a reply until tonight. I also realised that I was missing the second set of data, so set to and calculated it this evening. Bagger has commented in a PM that he was talking about real returns, as opposed to nominal returns. My approach is to compare income with the RPI, which it has beaten over the years comprehensively, this time using the income unit data.

That has been reported plenty of times in the past, so I will not repeat it here.

TJH

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Re: This from TMF - Is investing in dividend stocks a good idea?

#279491

Postby 77ss » January 23rd, 2020, 5:52 pm

kempiejon wrote:
77ss wrote:Replace the yield? Not so easy now, at 6.6%, but a bit easier when I trimmed (at about 6%). One is not obliged, of course, to put any proceeds into an equal or higher yielder.


With the bar at about 6%, BT Group, the tobaccos, Persimmon, Aviva, Glencore, Phoenix and Standard Life from the 100 index or NewRiver REIT, Hammerson, Microfocus, Petrofac, Hastings, Crest Nicholson, PLus500, Wood Group, Direct Line, IG Group, Marstons and perhaps Cineworld from the next tier might warrant further investigation for those seeking to swap.
I can see a couple of obvious clangers in there and of course your diversification might preclude some industries but I expect I could pick a couple.


A useful list. Some I already hold, some I would not want and some are ruled out on diversification grounds - but there are a few that I have never looked at - they can go on the back burner, so thanks!

As it happens, OT on this board perhaps, I chose to move down the yield curve, shooting for growth and diversification rather than yield replacement.


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