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HYP candidates under covid-19

General discussions about equity high-yield income strategies
Breelander
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HYP candidates under covid-19

#308317

Postby Breelander » May 13th, 2020, 4:00 pm

Some of you may remember JohnnyCyclops who posted regularly on TMF and for a while on TLF.

One of his regular postings on TMF was a mechanical screen using DigitalLook's screener as a starting point for selecting HYP shares...

JohnnyCyclops (2013) wrote:Here's the table of the 34 stocks that got through the screen parameters....

https://web.archive.org/web/20150508114 ... 08251.aspx

...he would publish a new screen monthly.

I though it would be an interesting exercise to run JC's screen in the current situation and see what (if any) potential HYP shares are still out there (long ago I had set up my own screener with JC's parameters). Running the screen and removing any on the Cut, Cancelled or Suspended Dividends list gives just 11 shares to choose from today, even less if you stick to 'the usual suspects'. :(

Name                       Market Cap (m)  Div. Cover   Avg Div. Grth. 4yr    Div Yield    P/E
Legal & General Group £11,919.20 1.74 7.01% 8.79% 6.5
Rio Tinto £46,295.87 1.67 19.99% 8.37% 7.2
British American Tobacco £72,313.29 1.54 8.22% 6.68% 9.7
Barratt Developments £5,006.94 2.52 18.24% 5.92% 6.7
Smith (DS) £4,316.26 2.06 11.55% 5.15% 9.4
3i Group £7,338.98 3.67 15.08% 4.64% 5.9
Johnson Matthey £3,785.51 2.68 5.90% 4.37% 8.5
Schroders £6,391.91 1.77 7.32% 4.03% 14
Intermediate Capital Group £3,252.99 2.11 20.76% 4.02% 11.8
CRH £18,168.51 2.44 7.44% 3.17% 13
Polymetal International £7,647.73 2.02 32.45% 3.11% 15.9

tjh290633
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Re: HYP candidates under covid-19

#308329

Postby tjh290633 » May 13th, 2020, 4:23 pm

I suspect that there are a few missing from that list. SSE, for example, reduced its dividend when it sold its retail operations. Presumably that counted as a cut.

TJH

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Re: HYP candidates under covid-19

#308339

Postby daveh » May 13th, 2020, 4:54 pm

Just 10, DS Smith cancelled its dividend due 1st May.

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Re: HYP candidates under covid-19

#308342

Postby monabri » May 13th, 2020, 5:05 pm

Just 9 . ...Barratt Developments (BDEV)

https://www.investegate.co.uk/barratt-d ... 44285909H/

Breelander
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Re: HYP candidates under covid-19

#308349

Postby Breelander » May 13th, 2020, 5:23 pm

It's just a mechanical screen, so SSE may well deserve to be included. But with two more to remove it just goes to show how much the HYP universe is shrinking. :(

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Re: HYP candidates under covid-19

#308370

Postby daveh » May 13th, 2020, 6:41 pm

Breelander wrote:It's just a mechanical screen, so SSE may well deserve to be included. But with two more to remove it just goes to show how much the HYP universe is shrinking. :(

Did you use the same parameters as in the archived post in the 1st post of this thread? (>3.2%* yield; cover 1.5X, PE <17* Cap >£1B 4year average div CAGR >5%) * quoted as FTSE average at the time). If so shows how times have changed and suggests that the average FTSE yield is going to be a lot below that 3.2% when all the cuts are taken in to account.

At the moment what I've topped up/bought has been prefs (AV.B) and ITs (HFEL). I might have to have a look at some of my ex high yield shares that are showing good value characteristics (low PE, value less than book, low debt) that look like they may re-instate the dividend fairly quickly if I'm to top up the ordinary shares I hold.

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Re: HYP candidates under covid-19

#308412

Postby Dod101 » May 13th, 2020, 8:26 pm

Thanks Bree. I wonder what happened to JohnnyCyclops? I always though his posts were very interesting.

I hold Legal & General, BAT and Schroders from the list. All good shares at least they will be as long as L & G is not bullied into cutting or suspending its dividend.

Dod

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Re: HYP candidates under covid-19

#308413

Postby 88V8 » May 13th, 2020, 8:26 pm

One can't help wondering whether the classic annuity-substitute HYP would ever have been postulated under current conditions, even immediately pre-COVID conditions.

It was a golden age, it all seemed so simple then. Or has time rewritten every line.

V8

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Re: HYP candidates under covid-19

#308421

Postby Alaric » May 13th, 2020, 8:45 pm

88V8 wrote:One can't help wondering whether the classic annuity-substitute HYP would ever have been postulated under current conditions, even immediately pre-COVID conditions.


It was postulated in Spring 2019 in a series of Stockopedia articles which generated quite a bit of heated debate. Vodafone was a selected share which any number of people thought would cut its dividend imminently, which it duly did.

I don't think any of the Stockopedia material mentioned cash balances, IT style Income Reserves or even a caution that HYP shares shouldn't be 100% of your assets if you had no other source of income.

Anyone taking up some or all of the suggestions would be looking at a material loss of dividend income in 2020.

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Re: HYP candidates under covid-19

#308471

Postby Breelander » May 13th, 2020, 10:06 pm

daveh wrote:
Breelander wrote:It's just a mechanical screen, so SSE may well deserve to be included. But with two more to remove it just goes to show how much the HYP universe is shrinking. :(

Did you use the same parameters as in the archived post in the 1st post of this thread? (>3.2%* yield; cover 1.5X, PE <17* Cap >£1B 4year average div CAGR >5%)


Yes, except (for reasons I can't remember) my maximum PE was a fraction lower at 16.65. I also limited the search to the fTSE100.

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Re: HYP candidates under covid-19

#308496

Postby kempiejon » May 13th, 2020, 10:59 pm

Breelander wrote:It's just a mechanical screen, so SSE may well deserve to be included. But with two more to remove it just goes to show how much the HYP universe is shrinking. :(


Ok so that's a start, thanks for doing this. A mechanical screen will need a human touch, wouldn't REITs have low cover, to my memory utilities have traditionally had less than 1.5 cover perhaps because of their regulation too? I'd probably let the cover slip a bit and see what then needs weeding out but as a copy of JCs regular update it's a good comparator of the current status. Yes the HYP universe looks smaller than I've seen it and even if those few companies that have passed or deferred dividends come back in quick time the list will still be sparse.

I used to use Digital look screens but I've fallen out of love with the fiddling to the website, if I remember my parameters 3.5% minimum yield, I too would filter down to a set market cap like £1b or £900M to include the top of the 250 and relax the cover to 1.1 to capture the utilities, I don't think I was bothered by PE. Setting dividend increase to zero would filter back the pharms and perhaps a few more. Wan'ts that always the HYP way you relax criteria to get enough picks.
I think yield would have to have come down today to something like 2 to get a longer list and that not very H in the YP.


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