Creating a SHDP

[G3lc]

Thank you - Going forward from now, what I’m trying to get at is the highest reliable ongoing dividends (I’m not particularly into buying and selling to gain income, nor am I interested in buying income with my capital) from the most reliable least risky companies, does one look at - historical results, the outlook, or cash in hand, borrowings, or pension liabilities, brands, the product, the moat, or the odd situation we now find ourselves in, or all these things and more, and is there a way of measuring whatever it takes to determine possible candidates for a SHDP? - or does one just take a view and trust to luck.

[1nvest]

i should say i have lifted your idea and transposed it for TR (total returns) onto the investment strategy board

Always nice to also include a cross reference link David ...
https://www.lemonfool.co.uk/viewtopic.php?p=327179#p327179

[Bubblesofearth]

But I think the answer is that one should avoid being greedy and go for the likes of Unilever, Daigeo, the financials excluding banks, and a selection of ITs.



Dod

Isn't the risk that you end up picking yesterday's safe shares, i.e those that have done well during the pandemic? So now we have the FMCG companies and pharmas on high ratings whilst oils, banks etc could be bargains as they are out of favour?

For me there is only one way to improve the safety of an equity portfolio and that is by diversification. IT's obviously achieve this but any portfolio of individual shares IMO needs to cover just as many sectors as it ever did.

BoE

[Dod101]

Of course I agree with you about diversification but not too much of it. Of the banks, I only hold HSBC which I thought would be secure in terms of its dividend but look what happened there. I will probably hang on to it though. Legal & General, Phoenix Holdings, Chesnara and Schroders Non Voting make up my financials and all have been fine. The tobaccos are in long term decline and I will probably sell down at least Imperial Brands in due course. Oil is too I think but I would imagine that the likes of Shell have the ability to convert to green fuels. The field is now quite small but Murray Income and Murray International, HFEL, 3i Infastructure and Edinburgh IT help in the IT sector, although I am probably about to ditch Edinburgh. I am not very comfortable with UK domestic ITs.

Dod

[Bubblesofearth]

Of course I agree with you about diversification but not too much of it. Of the banks, I only hold HSBC which I thought would be secure in terms of its dividend but look what happened there. I will probably hang on to it though. Legal & General, Phoenix Holdings, Chesnara and Schroders Non Voting make up my financials and all have been fine. The tobaccos are in long term decline and I will probably sell down at least Imperial Brands in due course. Oil is too I think but I would imagine that the likes of Shell have the ability to convert to green fuels. The field is now quite small but Murray Income and Murray International, HFEL, 3i Infastructure and Edinburgh IT help in the IT sector, although I am probably about to ditch Edinburgh. I am not very comfortable with UK domestic ITs.

Dod

How do you square not liking too much diversification with holding IT's?

BoE

[1nvest]

Of course I agree with you about diversification but not too much of it. Of the banks, I only hold HSBC which I thought would be secure in terms of its dividend but look what happened there. I will probably hang on to it though. Legal & General, Phoenix Holdings, Chesnara and Schroders Non Voting make up my financials and all have been fine. The tobaccos are in long term decline and I will probably sell down at least Imperial Brands in due course. Oil is too I think but I would imagine that the likes of Shell have the ability to convert to green fuels. The field is now quite small but Murray Income and Murray International, HFEL, 3i Infastructure and Edinburgh IT help in the IT sector, although I am probably about to ditch Edinburgh. I am not very comfortable with UK domestic ITs.

Dod

So which sectors for the future?

Financials, consumer goods/services, technology, pharmaceuticals/health, materials/commodities?

In doubt are the future for oil, tobacco?

If so, is selection according to yield appropriate? Why not for instance BRK, Unilever, Apple, GSK, RIO (and partner competitor pairings) to dilute down (diversify) according to your level of preference. https://tinyurl.com/y4a9myt5

[Dod101]

Of course I agree with you about diversification but not too much of it. Of the banks, I only hold HSBC which I thought would be secure in terms of its dividend but look what happened there. I will probably hang on to it though. Legal & General, Phoenix Holdings, Chesnara and Schroders Non Voting make up my financials and all have been fine. The tobaccos are in long term decline and I will probably sell down at least Imperial Brands in due course. Oil is too I think but I would imagine that the likes of Shell have the ability to convert to green fuels. The field is now quite small but Murray Income and Murray International, HFEL, 3i Infastructure and Edinburgh IT help in the IT sector, although I am probably about to ditch Edinburgh. I am not very comfortable with UK domestic ITs.

Dod

How do you square not liking too much diversification with holding IT's?

BoE

That is an interesting question but I do not like too much diversification with my own individual choices. Some seem to be keen on a wide range so that if they pick up a Carillion it will be of less significance, but I try to chose a small number of individual shares and then I suppose get my diversification through ITs. In choosing ITs though I am more choosing the management style and think of it as one pick, letting the manager get on with it. Apart from a cursory glance, I do not look very carefully at the IT's holdings. All I really want to know with my Its is is it internationally invested say? Technology and so on. I would not reject an IT because it has a holding that I do not like, that is for the manager to decide.

These things are to me always very difficult to explain and I certainly do not have all the answers!

Dod

[jackdaww]

Of course I agree with you about diversification but not too much of it. Of the banks, I only hold HSBC which I thought would be secure in terms of its dividend but look what happened there. I will probably hang on to it though. Legal & General, Phoenix Holdings, Chesnara and Schroders Non Voting make up my financials and all have been fine. The tobaccos are in long term decline and I will probably sell down at least Imperial Brands in due course. Oil is too I think but I would imagine that the likes of Shell have the ability to convert to green fuels. The field is now quite small but Murray Income and Murray International, HFEL, 3i Infastructure and Edinburgh IT help in the IT sector, although I am probably about to ditch Edinburgh. I am not very comfortable with UK domestic ITs.

Dod

How do you square not liking too much diversification with holding IT's?

BoE

=================================

its not really a contradiction if you are holding mostly IT's for themes and overseas coverage.

then just add your favourite UK stocks, which dont then need much diversification .

[Dod101]

Of course I agree with you about diversification but not too much of it. Of the banks, I only hold HSBC which I thought would be secure in terms of its dividend but look what happened there. I will probably hang on to it though. Legal & General, Phoenix Holdings, Chesnara and Schroders Non Voting make up my financials and all have been fine. The tobaccos are in long term decline and I will probably sell down at least Imperial Brands in due course. Oil is too I think but I would imagine that the likes of Shell have the ability to convert to green fuels. The field is now quite small but Murray Income and Murray International, HFEL, 3i Infastructure and Edinburgh IT help in the IT sector, although I am probably about to ditch Edinburgh. I am not very comfortable with UK domestic ITs.

Dod

How do you square not liking too much diversification with holding IT's?

BoE

=================================

its not really a contradiction if you are holding mostly IT's for themes and overseas coverage.

then just add your favourite UK stocks, which dont then need much diversification .

Thanks. Yes that is pretty much what I do and you probably the same?

Dod

[Arborbridge]

But I need my capital to at least maintain its value.

Dod

Then you shouldn't invest in shares.

BoE

Shares have maintained capital far better than cash, for example.
I know some will propose bond type investments, but I confess to a blind spot there


Arb.

[Arborbridge]

When I used the word 'need' I obviously gave the wrong message because it is an aspiration rather than a requirement. I know very well that there are no guarantees in investing but over a long period stock markets generally move upwards. What I really meant was that I do not disregard capital values and would never for instance have knowingly invested in a share which would behave like Imperial Brands, dearly bought income as I call it.

Dod

True, none of us would knowingly do that, and those of us who invested in IMB years ago didn't knowingly do that either
How would you know which one had bought until it was too late? (Ok, that's another whole thread, I know - and one without conclusion, otherwise we'd all be rolling in hay)

Arb

[G3lc]

Yes me to, but how do the professional managers that pick the stocks for the ITs decide on what to pick? - I would assume they do much the same as the rest of us - or do they?

[88V8]

In these odd times, would it be worth discussing a Safe High Dividend Portfolio with the emphasis on safe?

Safe over what period?

Disregarding capital fluctuations, over the next 12 months I think most of the usual Preference shares are safe, likewise BOI, NATW etc.
Also income ITs. The safest ITs in terms of income will, in my view, be those with a long record of rising payment, as this is their usp, their 'moat' and they will defend it to the last drop of their reserves. I hope.
Some high yield shares but not many.

If however in 12 months we do not have a vaccine, all bets are off. The Govt cannot repeat the furlough, and the EU haven't even agreed their response to the first wave let alone a possible repeat.
And what bothers me about a vaccine is its duration. Already we know that those who have had the bug soon lose their immunity. Will the same effect be seen in a vaccine, such that one needs repeated shots.

I sold nothing during the panpanic, then starting in March bought quite a lot in FI, ITs, some HYP shares, but now I'm sitting on my hands as I think the market has got ahead of itself.

The problem for me today, would not be buying the yield, but buying the 'safe'.

V8

[dealtn]

Yes me to, but how do the professional managers that pick the stocks for the ITs decide on what to pick? - I would assume they do much the same as the rest of us - or do they?

Well most of them won't have a "Safe" objective of preserving Capital, which is what it seems you are looking for.

At Best they will have an objective of meeting, and hopefully beating (though more likely missing), a Benchmark. That Benchmark is likely to be an Index, and that Index is likely to have a possibility of falling.

Now it might depend on how restrictive you allow your preserving Capital objective to be, and over what time frames, in determining what individual investments your "system" allows, and what the collective portfolio looks like. Hence my asking what you meant by "Safe" and what part of "HDP" it applied to. In practice I suggest few professional managers are operating as restrictive a system as you are proposing and asking "how do the professional managers that pick the stocks for the ITs decide on what to pick?" you are asking a different question.

If you are asking what Shares have a High Yield and Generally will have a reliable Dividend and a likelihood of a share price not falling (or at least only doing so in line with a broader market or Benchmark) then that is a valid question, and relevant to here. If you are asking, which is what I thought, how do you design a system or Investment Strategy that is both High Yielding and Safe with respect to Capital preservation, then it is difficult (and in the wrong place).

[G3lc]

When I talk of safe, I would rather not loose money taking into account both capital and dividends, and when I talk about high dividends I am talking about the highest dividend I can expect with the lowest risk to my capital, and this with say a 5 year time frame.

[Dod101]

When I talk of safe, I would rather not loose money taking into account both capital and dividends, and when I talk about high dividends I am talking about the highest dividend I can expect with the lowest risk to my capital, and this with say a 5 year time frame.

I think given the current conditions that you are seeking an impossible objective. All we can do is follow the age old mantra of not being too ambitious and try to find companies that are solidly financed with a very long term outlook. Dividends are likely to be modest for most of these companies, but I think they have the highest likelihood of a) survival and b) paying a dividend. That I think is about as much as we can hope for in the near future and that presupposes that we do not get any dramatic second wave of the Covid virus.

Dod

[dealtn]

When I talk of safe, I would rather not loose money taking into account both capital and dividends, and when I talk about high dividends I am talking about the highest dividend I can expect with the lowest risk to my capital, and this with say a 5 year time frame.

Well I am sure that applies to everyone, be they an amateur or a professional manager. Using terms such as "rather not" and "lowest risk" just aren't clear enough, at least to me, what you are looking for.

I am not trying to be difficult, and have made suggestions on what I thought you were looking for, which appears to have been wrong, but it is difficult to meet such a wide criteria I'm afraid, and even harder to devise a strategy, a set of rules or guidelines that can be used as a filter or method to arrive at a portfolio.

I suspect the easier approach would be to go through the many hundreds of funds, and their objectives to see which most resembles what you are looking for and then look to refine that approach further if you aren't satisfied in investing in such a fund directly.

[Bubblesofearth]

When I talk of safe, I would rather not loose money taking into account both capital and dividends, and when I talk about high dividends I am talking about the highest dividend I can expect with the lowest risk to my capital, and this with say a 5 year time frame.

I'm sure we would all prefer not to lose money!

I'm not sure you can get away from the fundamental tenet of risk reduction via diversification. The higher the level of diversification the lower the overall risk. Any attempt to select according to particular criteria, including yield, will necessarily increase risk compared to a whole market approach.

If you select from a pre-defined high yield universe then, again, the widest possible diversification of individual holdings will reduce risk the most. Unless investing in funds there will likely be practical limits to the level of diversification you can realistically achieve. This can be mitigated to some extent by making sure you achieve good sectoral diversification. We're getting close to HYP principles here.

Apart from this I'm not sure there is a magic bullet out there that will give you what you want if investing in equities. It's basically the usual stuff around diversification.

BoE

[G3lc]

Thank you - so I take it from your thoughtful and knowledgable comments is do nothing ’till the fog clears.

[Bubblesofearth]

Thank you - so I take it from your thoughtful and knowledgable comments is do nothing ’till the fog clears.

Cloudy the future always is.

BoE