My income portfolio

[Dod101]

I opened this thread and I omitted to say that I have added no new income to arrive at my 10% increase in income over last year so that is quite pleasing. I do not unitise as I see no benefit for me in doing so.

Dod

[Arborbridge]

I've had a chance to enter Novermber's dividends, and this is what I find (I'm taking the OP which refers - I think - to the total previous year's income being surpassed, rather than income to November)

Comparison with reference year 2019: 2020 = -11.9%: 2021= +1.3%: 2022 to end November= +8.73%

This is based on total real income, including whatever might have been reinvested in those years. Most of this new investment will have come from my Safety Margin - that is income I didn't need to draw for my pension.

As far as seeing whether I am achieving more bangs for the same buck, one needs to refer to income per unit, as follows:

Total income per unit from the amalgamated portfolios:

2019 22.19p; 2020 18.99 (-14.4%); 2021 20.11 (-9.37%); 2022 to November 21.03 (-5.22%)

Figures in brackets are the difference for that year from the reference year of 2019. The 2022 figure is only to 30th Novermber: I notice that between 5 and 9 percent of my income arrived in December in previous years, so there is a possibility that 2022 will become a peak year, exceeding 2019.

Arb.

[Dod101]

Here is my current portfolio. It is not strictly speaking just the income portfolio but includes the few growth shares that I also hold. These are easily identified by the low yield.

The yield on these is 4.55% based on the trailling yield as at 31 December 2022 against the current capital values. Obviously Caledonia has a great yield but that is because of a big special which they paid last year (and do from time to time. It could not though be said to be an income share)

The yield on Admiral is much too high because they cut their overall dividend with the 2022 full year results. It is still though a relatively high yield share.

I was building up my holding in JPM Global Growth and Income last year and so its yield comes out lower owing to the 'dividend drag'.

Best to ignore Treatt. It is not an income share and is in the portfolio solely because the famous Lord Lee holds it and likes it. It has been hopeless for me but it is just there for fun and in case it ever takes off.

SSE has said it will cut its dividend for 2023/4 but has promised a good final for their current year to 31 March (ie two days time)

The two Canadian banks were doing fine until the latest bank scare but I expect they will recover. They are in my SIPP and I just buy more shares once a year with the Dollars generated from their dividends. We are allowed to hold foreign currencies in a SIPP but not in an ISA.

No supermarkets and only M J Gleeson amongst the housebuilders. Conclude that I should hold say BHP but otherwise I will make modest changes only as the yield is fine for me and the portfolio generates surplus income above my living expenses. I like to be fairly conservative so that I get no surprises.

Comments or criticisms welcome.

Oops. The other 5.17% are the few bond funds, just historical but I think a useful diversifier.

Dod

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[OhNoNotimAgain]

How do you post just a neat table?

[richfool]

Thank you for posting your portfolio. Though is the yield on Caledonia correct at 7.16%

HL show it as 1.91%

Edit: Ah, your comments noted about the large special dividend last year.

[monabri]

How do you post just a neat table?

Instructions here ('style of tag' = table).

http://lemonfoolfinancialsoftware.weebl ... ormat.html

[Dod101]

Thank you for posting your portfolio. Though is the yield on Caledonia correct at 7.16%

HL show it as 1.91%

Edit: Ah, your comments noted about the large special dividend last year.

Yes around 2% is the typical yield for Caledonia. They have a good special every couple of years which is what happened last year.

Dod

[Dod101]

How do you post just a neat table?

The instructions are straightforward if you go to the financial software site but I appear to be too dim to get it right. I will though for my own satisfaction try posting a table once again on the Testing site.

Dod

[Dod101]

My comments on Caledonia should have read 'They pay a special every couple of years or so' There is nothing regular about their specials and tend to be when they sell a business which they do from time to time, usually at a good profit.

Dod

[moorfield]

Don't wish to be a miserable so and so unnecessarily. But I would be very interested to hear where portfolio generated income is this year is compared to pre covid, say 2019? I don't have a number myself since my first ever portfolio drawdown is planned for Q1 2023 and I have a fairly recent income generating portfolio to draw from. Thanks.

Doubled, thanks to upcycling of several HYPish shares into higher yield ITs and additional capital contributions. The ratcheting effect of that has seen a principal financial objective reached years earlier than planned - a natural yield income exceeding the higher rate income tax threshold. I don't feel the need to unitise and will just keep reinvesting for another 5-7, maybe 10 years. Even high yield ITs cut their dividends, but with a fair wind that income may double again before I am 60.

[Dod101]

Don't wish to be a miserable so and so unnecessarily. But I would be very interested to hear where portfolio generated income is this year is compared to pre covid, say 2019? I don't have a number myself since my first ever portfolio drawdown is planned for Q1 2023 and I have a fairly recent income generating portfolio to draw from. Thanks.

Doubled, thanks to upcycling of several HYPish shares into higher yield ITs and additional capital contributions. The ratcheting effect of that has seen a principal financial objective reached years earlier than planned - a natural yield income exceeding the higher rate income tax threshold. I don't feel the need to unitise and will just keep reinvesting for another 5-7, maybe 10 years. Even high yield ITs cut their dividends, but with a fair wind that income may double again before I am 60.

I was quite taken aback by this comment considering it is responding to a comment of at least several months ago and thus got nothing to do with my recent post.

Dod

[Shelford]

Hi Dod

Firstly, thank you for your many high quality posts.

I hold many of your shares/ITs too.

My only question (given your income performance was so much better than mine last year!) is you have a very high percentage of equities in your portfolio versus fixed income. That has favoured you in the past 10 years, and particularly 2022. In your shoes, I'd imagine 'not broke, don't fix it'. However an asset manager looking at your portfolio might say you are very over weight in equities at the expense of other asset classes viz. property, renewables. Have you considered adding (say) JLEN? There is a reasonable argument for avoiding commercial property at present given the fall out over higher interest rates, but arguably this issue is priced in.

Shelford

[Arborbridge]

How do you post just a neat table?

The instructions are straightforward if you go to the financial software site but I appear to be too dim to get it right. I will though for my own satisfaction try posting a table once again on the Testing site.

Dod

Or just use the "preview" button where you intend to post. If it's wrong, one can make correction and only post "for real" when one is happy. One can trial the three different ways of formatting the table in one dummy post (using "preview") and only post the one preferred by deleting the less good ones.

Arb.

[Arborbridge]

Hi Dod

Firstly, thank you for your many high quality posts.

I hold many of your shares/ITs too.

My only question (given your income performance was so much better than mine last year!) is you have a very high percentage of equities in your portfolio versus fixed income. That has favoured you in the past 10 years, and particularly 2022. In your shoes, I'd imagine 'not broke, don't fix it'. However an asset manager looking at your portfolio might say you are very over weight in equities at the expense of other asset classes viz. property, renewables. Have you considered adding (say) JLEN? There is a reasonable argument for avoiding commercial property at present given the fall out over higher interest rates, but arguably this issue is priced in.

Shelford

Point to note: "other asset classes" - property, renewables are often (one might say "usually") equities too.

If I may answer for myself (I expect Dod will answer soon) I prefer equities to fixed interest due to the ability to achieve increasing income. Fixed income may be safer, but it would not provide me a reasonably high and rising pension.

[OhNoNotimAgain]

Trailing 12 month dividends

Year to	Acc 	Inc
Feb-22	7.6415	4.3473
Mar-22	8.2402	4.6367
Apr-22	8.5496	4.7892
May-22	8.1831	4.5437
Jun-22	8.3380	4.6186
Jul-22	8.4397	4.6685
Aug-22	8.4724	4.6339
Sep-22	7.9252	4.3058
Oct-22	7.9618	4.3215
Nov-22	8.3345	4.5138
Dec-22	8.3048	4.4882
Jan-23	8.0193	4.3272
Feb-23	8.1115	4.3616

[Dod101]

Hi Dod

Firstly, thank you for your many high quality posts.

I hold many of your shares/ITs too.

My only question (given your income performance was so much better than mine last year!) is you have a very high percentage of equities in your portfolio versus fixed income. That has favoured you in the past 10 years, and particularly 2022. In your shoes, I'd imagine 'not broke, don't fix it'. However an asset manager looking at your portfolio might say you are very over weight in equities at the expense of other asset classes viz. property, renewables. Have you considered adding (say) JLEN? There is a reasonable argument for avoiding commercial property at present given the fall out over higher interest rates, but arguably this issue is priced in.

Shelford

I have always been very heavy in equities. I am sure an asset manager would be tearing his hair out but equities have always done me quite well and in recent years I have managed to avoid any of the disasters. I have not held commercial property such as B Land and Land Secs for a very long time. I have never made any money on them so I am unlikely ever to hold them or their like again. And that view has got nothing to do with higher interest rates. Even in the era of more or less free money I did not look at them. PHP is well down I assume because of the higher interest rates and quite heavy borrowings but the security of their income makes them almost irresistible.

As for infrastructure, nothing wrong with much of it but I do not like the dilution that we small investors suffer quite regularly from the way they raise new funds. I quite like 3i Infrastructure although they have diluted us small shareholders with their recent fundraising, but they have a good spread of businesses both in the UK but much of it in Europe. I could never invest in say onshore windfarms since I dislike them as a blot on the landscape.

I do not much like fixed income since it is usually just that 'fixed'.

Thanks for your comments though. I do not have a closed mind!

Dod

[monabri]

PHP is well down I assume because of the higher interest rates and quite heavy borrowings but the security of their income makes them almost irresistible.

Hopefully, though, interest rates will come down over the next year and PHP should benefit. Hence PHP is a potential top up candidate for me. Currently on a yield of ~6.4% and they have been tweaking their dividends upwards.

As an aside; Fixed income...in the form of Preferential shares.. I bought a small 'basket ' of "Prefs" during Q1 2023. I'll accept a fixed yield of 6/7% as part of an income portfolio.

monabri

( edit: maybe I should have emphasised the word " hopefully "....!)

[Dod101]

PHP is well down I assume because of the higher interest rates and quite heavy borrowings but the security of their income makes them almost irresistible.

Hopefully, though, interest rates will come down over the next year and PHP should benefit. Hence PHP is a potential top up candidate for me. Currently on a yield of ~6.4% and they have been tweaking their dividends upwards.

As an aside; Fixed income...in the form of Preferential shares.. I bought a small 'basket ' of "Prefs" during Q1 2023. I'll accept a fixed yield of 6/7% as part of an income portfolio.

monabri

( edit: maybe I should have emphasised the word " hopefully "....!)

I suppose there is room to speculate how much interest rates will drop. Once the world has adjusted to higher rates, I hope they do not fall too far. We cannot live on 'free' borrowings for ever and I do not think it is healthy to do so anyway.

I like the sound of your Prefs but I really do not quite understand the dynamics.

Dod

[1nvest]

I suppose there is room to speculate how much interest rates will drop. Once the world has adjusted to higher rates, I hope they do not fall too far. We cannot live on 'free' borrowings for ever and I do not think it is healthy to do so anyway.

The worlds potentially turning Japanese.

Pre September 21st 1931 and money was gold, Sovereign Pound coins, alongside One Pound notes. Gold being finite and inflation broadly averaged 0%, so depositing your gold such as lending it to the state, in return provided safe storage and interest - a real rate of return. Bonds and stocks broadly yielded similar total returns, so many opted for the simpler option of just depositing their gold (money) for interest in safe options such as government bonds. But then on the 21st September 1931 Parliament had to rush through legislation and did so in less than 7 hours in order to decouple Pound notes from gold, you could no longer go into a bank and ask to withdraw your deposit as gold sovereigns and instead had to accept Pound notes. Fiat currency where the Pound became backed by nothing other than 'confidence'. Which opened up the option for printing/spending - that devalues all other notes in circulation, benefits the printer, costs everyone else. Inflation being biased upward, as though it were just another form of taxation. Bonds went from real return assets to broadly being 0% real (but in a volatile manner over decade+ long periods).

Whist central banks are supposed to be 'independent' they're not, smoke and mirrors. Japan's central bank pretty much buys up all of the bonds that the treasury issue. Fundamentally a internal debt is not a problem, rather its just a money redistribution matter. If in a family a brother owes his sister £1000, that's not a external issue, just a internal family issue. Japan's debt to GDP (income/earnings) is a multiple factor, but doesn't really matter. Others such as the US and UK are also beginning along those same lines, why bother with borrowing gold/money when as fiat money you can just print/spend. No need for Gilts other than for accounting purposes, along with forcing pension funds also having to buy them so as to gain access to indirect taxation of pension funds.

If state bonds pay high rates so banks have to compete with that. At low/0% state bond yields that competition is near zero (other than for savers/investors the security of lending to the state is higher than compared to lending to others such as banks).

State (Gilt) interest rates are still low, if not lower than before. 0% interest when inflation is 2% is -2% real. 4% interest when inflation is 10% is -6% real. Whilst not putting banks under pressure to compete.

Broadly lending or borrowing nowadays washes, neither borrows or lenders consistently win, it alternates. So much so that HMRC don't even bother taxing capital gains on Gilts as that's a zero sum game, tendency to just cost overall if taxes were to be applied for no overall broad benefit. From the high interest rate periods of the 1980's we've seen a transition down to very low rates, lender won, even those who held cash deposits beat inflation by around 2%/year real. Great for all assets, bonds, houses, stocks ...etc. But that's now flipped, where negative real yields may persist for perhaps a decade or two, maybe more, that puts downside pressures on assets, houses/stocks/etc. No longer a case of dead-easy to win, even if you just held cash deposits, more a case of even to preserve purchase power of money set aside today to be spent later being more of a challenge. One possible means to do that is to become a borrower, benefit from negative real yields. If you locked into a 2% 10 year mortgage agreement a few years back, assuming such were on offer, then high inflation combined with fixed low rate interest is/was a winner.

'We' can live on free-borrowings, fundamentally however 'we' is the state, we the people do not have the same access to such free-money anywhere near as easily. It is possible still, but with time it will become like inflation linked savings bonds/certificates, withdrawn from general retail access.

One possibility is that the state/BoE have done a good job of convincing that high inflation is just short term, and kept wage increases and interest rates low, but where that inflation could become ingrained, such that rates might start to rise. Or inflation could fall, enabling interest rates to remain much the same.

'We' can live on free-borrowing - at least for decades, as equally as how we lived on positive real-yields for decades 1980's to mid 2000's - its just business as normal (cycles). Alongside that taxation also tends to correlate. 1980's to 2000's declining taxation, counter cycles and taxation tends to rise (typically towards 40% basic rate taxation, that uni-grads in effect pay in combined 20% taxation, 12% NI, 9% "grad tax" (sorry - I know you don't like that term). Others will be dragged into that, such as deflated away allowances, eroded by inflation ...etc.

[OhNoNotimAgain]

Strong sterling impacts March distributions

Jan-22	7.7945	4.4536
Feb-22	7.6415	4.3473
Mar-22	8.2402	4.6367
Apr-22	8.5496	4.7892
May-22	8.1831	4.5437
Jun-22	8.3380	4.6186
Jul-22	8.4397	4.6685
Aug-22	8.4724	4.6339
Sep-22	7.9252	4.3058
Oct-22	7.9618	4.3215
Nov-22	8.3345	4.5138
Dec-22	8.3048	4.4882
Jan-23	8.0193	4.3272
Feb-23	8.1115	4.3616
Mar-23	7.7138	4.099