VHYL vs WQDS

[yieldhog]

I'm in the process of simplifying my SIPP, ahead of the time when my wife (and ultimately my sons) will inherit it. Since retiring, I've aimed to generate over 6% annual yield whilst drawing about 4% income, hence leaving a bit of room for growth.
The virus situation has made me think about the part of my portfolio that could be badly affected by single company event risk. I held both Shell and BP which I sold in favour of balancing my long-term holdings of BERI and BRWM. I had previously sold all of my other energy/mining shares, so BERI/BRWM now represents my entire allocation (about 20%) in this sector. Some other single company holdings I sold included HSBC, 1SBA, 1SBB, CLIG, WPP, and M&S. To counterbalance the loss of income from these sales I have increased or initiated holdings in several ITs/ETFs such as IUKD, IAPD, SOI, NAIT, MUT and MYI.

Projected yield at book cost on the re-structured portfolio currently looks like 5.78%, but if I eliminate some currently non-yielders and low-yielders, like LLOY, MBSP, BT and CNA, then book-cost prospective yield increases to well over 6%. I'm loathe to give up on some of these since I think they may have signicicant upside potential, except possibly MBSP which was looking as though it might start paying interest again until COVID struck.

Moving on, I'm thinking that at some point I will simplify the SIPP into just a handful of holdings, possibly into just a single holding. This goes against the grain with me since I've always been averse to putting too many eggs in one basket. My previous portfolio structure allocated no more than 3 - 4% to any single stok position, whether it was an ETF, IT, REIT or anything else. However, since I won't be here to manage the SIPP, it needs to be a perpetual fund that needs little or no management. This is where funds like VHYL and WQDS might provide a possible solution.

Both VHYL and WQDS are dividend-paying world funds. It appears they each currently yield around 3.3% and offer reasonable growth prospects.
However, I've read some comments about people experiencing practical difficulties with dividend payments and exchange rate issues. Does anyone on TLF have practical experience of holding these funds and can comment on their experience?

[Newroad]

Hi yieldhog.

I own VWRL in a SIPP (and ISA and JISA's) with ii. I imagine it is the same in the respect you are asking as VHYL.

In the ISA and JISA's, which are not allowed to hold USD, ii automatically converts the "dividend" into GBP.

In the SIPP, which is allowed to hold USD, the dividend gets paid in USD and stays in that form if and until you do something with it.

Within ii, there is a fairly simple means of converting it at the spot rate with a margin applied, to GBP (and a couple of other currencies). Up to £25K, the margin is 1.5%. The margin drops until it is 0.25% for over £600K.

I hope this helps!

Regards, Newroad

[yieldhog]

Thank you Newroad, that's very helpful.
My SIPP is with EQi (Equinity), formerly Selftrade.
As yet, I do not own any VHYL or WQDS but do own one share (VOD) that pays dividends in US dollars. The VOD dividends automatically appear in my SIPP in pounds and hopefully any other non-sterling dividends would do the same, but I will check with EQi before dealing in any more dollar dividend shares.
Yieldhog

[Newroad]

Hi YieldHog.

The one thing I would check, if I were you, is whether the USD dividend from VOD is only displaying in GBP, or whether it has really been converted.

If I recall correctly, I only figured out that the SIPP dividend for VWRL remained in USD when I went to reinvest it - I think for display purposes, e.g. summing how much cash is in the account, it may have been converted into GBP equivalent.

Regards, Newroad