daveh's Income portfolio 2021 update

[daveh]

This is an update of my Income Portfolio. Earlier updates were on the TMF boards (but may well have been lost with the board closures, there were links in 2016’s update). My updates on LF for 2016-2021 can be found here:

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Executive Summary

Performance in income terms was remarkably good this year. Income has increased by 50% in cash terms and is back above the income achieved in 2019, pre covid. So covid only caused a one-year blip in income (so far) which has rapidly recovered.

Capital performance is well up on the year and in accumulation unit terms reached the highest value since I started unitising the portfolio in 2003 at £4.13 per unit. In income unit terms it is close to its maximum value at £1.73 per unit (income units were at their maximum value of £1.79 in May 2018) Overall the portfolio is up 20.02% for the year, calculated by XIRR.

Details and Commentary

Portfolio Constituents





Sector Breakdown



This year, my trading was back to more usual low levels. I added very little new money (~1.5% of the portfolio value) in addition to reinvesting the dividends.

There was a very large special dividend from Pennon (not counted as income) reinvested into a new holding of Unilever. A smaller special from Tesco (that I included in the income figures*) and that was reinvested back into Tesco.

Top ups were made in VOD, AV., MNG, BT.A, VTY, LLOY and HEFL which were near the top of my HPTUSS when bought. A couple of additional companies were topped up for non HYPTUSS reasons – I took part in the MAB rights issue mostly because the holding was very small, but also because I think it could do well if and when we get over covid. I also took part in the PFC capital raise as the shares were available at a discount and there was no lapsed rights value. The shares are to be sold at some point as there is no dividend until 2023 at the earliest. I also took part in the TRIG open offer.

* in the past I’ve handled specials on an ad hoc basis. I’ve decided from now on specials without share consolidation will be treated as income, and those with a share consolidation will be treated as a return of capital and excluded from the income.

Performance
The portfolio was unitised from September 2003 and the details are shown below.

Capital Performance (dividends reinvested) Accumulation units and Income units




Income Performance




My portfolio contains VWRL EMDV, IDVY and IAPD all exchange traded funds and HFEL and MCT which are Investment Trusts. These have been included to add extra diversification to high yielding companies in Emerging and non-UK Markets that I do not feel able to achieve by buying individual shares myself. I’ve also added TRIG, a high yield infrastructure fund investing in renewable energy assets, I’ve also wanted to invest more in the USA and in this case have included VWRL, which though an all-world ETF is >50% invested in the USA and MCT. Though VWRL is not particularly high yield, neither is the high yield equivalent (VHYL) or ETFs investing in US dividend shares (eg QDIV only yielded 2.5% similar to VWRLs yield at the time) so I went for the extra diversity and better total return of VWRL.

Last year the yield on end of year value was 3.5% compared to 4.8% in 2019. This year the portfolio yield on the end of year capital value has climbed back to 4.3% due to the Covid recovery, though it is still below pre covid levels as capital performance has out run the income performance this year

I commented last year that after the GFC dividends took just over a year to return to previous cash levels and just over two years on a unitised basis. On a cash basis, dividends have returned to 2019 levels in just under a year, but on a unitised basis are still a little below 2019 levels.

The overall return is back up to 7.6% pa from last years 6.4% pa calculated with XIRR on excel since I started the HYP.