#223257
Postby ADrunkenMarcus » May 20th, 2019, 8:02 pm
My review for 2018-19 (1 May 2018 to 30 April 2019).
TRADES
In August 2018, I sold Patisserie Holdings in my SIPP for reasons detailed in my SIPP thread. Sadly, I didn’t sell them in my dividend growth portfolio. Silly billy!
In October 2018, I sold Paddy Power Betfair amid concerns about its competitive position, deteriorating returns on capital (even adjusted for goodwill) and tightening sector regulation. The proceeds went into topping up Kone, Diageo and Diploma.
In January 2019, Patisserie Holdings went bust and subsequently delisted.
Early in April 2019, I reduced the AstraZeneca holding, taking advantage of the recent strength in the share price. This had the effect of reducing the dividend concentration as it accounted for a big proportion of dividend income. (It’ll also act as a drag on income as it was a decent yielder.) Some of the proceeds were taken out of the portfolio as cash, while the remainder went into initiating a holding in Mastercard. It is a quality company with almost 63.6% ROCE; 43.5% CROIC; and 55.9% EBITDA margin (2018 Sharescope data).
I added to Acorn Income Fund to help bolster income (5.8% yield and trading at a discount to NAV), trimmed M&G Recovery and put the proceeds (and remaining fractional cash) into Marlborough Multi Cap Income.
CURRENT HOLDINGS (% OF PORTFOLIO)
TOTAL RETURN - INDEX
The accumulation unit price fell 1.3% on the year compared to rises in the benchmark indexes of between 0.5% for the FTSE 250 TR or 5.2% for the FTSE All World TR in $. (The difference between a small decline and a small rise can be accounted for by Pattiserie Holdings going bust!)
After all that, the accumulation units are comfortably ahead of the FTSE 100, 250 and All Share but just behind the FTSE All World.
TOTAL RETURN – INDIVIDUAL HOLDINGS
Spirax Sarco Engineering’s total return was 45%, followed by Diploma at 35.4%, Diageo at 27.8% and Unilever at 18% rounding out the top four. At the bottom, the two Domino’s Pizza holdings performed very badly and DP Poland had a shocker. DP Poland was one of the largest holdings as at April 2018 (14.1% of the portfolio), so its subsequent 70% fall (taking it down to 4.6% of the portfolio) is single-handedly responsible for the portfolio’s underperformance in 2018-19.
If not for DP Poland’s fall, I estimate the accumulation unit price would have risen 8.7% instead of falling 1.3%. Having almost 15% of the portfolio in a share that fell 70% had a significant negative impact, but I’m actually pleasantly surprised that strong returns from smaller portfolio holdings did so much to bring it back. Spirax has risen through the ranks of the largest holdings, while Diploma, Diageo and Unilever have been consistent solid performers.
I should add Patisserie Holdings, which returned almost minus 100% (it paid a tiny dividend – who knows with what! – in July 2018) but was, fortunately, only a small proportion of the portfolio.
(ex. Kone and Mastercard)
INCOME:
The ordinary dividend income per unit for the second year (May 2018 to April 2019) came to 3.41 pence, plus a special dividend of 0.17 pence per unit (Victrex), representing (for the normal dividends) a ‘yield on cost’ of 3.41% and a current yield of 2.86%. The ‘real’ dividend yield on cost is about 3.2%.
Dividend growth (ordinary dividend income per unit) came to 5.4%.
The portfolio has returned exactly 10% of the initial income unit price in dividends (ordinary and special).
To date, about 65% of returns came from capital appreciation and 35% from dividends.
RUNNING COSTS
The running costs, based on the portfolio’s capital value at the end of the period, were higher than last year’s: annual cost (inc dealing) rose from 0.33 to 0.41% and annual cost (ex dealing) rose from 0.27 to 0.33%.
HOLDINGS FROM PURCHASE TO DATE:
What will the next year bring? Who knows.
I will seek to top up MasterCard to a more meaningful position over time.
On the dividend front, I suspect the ordinary dividend per unit for next year may be roughly flat or a little better compared to this year. A substantial proportion of the portfolio’s dividends are paid in dollars or euros, so a strengthening of the £ would be a drag. In Finland, the government looks set to raise the dividend tax from 30 to 35%, reducing Kone’s net dividend payment.
Best wishes
Mark.