Given my HYP - 'high yield portfolio' is a three letter acronym I've just learnt:) - is currently completely empty and fresh there are no industry sector considerations at all so I've just ordered the 17 who passed the initial screen by yield and am going to look into the top three.
No.1 Yield 7.5%
Share price £12.50, SSE have increased their dividend for 17 straight years. They didn't appear in my v1 screen because their Div Cover is 1.3 (I was searching for 1.5>) and their Payout Ration is 70 (I was looking for <60).
Given that the yield is very enticing, their PE ratio is 9.28 - half of the 18 I've set as the minimum - this is looking very enticing. My concerns over the lower div cover and higher payout ratio are certainly lessened by the 17 years of div growth.
Being one of the largest caps on the FTSE100 and in a defensive position it seems this stock is a staple for most HYPs.
The negatives for this stock appear to be around potential political interference with concerns about the impact of a price cap on variable energy deals. The div growth hasn't exactly been giant either rising just over 2% per year.
Summary, when I set out to begin investing in a HYP, I imagined it would focus on companies such as this. Big, settled companies churning out a regular profit with a long history of raising dividends. I understand the concerns about the political interference but given I'm looking to be in this for the long whole I am generally looking to avoid making decisions which frankly I know nothing about and can't be quantified by myself currently. In short, I'm happy to have this company as my opening stock added to my newly formed portfolio.
No.2 Yield 7.2%
Share price £4.86. The Div Cover (2.2), Payout Ratio (54%) and PE Ratio (7.55) are all strong plus the EPS has 5 years of strong growth.
The negative, that currently holds me off, is the fact that from 2006 to 2012 there were zero dividends. I'm looking for companies which have increased dividends but would consider one where for certain reasons the div was cut or held at previous value. Without investigating any further I'd assume that the reason for this was due to the economic crisis and it shows that when things take a downturn the div is one of the things that are cut. I may be wrong and will investigate this further in future but for now I'll rule it out in favour of SSE.
No.3 Yield 6.7%
Share price £2.61
8 years CADI (continuous annual dividend increases), good PE Ratio (10.06), Div Cover (1.5) and Payout Ratio (67%).
The interesting comparison here with the above CRST is that in 2008 and 2009 there was obviously some issue which resulted in the dividend being affected. Again one would presume related to the crisis. However, what I like here is that the Div was only cut and continued to be paid, rather than completely turned off.
Conclusion.
I am happy to add SSE as the first stock in my HYP, after purchase costs and stamp duty the expected yield achieved was 7.3%.
This adds £14.19 in expected annual dividends to my HYP.
As writing this I've remembered that a year or two ago I purchased Coca Cola HBC (CCH), which is currently expecting to pay an annual yield against cost price of 2.5% and add a further £1.21 to my expected annual dividend.
So, my HYP expected annual dividend is currently £15.40.
Looking forward to building on this!
Hi Brian
ReplyDeleteCongrats on the start of your HYP portfolio and my you enjoy the dividends it reaps! :-)
SSE is in my 'Dogs' portfolio due to its high yield, in its second year now. I also already hold LGEN.
You might have done this (though it's not clear) but are you making use of your platform's regular investing facility (if they have one) so that trading fees are much cheaper than the usual £10-£12?
Hey, thanks, feels good to have started.
ReplyDeleteI used the Monevator broker comparison table and settled upon an X-O account. Charges £5.95 per trade, this was the best I could find which allowed me to have it in an ISA.
I did tinker with a new one Trading212 but found that the prices weren't aligned with the LSE... assumed it's dependent upon their liquidity of something. But that would have given me 10 free traders per month.