#92 March Dividend Stock Purchase

My screen v3 returned quite a few stocks so I've picked a handful to look at more deeply.

I've chosen to narrow down this list by looking at the stocks with the:

1. highest average dividend growth over 5 years
2. highest current yield
3. longest period of dividend growth
1. I chose two here as there was little difference and one was quickly ruled out

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Stock #1 has the highest average dividend growth over the last 5 years. Bellway (BWY)

Why would I buy?

It ticks all my screening requirements, has a great average dividend growth over 5 years and the payout ratio remains particularly low. They've increased operating profit year on year for 5 years whilst increasing net assets. 0/8 brokers suggest a sell, 5 a buy.

What concerns or considerations do I have?

The dividend has been cut twice - in '08 and '09. Plus the more recent annual dividend was significantly lower than the previous 5 - pointing to the dividend growth wave slowing down.

Summary

The div was indeed cut, but at least it was maintained during a horrible time for companies in this sector. If indeed the dividend wave has been ridden it was still a double digit increase last year and with the current yield this company still meets my requirement of return on capital via dividends only within 18 years with a div growth as low as 4%.

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Stock #2 has the highest yield @ 6.9% = Greene King (GNK)

Why would I buy?

It ticks all v3 screen requirements and has a very high current yield with decent dividend growth. Although they've only had 7 years consecutive dividend increases the two cuts in '09 and '10 were both small reductions (13% and 4%) compared to most other cuts I have seen which when the decision is taken to cut quite a chunk (40%+) is removed.

What concerns or considerations do I have?

Whilst revenue has increased year on year for the past five years, operating profit, profit before tax and EPS have all reduced in at least one of the 5 years.
Reading the HL research view  provides explanations for this. In a nutshell they are in an ever competitive market and are being driven down on price and up on investment which has resulted in the higher revenues but reductions in profits.

Summary

If the concerns about the competitive market were not there this would not be at the current yield.
The fluctuations in the profitability of the company need to be weighed up against the high yield.

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Stock #3 has longest unbroken years of increasing the dividend = Spectris (SXS)

Yield only 2.2%, ave growth over 5 years is 5%, which is outside of the timeframe (23-25 years instead of 18) for dividend return on capital I have been considering. Given this I won't be investigating any further for now.

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Stock #4 has the second longest continuous streak of raising dividends = RPC Group (RPC)

Why would I buy?

It ticks all the requires for my v3 stock screen and has 25 years of increasing dividends. Revenue, profits and net assets have all increased annually over the last 5 years, and 5/6 brokers recommend a buy, the other is a neutral.

What concerns or considerations do I have?

Yield at 3.6% is lower than the 4% target I had buy coupled with ave dividend growth of 18% over 5 years it easily fits within the return on capital via dividends only period.

*Update* However, I've just found out that the dividend history from DividendMax website is different to that on HL and the Telegraph. So then updating the dividend growth returns a an ave growth of 14%. However, this is based on one giant increase last year by 61% and the remaining 4 years grew at a rate of 3% which would bring it below my return threshold target.

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Decision

I'm happy to invest in BWY & RPC.

Given the amount I've learnt and the updates to my stock screen, my initial purchase of SSE looks considerably more riskier than I initially envisaged. For that reason for this stock purchase I'm going to opt for the one which I deem less risky - RPC - I'm particularly impressed by the 20+ years of consecutive dividend increases.

However, I do like what I saw with BWY and expect this to be a contender in April.

Here's the purchase...

This adds £6.96 to my expected annual income, bringing it to a total of £22.36 expected in dividends each year.

#91 Bonus > Cash or Pension

So, although I don't know the exact figures yet it's been confirmed I will get an annual bonus shortly. Great news.

I was all set to receive this and immediately pay off the car loan.

However, this morning my company announced that it was providing the option to pay bonuses direct into our employee pensions.

It seems that this is a fairly common practice but not one I had been aware of in previous years.

The big news is that this would be Tax and National Insurance exempt.

Now my initial reaction, and that of the wife, was well it's still going to be better to have the cash now. But, as we're planning on paying off the car loan, I think we can be more objective and simply make this a financial decision.

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My bonus is 20% of £70k salary, which is £14k.

After tax and NI this would be roughly £7k net to me.

So I'm in affect paying £7k to have this bonus as cash rather than invested into my pension.

About the car loan.

This is £8k over 5 years, I can't remember the APR but the total repayment cost is £9,646

So £1,646 in interest over 5 years.

If I received the bonus in cash now I'd pay down the capital on the loan from £8k down to £7k. At a rough guess this would reduce the interest by (7/8ths) £1,441. Meaning over the term of the loan I'd expect to pay £205 in interest if paid off early rather than £1,646.

So the choice is to receive the bonus in cash and pay off a bulk of the car loan.
or
Put the bonus into pension, which would save me £7k in tax and NI, but cost me £1441 more in interest payments on the loan.

So the pension choice appears to be net £5,559 better off.

Then there is the consideration of growth over the 5 years. Cleverer people than me would work this out properly, but my view is how much growth would I expect to get during that 5 years I was still paying off the loan?

£14k increasing @ 3% (the lowest of the FCA recommended rates for pensions) could expect to increase by £2,265 over 5 years.

Now, this isn't cash, it's equities so can and will fluctuate but at least it's giving me a clear signal that...

If we put the bonus into a pension:

a) we'll save £7k in tax and NI, and invest a total of  £14k.
b) we could expect this to grow by more than the interest I'd be paying on the car loan. This is only possible due to it being based on double the capital (ie point a).


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I should have it confirmed on either Wednesday or Thursday the exact figures and have to sign a formal letter declaring I wish to have it paid into my pension by Friday.

I will discuss further with the wife tonight but I think the financials are pretty compelling.

Obviously this whole post has been written with humility and understand we are in a very lucky position to be entertaining things like this. And it'd be interesting to see how this discussion would bear out if we weren't planning on immediately paying off a loanand so it couldn't be such a simple financial decision.

*UPDATE*

As the deadline approached I wasn't sure I was going to have enough courage to stick it all in the pension and not use any for the current debt payments.

As it turned out I settled for a middle ground and agreed to have 50% directed into my pension - with actual figures this will be £7,427.

And the remaining 50% I'll take as cash, which I expect will be roughly £3,700 net. With this I plan to pay off the everyday credit card (£1k), put £1k into an account to finally have an account to pay for annual bills to smoothen out the bill paying process and use the remaining £1,700 to either pay down some of the car loan or put in our ISA for our monthly dividend portfolio purchases, undecided yet, probably a but of both.

#90 How Not To Do Matched Betting

I've been doing Matched Betting for 15 months.

I have accounts with 56 different betting companies.

I have completed 682 'offers'.

I have made £4,999.83 in tax-free profit.

And yet, with that experience I still had a nightmare of a weekend.

I am hoping that by taking the time to reflect and write down what I did this weekend and the decisions I took that I will learn from my experience and avoid this in the future.

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Act 1. Sign up and get bonus.

I signed up with Titanbet.

They have a fairly standard join up offer of 50% matched deposit. I took up the max which was deposit £50, get a £50 bonus.

Now, there are a couple of quirks to this offer which a fundamental.

#1 The deposit and winnings need to be turned over 7 times before withdrawal.
#2 These need to be turned over within 14 days.
and the killer #3 bonus winnings are capped at £500.

My qualification bet won so I was +37.50 in the Titanbet account. Bonus was then received.

Time to lose this into the Exchange.

3 bets were placed - £50, £50 and £37.50 placed - to use up all the funds. Best case these all lose to the Exchange and I'm done and walk away with the profit.

Bets 1 and 2 lost. Bet 3 however won at odds of 5.25 - giving me a return of £196.88.

Act 2. All bets win. Surely a good thing right?

Before I went to bed I then placed three £50 bets on outsiders expecting to lose this money into the exchange as quickly as I could.

I woke up Sunday morning and this had happened.

• Horse at Cheltenham had won at odds of 4.50 = £225 
• Roma had beaten Napoli away at odds of 7 = £350
• and NAC had beaten Feyenoord at odds of 6.25 = £312.50

If I had placed a three fold accumulator on these three coming in £50 would have returned me £9,843! such were the odds.

Now, the realisation kicks in. Sweaty palms. Distant looks whilst the wife asks me whether I wan't a cup of tea etc

I now have £1,171.88 sat in the Titanbet account.
The maximum I can withdraw is £600.
I don't have much money left in my Exchange
And am not even half way through wagering, which has to complete before I next get paid.

So, what did I do next.

I confessed to the wife, and accepted the cup of tea. And explained that I may need the day to sort out this mess and then went on a bit of a gambling spree.

Act 3. Save the situation.

I backed a random Mexican game to end in a draw. I then refreshed the page for 90 minutes as CD Tondela held on for a victory - it was 1-0 until the 97' when GOAL flashed up. Luckily it made it 2-0.

I had successfully begun to claw money back into the Exchange and lower my balance in Titanbet.

Next I tried to calm down and place sensible low odds, good match bets.

I bet on Arsenal to beat Brighton. However, I also panicked and then also bet on the draw and Brighton to win. The best case here was that Arsenal won - that would return £97.50 into Titanbet but the Brighton and Draw bets would lose -£100. So a net of £2.50 from Titanbet to the Exchange.

Then the game started and Brighton took the lead!

Further panic ensued so I backed Arsenal again with a further £50.

When the game ended 2-1 to Brighton all I had done was add a further £47.50 to my Titanbet account, almost cancelling out the Tondela victory.

With Barca and Man City coming up in the afternoon I had two choices.

Both at Home and both were both good matches with the Exchange. In any normal circumstance I would have - and will in future - go with the good match. But here I was having to lose several hundred from my Titanbet account and yet both were likely to win. BUT... if I laid Chelsea or Atletico - or even the draw - and those results came in I'd have almost all of my money tied up in Titanbet.

As luck would have it.... LIONEL MESSI did the job for Barca and even though I was concerned for a last minute equaliser Bernado Silvas goal settled the win for Man City.

and breatheeeeee.

I still had a lot to lose from Titanbet into the Exchange, but I was feeling more comfortable and positive. So I returned to what I should have done. Bet on good matches around 1.5 to 2.0 odds.

• Sociedad to beat Alaves. £27.50 more into Titanbet :(
• Motherwell Hearts under 2.5 goals. An 86' goal made it 2-1. Lost £50 to the Exchange :)
• I was sat watching Bayern beating Freiburg and 2-0 at 45 mins and thought this isn't going to stay this way. Bayern to win 2-0. Lost. £50 to the Exchange :) This was high-odds but I was confident whislt watching. Never a good idea obviously as all of this shows.
• Valencia to beat Betis. Won. £25 more into Titanbet :(

With Man City and Barca winning, and me getting 2/4 of the bets to lose into the Exchange AND the winners being low odds I was getting close to the £600 (£500 winnings and £100 cash balance) balance I needed and only had £100 of turnover left.

Act 4. 1 un-laid bet. 2 red-cards. And probably 3 years off my life expectancy.

• Huesca are losing at home to Almeria with 20' played. I lay Huesca.
• I realise that Huesca are top of the 2nd Division in Spain and on form. Almeria are mid-table and out of form. I panic. There are still 70' left.
• Huesca equalise. I lay nearly £80 on Almeria winning. I do not back Almeria on Titanbet. I Almeira are at odds of 8 at this point. I could lose £600~ quid. I decided to wait a little longer and back Almeria when they have drifted further and lock in more profit.
• Huesca score again 2-1. I feel pretty chuffed and think "why back now" that's an £80 profit.
• 72' Huesca get a man sent off. I sit very still.
• 84' Almeria equalise. Still no back from me.
• 86' Huesca get a second man sent off. I am pretty much paralised now. The ref adds on 4 minutes of stoppage time. There is no point in backing now as it would only lock in a giant loss.

Watching those final minutes with 9 men Huesca defending was terrible. Several crosses were cleared. One shot blocked. 9 men on a team looks quite odd and there were holes everywhere.

• The final whistle goes. I've made a good profit on the match and am almost in tears.

Act 5. Closing sequence.

The final match.

I've backed Marseille to beat Nantes. I have a balance of £600 and this £50 open bet. And when the bet is settled I will have completed the wagering.

Nantes take an early lead. I feel invincible.

In injury time Nantes then get a man sent off. I panic. But still feel confident.

Then Marseille equalise. "One more chance" the commentator says for the win.

One bad control from a Marseille midfielder the ball rolls out of touch and the Nantes player takes up an age. Throw in, few passes and the final whistle.

I feel like I've won a cup myself!!!!!!


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At this point. I update the spreadsheet.

Work out that I've made over £80 in profit.

Have £600 in balance with Titanbet which has completed wagering.

I withdraw.

Apologize to the wife and kids for the person I've been all day.

And then go to bed absolutely buzzing.

Never again.

At one point earlier in the day I had even miscalculated and thought that it was likely I was going to lose £900 which is a couple of hundred off all of my Matched Betting money. My Matched Betting money = my only cash savings.

Going forward I can look back almost positively as I came out on top. But that was purely by chance. And the decisions I made deserved really to result in a large loss.

So, I'm going to count my blessings. Take my winnings into CHeltenham and be sensible. 

#89 March updated approach to yield

I knew this was going to be a steep learning curve!

So after further reading here is v3 of my stock screen.:)

1. Exclude stocks within industries I already have exposure too.
2. Market Cap £1.5bn > 
3. Continuously paid dividend since 2000.
1. I found this site which coupled with data from Dividend Max which allowed me to add data into my spreadsheet on whether a stock has continuously paid dividends since 2000. I prefer this over continuously raised dividends as a screen.
4. Payout ratio <80%. 
1. I consider this an important criteria and generally are looking for <60%.
5. Div Cover 1.5>
6. PE Ratio <18

Now the main change... you may have noticed that I've excluded yield up until now. Well that's because the more I thought about how one years yield could be less valuable than a stock growing dividend at a faster rate. So, having looked around I found this site which has an in-depth look into 'is dividend growth better than yield?' and have come to the conclusion both are valuable and the best way to gauge a company is by comparing both yield and div growth.

So, running the screen through the FTSE 350 in my google doc and plotting the remaining stocks on a 'bubble' graph brings up this...

Next, I'm not sure yet about Investment Trusts. ie I don't really know how the annual charge works and so for the moment am going to exclude these which then gives an update graph...

Next I wanted to decide if I could find the minimum combination I am targeting for yield and/or growth. For now I've copied the approach used on the dividendlife and preferred his approach to returning of Capital. For this I've settled on a stock returning 99% of capital* within 18 years - granted this is an arbitrary number taking me up to 50 years of age - but it seems a good time to hold.

What that looks like is this...

*DividendLife assume no re-investment of divs. Simply because it's easier to work out.

Here's a good example of how this would change my view on a stock I had previously not considered because the yield was <4%.

LON:FXPO. This has a yield of only 1.5%. However, when you take into account the average div growth over the previous five years has been 11.46% it still gets into the 'green zone' above to deliver 99% return on capital within 18 years.

Does this rule out any high yielding stocks I was looking at previously? No.

What it does do is open up stocks which appear to be very strong and sensible but lack the required yield. 

So, armed with this new approach I'll be reviewing stocks, creating a new shortlist and looking to add stock no.2 to my portfolio just as soon as Cheltenham racing finishes! 

#88 February Summary

Updated monthly summary now :). I've shifted my focus away from sticking to a budget and instead am now concentrating on our savings rate.

Summary:

We managed a savings rate of 10.67% even though we had a couple of larger expenses in purchasing a new car seat, paying car tax and moving from Plusnet to BT - which resulted in a £200 bill! - though we expect to recoup quite a bit from cash-back etc.

Re: the new Net Assets table, I'm not including full Net Worth detail ie pension, mortgages etc as that's not the priority for me right now.

We've got the £8k car loan which - fingers crossed - we'll be able to clear or make a big dent in in March with my annual work bonus.

The current cash pile is used for Matched Betting so we can't just pay off the CC.

Income

	£	£
Salary	3,470.40
Other	100.00
Total Income		3,570.40
Variable Spending	1,394.49
Fixed Spending	1,794.96
Total Outgoings		3,189.45
Net Income		380.95

Savings rate of 10.67%

Assets

	£	£
Mr Stock Isa	75.67
Sharesave '19	1,600.00
Sharesave '20	400.00
Mr Global Fund Isa	1,456.86
HYP Capital Isa	188.96
Cash	1,231.70
Total Assets		4,953.19
Student Loan	0.00
Everday Credit Card	1,048.76
Carpet Loan	1,188.48
Car Loan	8,000.00
Total Liabilities		10,237.24
Net Assets		5,284.05

Charts

I love a chart :) but am going to focus on the important and relevant one(s) in the summary.

Slightly thrown out of sync because we took out the car loan - which gave us a jump in cash and debt. Expecting to re-pay majority of this loan next month and this will then - hopefully - look more positive.

Matched Betting

I've never found a way to really include MB in my monthly summaries. For now I'm just going to use the cash as a Net Asset. 

In February we made £294.95. My second highest ever month since January 2017. This was boosted by a handful of Bet365 seriously good offers (50 pre play, 50 Free bet in-play).

Next month is Cheltenham so hoping for a run of good deals!