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Blah's "I don't like banks" portfolio
Blah99
Posts: 486 Forumite
Aim: Invest in companies purely for dividend yield that exceeds the return available on high street savings accounts (this threshold nominally set at 4%).
Strategy: A mixture of short and long term investments driven by the ex-div date and the price performance of the share. Growth is gratefully received but not expected, therefore some companies in riskier sectors (for example, with limited exposure to consumer confidence) may be chosen for a short term buy. Companies chosen by:
Company 1: Centrica (CNA)
Yield: 6.12%
Ex-div: April, September
Strategy: Buy below 210p, hold
Company 2: Pennon Group (PNN)
Yield: 4.59%
Ex-div: May
Strategy: Watch, wait for trend reversal or review 8 weeks before ex-div
Company 3: Aviva (AV.)
Yield: 8.68%
Ex-div: March, August
Strategy: Review price in Jan, or consider buy on break above 420p
Company 4: National Grid (NG.)
Yield: 5.46%
Ex-div: June
Strategy: Watch, wait for trend reversal or bullish indicators
Company 5: ICAP (IAP)
Yield: 5.31%
Ex-div: July
Strategy: Consider buy on break above 320p
Okay, well now I'm getting shouted at so I'll finish this later (bet Warren Buffet doesn't have that problem)... Comments interestedly received.
Strategy: A mixture of short and long term investments driven by the ex-div date and the price performance of the share. Growth is gratefully received but not expected, therefore some companies in riskier sectors (for example, with limited exposure to consumer confidence) may be chosen for a short term buy. Companies chosen by:
- Yield >4%
- Must have a div cover of >1.5 (indicating ability to pay dividends)
- A consistent record of dividend payments
- A spread < 1% (liquidity)
- No penny shares etc
- Very limited or no exposure to consumer confidence (eg: retailers)
- Anything else I think is appropriate
Company 1: Centrica (CNA)
Yield: 6.12%
Ex-div: April, September
Strategy: Buy below 210p, hold
Company 2: Pennon Group (PNN)
Yield: 4.59%
Ex-div: May
Strategy: Watch, wait for trend reversal or review 8 weeks before ex-div
Company 3: Aviva (AV.)
Yield: 8.68%
Ex-div: March, August
Strategy: Review price in Jan, or consider buy on break above 420p
Company 4: National Grid (NG.)
Yield: 5.46%
Ex-div: June
Strategy: Watch, wait for trend reversal or bullish indicators
Company 5: ICAP (IAP)
Yield: 5.31%
Ex-div: July
Strategy: Consider buy on break above 320p
Okay, well now I'm getting shouted at so I'll finish this later (bet Warren Buffet doesn't have that problem)... Comments interestedly received.
Mmmm, credit crunch. Tasty.
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Comments
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A few thoughts:
Have you looked at the motley fool HYP board? You might get lots of helpful comments there.
I do not quite understand why for Aviva and ICAP you want to wait for the price to go up? You get fewer shares and the yield on each one goes down. I am sure I am missing something.
Centrica have just had a rights issue. Does that factor into the figures you have been looking at? I think it was to allow them to buy something - usually means the group gets distracted integrating the new business or gets changed in some other way.
Good luck and keep us posted.0 -
Have you looked at the motley fool HYP board? You might get lots of helpful comments there.
I don't rate the MF boards very highly, to be honest. Noise and more noise.I do not quite understand why for Aviva and ICAP you want to wait for the price to go up? You get fewer shares and the yield on each one goes down. I am sure I am missing something.
The aim of this portfolio is to gain income through dividends via minimal risk purchase strategies. In my opinion Aviva has a risk of dropping again quite significantly, so I'd prefer to wait until January and review. Alternatively if the price held above 420p and created new resistance I'd be happy to buy in at that point. ICAP has similar logic - the ex-div date is a long way away and there's a downside risk. I'd prefer to keep cash available for investment into other equities whilst waiting for the ex-div date to roll around, and to be sure that there's resistance above 320p.
Again the point is to max out via dividends and not to invest long term. The ideal situation would be to buy Aviva, sell after the ex-div, then buy Centrica, then sell after the ex-div etc etc. Obviously some market strategy is needed and there's no sense in not riding an upturn if its there, but my stops will be tight.
Not much time tonight, I'll try and update this thread again tomorrow and post my buys.Mmmm, credit crunch. Tasty.0 -
I am probably being a bit thick here but what you are describing sounds like it could just be a way of turning capital into income. When the share goes ex div I thought the value tended to fall by the amount of the dividend. So if it had a value of £1 and a 5 p dividend was declared then the share would drop to 95p (ignoring any other market factors). So taken to extremes if I buy the share the day before it goes ex div and sell it the day after all I have done is turn my £1 of capital into 95 p of capital and 5p of income (on which I pay tax) - oh and put some money into the hands of the chancellor as stamp duty and the stock broker as commission.
Am I missing something?0 -
Heres my no doubt amateurish contribution (also being in the refuse business!!).
Company: British American Tobacco (BATS)
Yield: 3.9% (but forecast to increase)
Ex-div: March, August
Strategy: Pass.
Notes: Most of its customers are addicts - probably little affected by consumer confidence. Tobacco industry still growing in emerging economies and BAT is a global player.0 -
Well excuse the lack of updates, I fell very ill over the last few days. To answer:DRS1 wrote:When the share goes ex div I thought the value tended to fall by the amount of the dividend. ... oh and put some money into the hands of the chancellor as stamp duty and the stock broker as commission.
Using your extreme example, you're right. However the reciprocal drop in a share price usually only happens a short period before the ex-div date. So, taking my Pennon Group as an example, by reviewing the current position 8 weeks prior to the estimated ex-div date we will have enough time to pick a decent entry point and still be in before the adjustment caused by the ex-div. Regarding the fees and stamp, you're correct again - we will incur these costs. However by selecting strong companies and buying a decent holding (minimum £2,000) we only need a small movement to break even. At that point we can hold for a bit, be a little adventurous and take some upside, and set a very tight trailing stop. And depending on the dividend and the size of your holding, dealing costs will probably be covered anyway.
Just to be clear, we are putting money into equities and by definition we are running a risk. We could buy one of these companies and it could tank the next day, but that's where proper stock selection comes in. We're still looking for strong, stable companies that will survive and even grow during the current economic conditions. The difference is that by setting a trading strategy based on dividends we pick an entry point, we go in, we reap the dividend, we take a bit of upside, and we get out.
Beat the high street retail %, that's the plan.
That's the theory, anyway! I'll expand on all this a bit more when I'm feeling better, and in a years time we'll see how I've done.turbobob wrote:Company: British American Tobacco (BATS)
I like BATS, it's well known as a safe haven. Definitely a good suggestion, I'll look into the fundamentals shortly and it may well make it to the list. Regulation is always a bit of a concern, especially with the new no-display laws being mumbled about, but let's see!Mmmm, credit crunch. Tasty.0 -
Doesnt the ftse as a whole yield over 4% now, in which case it'd be less risky and hassle to just get a tracker?
boring = good0 -
I was a bit confused as to whether you were looking to keep these shares over a period of time or just looking to capitalise on the dividend and then sell.
If its the latter then there are better ways to try that than buying physical shares, which can prove costly in terms of a percentage gain.
Its a sound plan though, at the moment there aren't any asset classes performing very well, so its just a case of making the best of a bad job0 -
sabretoothtigger wrote: »Doesnt the ftse as a whole yield over 4% now, in which case it'd be less risky and hassle to just get a tracker?
boring = good
One reason why: Allshare -v- National Grid, 6 months. Remember that we're using this as a bank account replacement, not an investment, so we'd be (theoretically) putting money in that would otherwise be in safe savings accounts, so stability and safe havens are a big thing here. I'm actually a little concerned I haven't explained myself properly to be honest - this is a strategy separate and apart from "normal" trading. It's designed to get better returns on your cash than you'd get from a bank, with minimal risk on short term buys to reap the dividend on a share that isn't likely to yo-yo out the park...
baroo wrote:so its just a case of making the best of a bad job
You got it exactly. Going in and out just to catch dividends isn't the most favourite idea I've ever followed, but it seems a damn sight better than making 3% in a bank account.Mmmm, credit crunch. Tasty.0
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