High Yield Defensive Stocks

AnotherJoe

I  come from the position theres no such thing as a free lunch. Therefore a  very high yield must mean its just as risky as a very high PE on a "growth" stock. I dont believe you should automatically think it doesn't matter if the share price falls either because thats unlikely to be independent of the dividend, and when/if the yield ever drops, then its a double whammy, share price crashes and dividend gone.

MonroeM

AnotherJoe said:

I  come from the position theres no such thing as a free lunch. Therefore a  very high yield must mean its just as risky as a very high PE on a "growth" stock. I dont believe you should automatically think it doesn't matter if the share price falls either because thats unlikely to be independent of the dividend, and when/if the yield ever drops, then its a double whammy, share price crashes and dividend gone.

Yes, I agree with all of that AJ, however my main portfolio is 70% growth funds and 30% Wealth Preservation funds and is very light in UK. Therefore, with this new SIPP I thought I would go with some FTSE shares that have a decent dividend and some potential for growth, this I believe will add to the overall diversification of my portfolio. I did consider investing in some growth stocks (I nearly invested in Nio at 11.00 and it is around 45.00 now) but overall I didn’t want any more investment in growth stocks as I feel I’m already well covered in that area.

Another_Saver

AnotherJoe said:

I  come from the position theres no such thing as a free lunch. Therefore a  very high yield must mean its just as risky as a very high PE on a "growth" stock. I dont believe you should automatically think it doesn't matter if the share price falls either because thats unlikely to be independent of the dividend, and when/if the yield ever drops, then its a double whammy, share price crashes and dividend gone.

Two reasons I disagree, one is that retrospective evidence indicates the contrary, two is that the way I see it, growth is more attractive to investors than yield, hence yield should generally present better value in terms of future returns most of the time (but who knows really). Perhaps this trend will flip as the 60s boomers start divesting into retirement over this decade and yield becomes more attractive.

Thrugelmir

MonroeM said:

Sally57 said:

MonroeM said:

I have a relatively small proportion of my portfolio in cash from a recent pension transfer into a SIPP. I decided I wanted to invest this money into some relatively high yield defensive stocks (3/4 different shares) with some potential for growth.
As an example, several weeks ago I invested in Legal & General at 180.00 and it now stands at 232.00 but also has a yield of 7.5% so it seems to fit in with my requirements. Just recently I also added GSK at 1440.00 so in my view it has growth potential and also a decent yield of 5.6%.
These investments are for the long term so any share price fluctuation or volatility does not particularly matter as long as the yield is fairly reliable. At this stage any yield will not be taken as income so all dividends will be reinvested.
I am still looking for another one or two stocks into to invest in so I am very open to any opinions or suggestions to any shares that fit this criteria? Thank you.

OP you seem to have made a good decision/buy with L&G at 180.00 as it’s currently priced at 253.00, however you bought GSK at 1440.00 but it seems to be heading to a year low currently at 1374.00 so not such a good buy but hopefully it should improve in the future. I bought GSK at a higher price of 1475.00 so only time will tell.

Yes, at the moment L&G is working out well and has a good yield but who knows in the future? As I mentioned these investments are long term so with regard to GSK I’m not really concerned about the share price volatility at this stage as long as it still produces the 5.6 per cent yield. I agree the share price is quite low but in my opinion there is some potential for growth.

LGEN is one of those rare opportunities that arises from time to time.  Future growth in dividend maybe constrained but is attractive in the medium term. GSK I'm not convinced by. Haven't been for a while. 

Thrugelmir

MonroeM said:

AnotherJoe said:

I  come from the position theres no such thing as a free lunch. Therefore a  very high yield must mean its just as risky as a very high PE on a "growth" stock. I dont believe you should automatically think it doesn't matter if the share price falls either because thats unlikely to be independent of the dividend, and when/if the yield ever drops, then its a double whammy, share price crashes and dividend gone.

Therefore, with this new SIPP I thought I would go with some FTSE shares that have a decent dividend and some potential for growth, this I believe will add to the overall diversification of my portfolio.

Don't just focus on initial yield. Stocks such as LSE are great long term performers. More a question of waiting for the price to temporarily dip before buying in. LSE has grown it's dividend by over 80% in the past 5 years. 

JP2019

I would suggest investing in utilities for safety. Thames Water, EDF etc 

Apodemus

JP2019 said:

I would suggest investing in utilities for safety. Thames Water, EDF etc 

...but do your own analysis of the political risk associated with these!

NottinghamKnight

JP2019 said:

I would suggest investing in utilities for safety. Thames Water, EDF etc 

Privatised utilities have generally been loaded up with huge amounts of debt based on projected income; it's taken years for the regulators to realise this but they are now trying to enforce restrictions which is leading to a rocky ride. The utility will need to be provided for but in extreme cases you could see shareholders being hit or even wiped out. With the push towards deflation and the reality of QE then logically returns should reduce though no certainty this will occur.

Thrugelmir

JP2019 said:

I would suggest investing in utilities for safety. Thames Water, EDF etc 

Thames Water was privatised years ago. 

csgohan4

I've read on the monevator that for high income, IT's are usually best suited, especially CTY which has low OCF and reasonable yields. As retirement wise your looking more for income rather than equity growth