Diversifying our stock portfolio(s)

Langtang

We will soon have 2500 Chevron Shares and we already have about 5000 Standard Life ones. We have a DRIP set up for the SL ones, but will be collecting the Chevron dividend to supplement our pensions. On another MSE post of mine, where i explained that I was keeping the Chevron ones, some responders were worried that we were not diversified enough (understandable).

Whilst looking through interactive investor's website tonight, I came upon an article about the worlds top 10 dividend paying shares of 2020:
https://www.ii.co.uk/analysis-commentary/worlds-top-10-biggest-dividend-payers-2020-ii515236 

Royal Dutch Shell,

AT&T

Exxon Mobil

Apple

JPMorgan Chase

China Construction Bank

Johnson & Johnson

Verizon

Chevron

Taiwan Semiconductor Manufacturing

I also read another article on their website regarding 10 shares that will give you £10k dividend per year (roughly what the Chevron ones pay out at present):

https://www.ii.co.uk/analysis-commentary/10-shares-give-you-ps10000-annual-income-2021-ii515175 

Would it be better to sell some of the Chevron shares and to buy some of those listed above, or even those listed in the second link, and eventually put them all into S&S ISAs? 

Would that be suitable diversification? Is there a better/different way of getting the same results?

Voyager2002

Another way of getting a similar result would be to buy an ETF such as the Dividend Aristocrats: you only make one purchase (and so pay only one trading commission) but your money is invested in perhaps thirty companies that pay high dividends.

DireEmblem

Are the dividends key, if so how about these?

https://www.morningstar.co.uk/uk/etf/snapshot/snapshot.aspx?id=0P0000YVD3

https://www.morningstar.co.uk/uk/etf/snapshot/snapshot.aspx?id=0P00019HW9

BuildTheWall

Also look at SAIN - an investment trust full of dividend paying stocks and offers good diversification with a bit of growth as well. 

Eyeful

The money is in 10 companies instead of 1,(which is good). A quick look, there is 30% in oil and 20% is banks. Just 10 companies is still a concentrated portfolio.

If dividend is what your after, have you considered investing in an ETF, Fund or Investment Trust for their dividends. Such as these for instance:-
https://www.trustnet.com/factsheets/e/0ynb/spdr-sp-uk-dividend-aristocrats-ucits-etf
https://www.hl.co.uk/shares/shares-search-results/v/vanguard-funds-plc-ftse-world-high-div-yld
https://www.theaic.co.uk/income-finder/dividend-heroes

The following articles are a bit out of date, but I thought they might be of interest to you.
 https://www.fool.co.uk/investing/2020/10/13/2-high-yielding-investment-trusts-id-buy-now/
https://www.thisismoney.co.uk/money/investing/article-7027021/Which-investment-trusts-pay-best-dividends.html

Steve182

If it's dividends are you're mainly interested in I'm curious why you would keep hold of Chevron rather than looking elsewhere.

You're obviously aware of the double taxation issue on dividends unless they are held in a SIPP?

The shares don't look particularly attractive to me looking at current or forward metrics.

I'm not generally a value or income investor but I do hold DGOC which is a profitable and growing London listed US gas/oil producer.  It has significantly higher dividends and more attractive P/E's than Chevron.

DGOC still has double taxation issue of course, but my SIPP resolves that problem.

Notepad_Phil

If these two companies are a substantial part of your assets then you really should consider diversifying as any problems with them could have serious consequences if you're relying on them. For instance take a look at what happened with BP back in the early 2010s with the Deepwater Horizon spill and the long term effect on the company's financials.

Personally I hold the vast majority of my invested cash in either passive indexed funds (with each fund holding at minimum the shares of 100s of companies) or active funds/investment trusts (with each holding at minimum the shares of dozens of companies). Ideally you would periodically check the top 10 holdings in these funds to check that they're not all holding high percentages in the same company, but even if you didn't you're likely to be in a much better place should another BP situation come around again.

So if these two shares are a substantial part of your assets then your idea of reinvesting into 10 shares is definitely much better than just having 2 shares, but personally I'd be looking to sell them off ASAP and reinvest the money into funds and/or investment trusts.

JohnWinder

Langtang said:

Would it be better to sell some of the Chevron shares and to buy some of those listed above, or even those listed in the second link, and eventually put them all into S&S ISAs? 

Would that be suitable diversification? Is there a better/different way of getting the same results?

Probably time to read this account:

http://www.efficientfrontier.com/ef/900/15st.htm

'Of course, by owning only 15 stocks you also increase your chances of becoming fabulously rich. But unfortunately, in investing, it is all too often true that the same things that maximize your chances of getting rich also maximize your chances of getting poor.....

It’s just that nonsystematic risk is only a small part of the puzzle. Fifteen stocks is not enough..... The only way to truly minimize the risks of stock ownership is by owning the whole market.'

Prism

JohnWinder said:

Langtang said:

Would it be better to sell some of the Chevron shares and to buy some of those listed above, or even those listed in the second link, and eventually put them all into S&S ISAs? 

Would that be suitable diversification? Is there a better/different way of getting the same results?

Probably time to read this account:

http://www.efficientfrontier.com/ef/900/15st.htm

'Of course, by owning only 15 stocks you also increase your chances of becoming fabulously rich. But unfortunately, in investing, it is all too often true that the same things that maximize your chances of getting rich also maximize your chances of getting poor.....

It’s just that nonsystematic risk is only a small part of the puzzle. Fifteen stocks is not enough..... The only way to truly minimize the risks of stock ownership is by owning the whole market.'

The question is does someone want to minimize those risks. I would rather hold far less stocks and take the odd risk that one or two could fail completely.

Langtang

DireEmblem said:

Are the dividends key, if so how about these?

https://www.morningstar.co.uk/uk/etf/snapshot/snapshot.aspx?id=0P0000YVD3

https://www.morningstar.co.uk/uk/etf/snapshot/snapshot.aspx?id=0P00019HW9

Not particularly. We have a shortfall of c£10k between private pensions and state pension age (7 years) So not particularly key.

To put it into context, my FIL got the shares whilst working with Texaco - half paid, half free, and they've performed really well for him over the years so I thought, if it ain't broke, don't fix it. I can see the diversification aspect, but just feel that they're doing OK and are doing what we need them to...

Langtang

Steve182 said:

If it's dividends are you're mainly interested in I'm curious why you would keep hold of Chevron rather than looking elsewhere.

You're obviously aware of the double taxation issue on dividends unless they are held in a SIPP?

The shares don't look particularly attractive to me looking at current or forward metrics.

I'm not generally a value or income investor but I do hold DGOC which is a profitable and growing London listed US gas/oil producer.  It has significantly higher dividends and more attractive P/E's than Chevron.

DGOC still has double taxation issue of course, but my SIPP resolves that problem

Thanks very much for taking the time to post. As I am a relative newbie to investments/Stocks, your numbers are Greek to me. Not sure I fully understand why they don't look good to you? Then again, I don't really understand period. Although I do understand that the double tax thing is a bit of a faff.

As I mentioned in another reply:

To put it into context, my FIL got the shares whilst working with Texaco - half paid, half free, and they've performed really well for him over the years so I thought, if it ain't broke, don't fix it. I can see the diversification aspect, but just feel that they're doing OK and are doing what we need them to... All I need to do is to wrap them in some kind of tax efficient way.