Woodford Equity Income

sorcerer
sorcerer Posts: 878 Forumite
in Savings & investments
So after holding Woodford Equity Income since the start I have decided to sell it and move on. Two reasons it poor dividend for this year and its poor performance.

I am thinking of replacing it was Merchants Trust, and despite having to pay stamp duty on top, I think in the longer term it will hopefully be better. I will save about £22 a year in Platform fees, the dividend is nearly double of woodfords, and performance over the last year is about 14% ish, compared to woodfords 0% ish.

With it being a trust, it can also hopefully grow the dividend each year, currently dividend growth is about 1.4% a year.

What do you guys think?
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Comments

  • Prism
    Prism Posts: 3,797 Forumite
    First Anniversary Name Dropper First Post
    It has a decent dividend but I wouldn't want to be in this fund during a crash. Its basically 70% banks, industrials, miners and consumer cyclical. That stuff tends to fall hard. Its also leveraged at 13%.
  • sorcerer
    sorcerer Posts: 878 Forumite
    That is a far point, but I do hope to hold it for the next 21 years at least, so hopefully a price fall short term should not be too much of a problem.
  • Linton
    Linton Posts: 17,125 Forumite
    Name Dropper First Post First Anniversary Hung up my suit!
    From the performance data I dont see any good reason to transfer. Over the past 12 months Merchants Trust has greatly outperformed Woodford Equity but in the previous 2.5 years Merchants Trust barely broke even whilst Woodford returned 30% . Selling low priced investments to buy high priced ones every year is a very good way to lose money - you should be doing it the other way round.

    Merchants pays rather higher dividends than Woodford, but if you wanted high dividends why did you buy Woodford in the first place? Note that performance figures include dividends. Dividends aren't an added extra.
  • bertpalmer
    bertpalmer Posts: 109 Forumite
    First Anniversary Combo Breaker First Post
    I ditched it a week ago. I'd only had it for a year so very short term but it's been a pretty good year and it was my worst performing fund.

    Decided to get some Fidelity Tech fund action instead.
  • ColdIron
    ColdIron Posts: 9,014 Forumite
    First Anniversary Name Dropper Photogenic First Post
    edited 9 January 2018 at 3:30PM
    If you require a growing dividend perhaps look at City Of London (CTY). Lower OCF and gearing and a 50 year plus record of increasing dividends. It trades at a small premium instead of the larger discount of MRCH but not enough to be concerned about. Do you really need the income? 21 years suggest not. Just a suggestion for research
  • Prism
    Prism Posts: 3,797 Forumite
    First Anniversary Name Dropper First Post
    sorcerer wrote: »
    That is a far point, but I do hope to hold it for the next 21 years at least, so hopefully a price fall short term should not be too much of a problem.

    Why are you planning on keeping the fund for 21 years when you have only been in Woodford for 3 and a half?
  • sorcerer
    sorcerer Posts: 878 Forumite
    edited 9 January 2018 at 3:31PM
    My hope is to live off the income in the portfolio, sooner rather than later, a portion of the 21 years will be me living off the income.. I also own CTY , and despite it's lower dividend I did think about adding to my position. But I didn't want to put the whole lot into it. But the yield (for merchants) is ohh so tempting :-)
  • sorcerer
    sorcerer Posts: 878 Forumite
    Prism wrote: »
    Why are you planning on keeping the fund for 21 years when you have only been in Woodford for 3 and a half?

    My original plan was to hold woodford for the same time, but in recent years, I have moved over more to investment trusts, and as such nearly 50% of my portfolio is in trusts. I like them because I get charged less for the platform and a lot of them have growing dividends year on year.

    Holding woodford over 21 years would cost me about £500 in fees, holding CTY or Merchants would cost me £0, unless things change off course.
  • Sue58
    Sue58 Posts: 288 Forumite
    First Anniversary Name Dropper First Post
    ColdIron wrote: »
    If you require a growing dividend perhaps look at City Of London (CTY). Lower OCF and gearing and a 50 year plus record of increasing dividends. It trades at a small premium instead of the larger discount of MRCH but not enough to be concerned about. Do you really need the income? 21 years suggest not. Just a suggestion for research

    With IT's as well as looking at gearing and any yield for income (if required) is it more important to assess the NAV price as opposed to the share price with regards to results/profits?
  • ColdIron
    ColdIron Posts: 9,014 Forumite
    First Anniversary Name Dropper Photogenic First Post
    sorcerer wrote: »
    My hope is to live off the income in the portfolio, sooner rather than later, a portion of the 21 years will be me living off the income.. I also own CTY , and despite it's lower dividend I did think about adding to my position. But I didn't want to put the whole lot into it. But the yield (for merchants) is ohh so tempting :-)
    Whilst using equity income funds and reinvested dividends is a valid strategy for part of a total return portfolio, I'd be inclined to hold off hunting for yield until I actually needed it
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