Member Info for zac0_4

NSS - I do apologise but ...

"Up 3.4% on the week"

Its a pity that the other 155 weeks over the last 3 years have produced an overall return of -47%!!!!

Charlesrixon - Thankfully I'm well diversified! I don't know why I haven't learnt my lesson yet with regards to dividend investing. I've just looked at a cross section of my holdings and looked at performance (total return) against the high point in q1 2020 ie high point just pre-pandemic.

Merchants Trust -5%, Henderson Far East Income -10%, Aberdeen -8% and let's not forget BP at -36%!
Compare that to my boring funds - Blue Whale Growth +46%, Rathbone Global Opps +40%, Fundsmith +38%. Even my holding in a global index equity fund (L&G International Index) has returned +26%.

I continue to hold here because I still hope (yes, hope!! - not the best sentiment upon which to base an investment decision!) that over the next 12 months we can see 330 to 350p. On that basis, including annual dividends, it would equate to around a 25% return from here.

At some point however I'll be saying goodbye to dividend paying holdings for good!!!

It's not about long term holding it's about monitoring performance. Over the last 6 months:

Oil up 10%, FTSE up 10%, BP flat (possibly 3% dividend)

During that period BP have announced a dividend increase, produced profitable results and carried out multi $bn share buy backs. What's causing this to underperform? Maybe it's the fact that they've stated that they're reducing output by 40% over the next 8 years and provided no tangible numbers to replace lost revenue and profit.

Oh, and I agree, I liked the dividend before it was cut in half and they reduced the value of my capital by 35%!

On 1st March the share price was £2.98. Today, almost 6 months later, it's . . . £2.98!!

The average oil price in March was $65pb. Today it's $71pb. so, almost 10% higher.

Irrespective of your purchase price your capital has returned 0% over the last 6m. At best you've had a 3% return from dividends. Here lies a danger to, so called, long term holders. How long do you remain invested watching your capital stagnate?

Me, I've always said the end of q1 2022. If there's no significant upturn in the share price by then, I intend to sell up. Whilst this stagnates even a global index fund has returned 12% over the same period!

" . . . for k appreciation lets look back in 5/10 years time . . ."

Well I hope the next 5 years are better than the last! A total return of -10% (including dividends) is appalling!!!!

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ade2a - which part of the following don't you understand? HFEL received dividends to the equivalent of 23.74p per share and paid out dividends of 23.00p per share.

Words of inspiration . . . well I'm not sure about that, but here's some views:

For those of you in your 30's (possibly 40's) or less - before you get involved in single company shares set up a direct debit and invest in a global equity fund, month in month out. Year after year after year. If possible increase your monthly investment by, at least, the rate of inflation every year. Never panic. Never sell. Just invest. You'll build up quite a sum of money over the long term.

Never invest just for income (dividends). Always invest for total return. If you require income there's nothing wrong in dipping into your capital. That's been one of my many mistakes over the years.

As for BP, well your guess is as good as mine. What do I know? I'm sitting on a 35%+ capital loss and my dividend has been cut in half! Where it goes from here is anybody's guess. Personally I still believe that there's possibly some recovery to be had. I'm holding until the end of q1 2022 and will review then. At the moment I can't see a catalyst that will deliver a substantial share price increase. They've announced that they'll reduce output by 40% over the next 8 years but, from what I can see, there's no real tangible evidence as to what will replace that loss.

Two final points - good luck to all, irrespective of your views here, and secondly, don't believe a word that's posted on share chat rooms!!!

I've absolutely no idea why the decline in share price! Your guess is as good as mine.

As for capital preservation, we'll it's a bit late for that where my dividend paying shares are concerned. BP, Shell, Aberdeen, New River Reit - what a shambles!

Thankfully the largest proportion of my portfolio is in well managed global equity funds. Fundsmith equity, Rathbone global opportunities, LF Blue Whale capital.

Dividend paying shares vs Global equity funds - no competition! Good luck.

How do I know? Simple, I've just topped up my holding at £3.00 so it's bound to fall further!!!

"Rounded it up" . . . by 20.7%!!!!!!!!

caitlin1 - the value of your capital today will deliver you a return from dividends of a little over 5% over the next 12 months.

I assume you're measuring your dividend return against your initial purchase price? If so, be careful because it can be very misleading if dividend return is your key driver.

Also, I've bad news! Your dividend return measured against your purchase price is a little over 8%, not the 10% you state!

"All about the divi. Nearly 10% for me"

Oh no it isn't you're receiving 5% like everybody else!

How about the 40%, or so, decline in share price from pre-pandemic level coupled with little or no sign of a further recovery?

TinkerT - I'm in a similar situation here but on a smaller scale. 34% capital loss and a 50% reduction in my dividend. An absolute shambles.

I did what you're considering with another (wonderful!!) dividend paying holding, New River Reit. I sold on the way down at 80p and took a £20k+ capital loss. The more I looked at the financials I couldn't see any recovery. That, at that time, proved to be the correct move. I reinvested the balance of my capital in Merchants Trust which has grown 37% since my purchase and has a track record of 49 years of increasing its dividend! However, I was lucky in that I made the move pretty much at the bottom of the market.

I don't know what to do here. I've sort of resigned myself to holding until end of q1 2022. I can't help feeling that there's still some recovery to be had here. But that's purely guesswork on my behalf.

What I do know is that I will continue to move away from individual shares and into investment trusts for my dividend holdings. More resilience with regards to the dividends.

Thankfully a large proportion of my investments are in global equity funds ie Fundsmith equity, Rathbone global opps and LF Blue Whale capital. Funds versus dividend paying shares - there's no contest!!!!

jmak1912 - can I ask what your average purchase price is and when you made your 1st purchase here?

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ade2a - thanks for the detailed response.

At the moment I'm taking a very simplistic view. The only reason HFEL is paying a 7.5% yield is because the share price has declined so much. In Jan 2020 the yield was just over 6%. In monetary terms HFEL are paying no more out today than than they were then. It's all down to a 17% decline in the share price.

Similarly, in 2020 Rio, as an example, had a yield of over 8.5%. Their share price today is 21% higher so the yield has dropped to 7%. Yet they are paying out no less than they were then.

My simplistic view may cost me over the long term but currently that's the way I'm viewing the situation.

ade2a - can you please elaborate on why you think there is a shortfall in income coming into the fund versus income paid out in the form of dividends to shareholders.

Currently there are approximately 151m shares in circulation, each paying an annual dividend of 23.6p. So, total outgoings of £35.6m pa.

By your reckoning only £25.4m is received in income each year (5.5% per share) leaving a £10m shortfall. How do you arrive at the shortfall?

I'm a long term holder here and am far from pleased with recent performance. However, here's some comments taken from a report I read issued in July

". . . (HFEL) continues to reward its investors with a high, rising and fully covered income . . ."
" . . . strong earnings growth expectations for the region as eminently achievable, which should support further dividend growth . . ."
" . . . its dividends (always fully covered to date, even in FY20) . . ."

None of the above comments would indicate any threat to the current, and future, level of dividend payments.

I'm interested as to why you think the current level of dividend payment maybe under threat. As I say, can you please elaborate.

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