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HDIV - what??
Jezzer
Posted: 05 January 2018 16:42:59(UTC)
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Having retired at the tender age of 55 back in August last year, I've just been doing a 'start of the year' review of my portfolio and had a bit of a surprise, which is perhaps due to me not doing enough research in the first place. Anyhow, I'd be interested in views on HDIV, which I bought late in 2016 with a yield of around 5.4%, as I was in the process of restructuring my portfolio to be more income-oriented, as I approached R-Day.

Reasons for buying: -

- Yield over 5%
- Diversification

I have about 5% of my pf in HDIV, with other chunks in funds/ITs invested in stocks, corporate bonds, property, infrastructure and currently about 10% in cash.

I am aware that HDIV had planned to move to the UK and change its income payments from quarterly divis to bi-annual interest payments, which doesn't affect me from a taxation perspective since I hold it in a SIPP and in an ISA. However what I am surprised at is the latest dividend yield of just 2.59% (according to HL today). What happened?!

I'd be interested in any insight into why I shouldn't sell it on Monday morning!

TIA!

Jez
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Mostly Retired on 06/01/2018(UTC)
Mr Helpful
Posted: 05 January 2018 17:17:11(UTC)
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Quote from interim report :-
"Important events since the period end
Dividend Rebasing
On 7 September 2017 the
Board announced its intention to rebase the dividend to no less than 1.10p per ordinary share on a quarterly basis, effective from
the dividend payable in December 2017. This represents a reduction of 12 per cent. on the quarterly dividend and assumes that there is not a further
significant fall in market yields. The shares will therefore provide a yield of 4.7 per cent. (based on the share price as at 6 September 2017). This dividend
target takes into account the revenue benefits to the Company of the revised fee arrangements described below and the cost reductions arising from the
re­domicile of the Company into the ...."

So if nothing else changes and 4.40p annual dividend is paid, then looking at a yield circa 4.5%.
Certainly a curious dividend history looking at HL data alone.
4 users thanked Mr Helpful for this post.
Jezzer on 05/01/2018(UTC), Big boy on 05/01/2018(UTC), North Star on 07/01/2018(UTC), dlp6666 on 09/01/2018(UTC)
Big boy
Posted: 05 January 2018 17:17:36(UTC)
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Conflicting figure going around but looks like the dividend yield is short 5%. Company would benifit from massive decline in interest rates but not sure of future trends .....looks like portfolio of Corporate Bonds. Not sure any reason to retain on small premium...
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Jezzer on 05/01/2018(UTC)
Money Spider
Posted: 05 January 2018 18:23:57(UTC)
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I held some HDIV until recently in the 'fixed income/defensive' part of my portfolio. I sold after the last ex-div date because:

1. The income stream from HDIV is now classified as 'interest' in my taxable portfolio (as you mention and as I posted here a couple of months ago).
2. I held a small amount in my SIPP Drawdown fund. Dividend yield has reduced and so holding a small amount makes it a distraction.
3. Premium has risen so time to take a profit.

I re-invested the proceeds in HICL, which is up about 5-6% since I bought it in December.
3 users thanked Money Spider for this post.
Tim D on 05/01/2018(UTC), Micawber on 06/01/2018(UTC), dlp6666 on 09/01/2018(UTC)
Mostly Retired
Posted: 06 January 2018 06:23:49(UTC)
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Like Jezzer, I also was not doing enough research :)

I hold about 4% of the investment book in this IT. I bought in June 2012 and the figures for me are an IRR of 9.2% on the "original capital alone" basis and 3.28% on the "full cash flow" basis. I am not unhappy with that as it is in my view a defensive and comparatively "safe" place.

It sits in the (taxable) part of my book that would be used to supplement income when I move from "mostly retired" to "out of it entirely", which is not that far away!

If I trade out I take a taxable gain, which can in substantial part be sheltered, However, the question arises, if I exit HDIV with a prospective yield of around 4.5% - what is the alternative?

Infra funds are interesting, as per Money Spider's response, but I am full there. I like IT exposure and really wanted to have an IT that is in the "defensive income payer" category. My current defensive ITs tend to follow the Family Office theme which I like a lot (e.g. RIT, PAT, CLDN) but they tend to be capital preservers and not income payers. I accept that as I get closer to the change from "mostly" to "wholly" retired my risk appetites are becoming increasingly conservative!

My feeling is that the rebase to a slightly lower yield is a logical step, and I am focussed on sustainability of income. So in the absence of a compelling substitute I think I am going to stick for the immediate future.

One lesson for me is that I probably have too many separate investments to keep a proper track. So the big point that Jezzer has reminded me to do is to clean up my over diversified (read "messy") book!
5 users thanked Mostly Retired for this post.
Mickey on 06/01/2018(UTC), Chris Howland on 06/01/2018(UTC), Mr Helpful on 06/01/2018(UTC), andy on 07/01/2018(UTC), dlp6666 on 09/01/2018(UTC)
Big boy
Posted: 06 January 2018 09:42:53(UTC)
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Remember with declining interest rates you get capital appreciation but with rising interest rates your capital reduces so no good looking back on passed performance. With HDIV where do the expenses come from capital or revenue. I much prefer Hammerson,BLND or LAND with simular yields. These stocks also stand on discounts of 20-30% against a premium on HDIV...... Also don't get hung up about income which is taxed at much higher than capital. Apart from state pension I live on capital gains which means I pay very little tax.....mind you they will get it when I die so I need to go out and spend it.....
King Lodos
Posted: 06 January 2018 09:56:36(UTC)
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Of course if you focus on capital over the long-term, a very large portfolio paying a 2% dividend could be providing a greater income than a smaller one paying 6%.

Over 30+ years, the compounding difference of an extra 1% on total returns can be enormous
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Jezzer on 06/01/2018(UTC)
Mr Helpful
Posted: 06 January 2018 19:17:47(UTC)
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Mostly Retired;55066 wrote:

However, the question arises, if I exit HDIV with a prospective yield of around 4.5% - what is the alternative?
My feeling is that the rebase to a slightly lower yield is a logical step, and I am focussed on sustainability of income. So in the absence of a compelling substitute I think I am going to stick for the immediate future.


Now please don't follow me down the road to perdition but on the defensive side of portfolio we have :-
+ A mixture of short-duration Bond Funds with miserable (sub-inflation) yields.
+ Debt ITs SEQI and GCP to boost the overall yield of Bonds
+ High Yield = Junk IT NCYF quite popular here as it appears in John Baron's portfolios. But HY is unpleasantly correlated with Stocks so may suffer badly alongside Stocks in any downturn. This may have been mentioned by KL recently.
+ Real Estate ITs/Co's (see esp BigBoy's comments above)
+ Renewable Energy
+ Infrastructure
+ Tons (Tonnes?) of wasting Cash

Our investment philosophy is based on :-
+ Today (what is on offer today, not anticipating tomorrow)
+ Small Steps (not sudden large changes in allocations)
+ Patience
And today the last is needed the most for an Adaptive Value Investor, when little value is on offer.
4 users thanked Mr Helpful for this post.
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Jezzer
Posted: 06 January 2018 20:18:34(UTC)
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I'm in NCYF too (5% of pf again). So capital value falls, yield goes up, you rebalance and buy more with all that spare cash. So what's not to like? If you are living off natural yield, does it really matter? So long as they continue to maintain their yield of course...

Which REITs? I'm in BBOX (which is trendy) and FCRE (which is doing a lot better than BBOX in cap gain and yield, maybe they aren't spending as much on PR as BBOX 😂

Infra I'm in FSFL, JLIF (very recently) and Premier Global Infrastructure (Inc) fund. Happy enough with all those so far.

Just recently bought into APAX for yield and diversification. The only investment I have that's currently in the red, but it's early days. I spent some time working with PE guys in the couple of years before I retired and that gave me plenty of confidence in the "asset class".

I'm a bit less worried about HDIV now but will have a look at BLND and LAND as possible alternatives, to see whether they tick my boxes for yield and diversification.

Jez

Big boy
Posted: 07 January 2018 09:43:26(UTC)
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HDIV......having slept on it I would rate this a strong Sell. I think we could see a negative TR over next year or so.
Not sure how much the cost of debt/charges eat into capital and revenue a/c plus the premium could easily be reversed.
Can anyone tell me how the costs are treated.......
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Jezzer on 07/01/2018(UTC)
andy
Posted: 07 January 2018 20:16:30(UTC)
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Big boy

So - out of curiosity - where have you re-cycled (plan to recycle) the HDIV into?

I hold it in my income / defensive part - knowing in the event of a market crash it is likely to go down along with the equities (it is credit risk sensitive rather than interest rate sensitive).

I thought the drop in yield to be a not unreasonable one - I would rather take the pain than pretend.

However, I also find it rather opaque - I hold mainly ITs so I can have a better idea of what is going on. The monthly factsheets tell me very little and on the website the last annual report is dated to October 2016 and the latest interim report is April 2016. I know they might have been busy moving from the Channel Islands to the UK and there are a few videos - but I like to know more of what the thought process is.
2 users thanked andy for this post.
Chris Howland on 07/01/2018(UTC), dlp6666 on 09/01/2018(UTC)
Jezzer
Posted: 08 January 2018 15:45:17(UTC)
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Big boy;55094 wrote:
HDIV......having slept on it I would rate this a strong Sell. I think we could see a negative TR over next year or so.
Not sure how much the cost of debt/charges eat into capital and revenue a/c plus the premium could easily be reversed.
Can anyone tell me how the costs are treated.......


Big Boy

Could you elaborate on your thinking here? I've just looked at the latest Fact Sheet and as suspected, the yield on HL's website is simply mis-reported. That is what brought the fund into question (in my mind) in the first place. Otherwise the performance is good, yield is actually just over 4% now and this is the best performing bond fund in my portfolio at the moment (5% cap gth in the year since I bought it and a yield of about the same). I also hold CMHY and NCYF.

So I'm having second thoughts. I know bond funds are likely to suffer come interest rate rises but is this going to suffer any more than your typical bond fund? I see they use derivatives to 'de-risk' - presumably to offset interest rate risk (just guessing)

Here's the Nov'16 fact sheet.

https://www.fundslibrary...er=hl_website_documents

All educated thoughts and insights welcomed...!

Cheers
Jez
andy
Posted: 08 January 2018 20:23:09(UTC)
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I dont know if someone at Hendersons reads this forum - if so - fantastic news - but the interim report popped up today. Note its the "half year report" and not the "half day update" you want as the later is for 2015.

Link to HDIV website for document ...

https://www.janushenders...ersified-income-limited

or direct link to the .pdf ...

https://az768132.vo.msec...8_10_01_57_413.gzip.pdf

Andrew
3 users thanked andy for this post.
Jezzer on 08/01/2018(UTC), dlp6666 on 09/01/2018(UTC), Chris Howland on 09/01/2018(UTC)
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