Tuesday, 31 March 2015

Shares Portfolio Update - End Q1 2015

New Strategy

Last week I offered some thoughts on my income investment strategy and came to a decision that my individual shares portfolio was the weakest link in my income strategy. I decided therefore to reduce my reliance on this sector and I have started to ease down a little on my shares portfolio. As I get older I appear to be losing a little of my appetite for all the work involved, all the time and effort it takes to research shares and run the portfolio is just not worth it.

In the past month I have sold four shares from my portfolio - Imperial Tobacco, DS Smith, Hargreaves Lansdown, Sage Group and in the past week, Nichols which has seen a strong run to £11.90 (net proceeds £1,418) - all have seen strong share price gains since my last review. The proceeds of  £8,875 have been reinvested in Vanguard UK Income fund. This will now provide an additional benchmark against which to evaluate the rest of my equity income holdings.

As I said in my previous post, I do not intend to sell off the entire holding of shares - just start to remove some of the more volatile performers and try to improve my overall income by switching out of some of the lower yielding shares. The balance between shares and collectives will change from around 35:65 to maybe 20% shares and 80% mix of investment trusts/funds.

I last updated on my shares portfolio in November, since which time the FTSE 100 has broken through its previous all time high point, has then gone on to break through the 7,000 barrier earlier in the month, then just as rapidly dropped back down - fortunately, most of the shares in my portfolio have seen a corresponding rise in value over the past 3 months.

Since the start of 2015, high up the leader board are Tesco - up 29% which is a relief after the dramatic sell-off in the second half of 2014. Legal & General is up 15% and Glaxo up 14% but surprisingly, top of the pile is RB spin-off, Indivior which has risen 31% in just 3 months.

As ever, there are a couple that have not joined the party - Booker is down 10% over the 3 month period and Centrica is down around 7% after full year results and a 30% dividend cut.

At the close of business today, the FTSE 100 stood at 6,773 - a gain of 0.75% on the starting level of 6,723 end November 2014. Total return for the FTSE 350 year-to-date is 6.6%.

I am pleased to see that overall, the shares portfolio is quite a bit ahead over the past 4 months with a return of 9.3% including dividends of 1.2%. Lets hope this can continue for the rest of the year!

Dividends

Dividends are the most important aspect for me and these continues to roll in very much as expected. It is well documented that, over the longer term, dividend growth and, where appropriate, the reinvesting of dividends will provide the lion’s share of overall returns from an equity portfolio.

Of the companies which have declared full year figures, Next have lifted their dividend by 16.3% and in addition will be paying a number of special dividends which is expected to lift the yield to over 5% for the year. Legal & General announced a 21% increase and easyJet a 35% uplift. These increases will go some way towards offsetting the 30% cut announced by Centrica earlier in the year and the shortfall in income from my two supermarket shares.

I am not however expecting double digit income growth seen last year. I have a figure of 8.0% pencilled in at this early stage.

Here’s the current portfolio:

(click to enlarge)

As ever, slow & steady steps…..

7 comments:

  1. Hi,

    It's interesting to read that you see your investment strategy as something that evolves.

    I'm reassessing my plans with regards to my pension at the moment and I find myself worrying that I'm "dithering" rather than setting a firm course and sticking to it. But things change as we learn (in my case) or alter course slightly in line with how we see our future requirements.

    Here's hoping you reach (or exceed) your 8%. :-)

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  2. Cerridwen,

    As with many areas of life, I think it always pays to be flexible and open to the opinions of others. If anything, my tendency is to be a little too dogmatic but always trying to learn as I go along.

    I think as you go through life, circumstances change - new job, children, grandchildren come along etc and we all get older (and wiser?) so plans will need to evolve and adapt. What may have seemed the right thing to do at one time may seem a little not quite right at another time.

    With my investing, it has to make sense intellectually and also 'feel' right emotionally. Hopefully, the revised strategy can bed down and not need revisiting for a while!

    Hopefully, your pension plans will feel 'right' at some point soon - you seem to have been receiving some great comments about it on your blog.

    Thanks for taking the time to comment.

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  3. Hi John, 8% is a pretty high expectation for divdiend growth, assuming you're not reinvesting any of them (is that the case?). Well done if you can manage it... but from what I see with the UK market's dividend cover at 1.9 and earnings growth flat for the best part of a decade, it might be tough going.

    Hopefully I'm wrong though and we can all enjoy a good year.

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    Replies
    1. You may well be right John, maybe 8% is a little on the high side - lets see how things pan out as the year unfolds. I am thinking the FX headwinds may have reversed this year which may be a boost.

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  4. I think 8% is perfectly reasonable, especially given the fact that you are totally open to investing in smaller companies who are likely to boost earnings significantly more than some of the BHPs of the world. Anyway, I wish you the best of luck and I hope you beat 8% dividend increases!

    Cheers

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    Replies
    1. Thanks for stopping by TV - hope your blogging is going well.

      Its probably a little early to forecast with any degree of certainty and the figure will need to be revised as dividends are declared later in the year by other holdings in my portfolio - fingers crossed!

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    2. yes definitely fingers crossed, but I don't doubt that you'll get a great return!
      cheers

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