Friday, 19 September 2014

Safe as Houses? (Portfolio Buy)

Safe as houses, buy housing bonds - poster
Source
A perennial problem for a DIY Income Investor is where to reinvest cash - be it straight income or the proceeds of a sale.

The search for a good home for your investment cash can take a while - and can cover the globe (if you're into the more exotic Exchange Traded Funds). But sometimes ideas for reinvestment come from closer to home: from the portfolio itself.

In fact, I do quite often 'double up' on existing holdings in the DIY Income Investor portfolio, particularly if they have fallen in value for no good (or obvious) reason. With 30 different securities and a third of the value in ETFs, I feel it is more than enough diversified. So building up an existing holding is often an easy choice. Having said that, I wouldn't want any single security to account for more than 5-10% of the portfolio.

That brings me to my latest purchase, which is another helping of Berkeley Group (LSE:BKG), topping up a portfolio 'buy' earlier in the month. A company that builds houses in London seems a good bet to me. Moreover it has a rather unusual commitment to return cash to investors.

The yield is even higher than when I first bought it (currently at 7.6% and forecast to be 7.8% next year), meaning that somewhere in the small print the market must be seeing a major problem. I have to admit that, apart from the recent lack-lustre financial performance and the low dividend cover, I don't really understand what this problem might be, making this a 'riskier than usual' purchase.

So, its more 'bricks and mortar' for me. And with this purchase the portfolio forecast annual income reaches a new all-time high.

[Purchase price: £23.90]


I am not a financial adviser and the information provided does not constitute financial advice. You should always do your own research on top of what you learn here to ensure that it's right for your specific circumstances.

1 comment:

  1. The recent drop in sp might be due to the sudden departure of the Finance Director - a cursory glance at the news item doesn't reveal the reason for his departure though....

    http://www.iii.co.uk/stockmarketwire/190943/finance-director-leaves-berkeley-group-holdings?context=LSE%3ABKG

    From my perspective the dividend history is a bit patchy with no divs being paid out during 2008 - 2012 period. So does this mean next down turn or burst of housing bubble the sp will fall off a cliff along with the div payments? I usually like to hold on to shares to get growth in div income but if I were to buy this share I would definitely apply your sell strategy of sell when capital gain is 5 times income.

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