Thursday, 30 October 2014

Topping Up (Portfolio Buy)

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Despite keeping away from the depressing market news over the last weeks, I did have some cash sitting doing nothing in the DIY Income Investor portfolio - a situation which always feels a little incomplete to me.

My first choice for investment is to top up one my existing investments - on the basis that 30-or-so different securities constitutes more than enough diversification. And I'm not even sure that I know what is going on with all of them.

So, top-up it is - the key question is: what?

I start with yield - and the spreadsheet of my DIY Income Investor portfolio is ranked according to yield. Starting at the top, I look for an 'under-represented' security, where the capital amount is significantly less that the others. Then I make a judgement.

The highest under-represented yielders (at around 9%!) are currently:
But I don't feel so confident about either of them.

The next highest holding that looks like it could do with topping up seems to be Anglo Pacific Group (APF). It currently yields over 8%, primarily because it has had a horrible time over the last year, making a loss and falling in price by around half. But this is not a really risky business, as it is based on the mining 'royalty' model: as long as minerals are being dug up (by someone else), the company generates income. And it has a fairly well diversified portfolio of royalty holdings.

On the positive side, there is some recent good news about it's royalty stake in Rio Tinto's Kestrel mine (their biggest royalty source) seems to safeguard this year's dividend. On the negative side, there are no promises about next year, but I've held APF on-and-off for several years and this is basically a dividend-oriented business.

So, I've nearly tripled my holding. With this purchase, my forecast annual income hits another all-time high and the overall portfolio yield is 6.3%.

[Purchase price: £1.287]


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.

2 comments:

  1. "...not a really risky business, as it is based on the mining 'royalty' model" - Blackrock World Mining have just had 8% of NAV wiped out (& a lot more in share price), using this model, when London Mining recently went into administration.

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  2. Hi Sisyphus, would you want to look at John Menzies PLC. (MNZS), 8% yield, seemingly good cover of dividend at 2.57, (falling, though), on the flip side, trading outlook was not great, newspaper distribution business is declining

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