Suggestion for HYP7 - Southbank Investment Research

Participant

Hi Stephen.

I read with interest your commentary regarding the treatment of the recent Special Dividend arising from the consolidation of shares in National Grid, and your likely treatment of the forthcoming similar ‘windfall’ from Compass.

I also looked back over your treatment of the previous Special Divi from Compass in June/July 2014, and from Standard Life in April 2015.

You have described the two possible actions – either cash taken as income or reinvested somewhere in the portfolio – and it is the latter that I am most interested in.

Would you consider making the current portfolio – HYP7 – one where you reinvest all of the income? HYP7 currently sits up well in this regard, with no dividend payments having yet become due.

This would be an interesting and instructive exercise, and it would no doubt involve having to set aside a few dividends until a worthwhile investment amount has been accumulated. I would suggest a minimum amount of, say, £1000 in this regard.

You could report the ‘cash on hand’ situation in your weekly and monthly updates, and comment about your choice of destination share, every few months

Sound like fun?!

Stephen Bland

Moderator

Thanks for the suggestion. In fact this idea had crossed my mind years ago, right back to when I founded TDL. At that stage I had to make a decision whether to record the portfolios including or excluding accumulated dividends. I rejected the former.

Principally this was because of the sharply increased record keeping burden. I have enough to do already and dealing with accumulated dividends and their reinvestment would complicate this substantially. And it is not just during the construction because each January I show the performance of all completed portfolios to date. So I would have to carry on, in my records, maintaining the performance of HYP7 and its accumulating dividends and how I reinvested them long after it was finished and I had moved on to future HYP constructions.

Had I opted to bring in accumulated dividends and their reinvestment from the start, I would now be facing an overwhelming workload in having to account for this and maintain it continually in every portfolio to date in order that my annual performance updates would remain accurate. So I understand your reasons but in practice I won’t be doing it that way.

The annual updates show the latest capital value of every completed portfolio and their total dividends for each past year.