Dividend ETF's

I mentioned briefly in my June Income post yesterday about the iShares UK Dividend Plus ETF tracker.

This was launched by Barclays in late 2005 and it holds the highest dividend yielding stocks from the FTSE 350. Dividends are paid quarterly and it's an excellent first holding for any equity income investor. The very low management charge of 0.2% is also highly appealing.

I hold some of these in my Income portfolio and in my Self Invested Personal Pension. They trade at NAV each day an they have been trading below £8 a share in the last week - compared to £13 a share a year ago.

BUT the dividends are rising - which is the reason for holding them in the first place. I am waiting for the June quarterly dividend to enter my ISA and SIPP cash balances. The dividend this year for the quarter is 20.04p compared to 17.31p in the same quarter last year. A healthy rise by anyone's standards I think!

So although the level of my capital investment has gone, the income received is going up. That's OK with me as I didn't buy the shares to make a quick buck. They are contributing to my goal of a sustainable and rising income.

For anyone looking for an easy way to kick start equity income investing these are worth a look. They do have a bias to financials as they are generating the greatest yields at the moment, so be prepared for more roller-coaster price movements - but with a healthy quarterly dividend boosting my coffers (they yielded 7.16% at Friday's close) I'm greatful to hold them. They are traded on the LSE with the ticker IUKD.

Disclosure: The Dividend Seeker holds iShares UK Dividend Plus shares.

June Income

As June draws to a close I post the first monthly dividend income summary. I will do this at the last weekend of each month, with the first weekend of each month reserved for a capital review.

The first month's dividends amounted to £194.19. Not bad, and not to be sniffed at. Many of the stocks I purchased to construct the portfolio during April and May had already gone ex dividend on their payments so I missed the boat on some of them.

The values received are as follows:

BP - £102
Prodesse Investment - £27.50
Provident Financial - £41.50
Royal Dutch Shell B - £22.25 (this was half of the future expected values as I bought the second £2000 worth of shares after the shares were already ex-dividend, so the September payout should be in the region of £44)


I expect payments to start ramping up from hereon in - for example next week alone I expect dividends in the region of £130 from Taylor Wimpey, Intermediate Capital Group and iShares UK Dividend Plus ETF. As previously stated, none of this income will be spent, it will all be held to reinvest in further share purchases to grow the capital level overall.

The ETF is worthy of more comment, which I hope to do tomorrow.

The Dividend Seeker

Dividends Count - Now More Than Ever

There is not much activity to report this week from my portfolio. No dividends received or no new purchases.

But this is not necessarily a bad thing. The capital value has fallen quite considerably with four out of five days showing a decline. But instead of panic selling and realising paper losses, this selection of stocks should continue to deliver the function they were purchased to do - to provide a strong and rising income stream to allow dividends to be reinvested.

This bear market is now showing a plethora of opportunities for income seeking investors such as myself. Even some companies that I would not normally consider safe are showing up possibilites of good dividends return on a yield basis even if a significant cut were applied.

The key remains to scout for companies with a long history of stable and rising payments coupled with good earnings cover. I just wish I had more capital available now to take advantage of the myriad available.

There are two big dividends due next week - Taylor Wimpey and Intermediate Capital Group. Taylor Wimpey's will be the last at such a level for some time I think as the dividend will almost certainly be cut next year along with most of the housebuilders, but will still provide a good yield return on my purchase price.

These dividends will take me above the £1000 mark in cash, and I can purchase GKN which I mentioned a couple of weeks ago.

Next week will be the four weekly review of capital performance. I'll post a summary here as soon as I've completed it. I suspect it won't be happy reading, but I am in this for years, not just a month.

The Dividend Seeker

Provident Financial

It's been a quiet week from my perspective - no trading and only one dividend. Provident Financial paid their final dividend today and the cash is already in my ISA.

I chose Provident Financial for my High Yield Portfolio for a number of reasons. One, obviously the yield! It's well over 7% but covered thinly by earnings (barely more than 1x earnings). Bt this cover should increase over time as the level of dividend payments are partly the legacy from the demerger of International Personal Finance last year.

Secondly they operate a good quality sub-prime lending operation. Door to door lending leaves an aftertaste in many peoples mouths, but people will always need cash even when the banks won't lend to them. They have a good screening process which helps keep bad debts manageable and I can only see demand for their services increasing in the years to come.

The cash received stays on the cash balance for now. I'm a fair way off having the £1000 in this ISA to make another purchase, but am not far off in my second ISA to purchase that tranche of GKN shares I still have my eye on.....

But if the share price rises before I can buy I have a back up candidate - HSBC Infrastructure Company. But more of that next time...... :-)

So what's next?

Well, not a great deal of activity at the moment as I am yet to hit the minimum £1000 of received dividends before I buy any more shares.

Why £1000? Well, to limit the erosion of dealing costs. The broker I use charges £12.50 a trade, so I'm only paying 1.25% on a £1000 trade, but if I were to trade in smaller amounts the percentage would creep up and become uneconomical.

Ready for when I do have enough funds I am already on the look out for the next purchase. I could top up, of course, but as the portfolio is new I am looking for further companies at the moment. Topping up will come later.

I'm looking for companies in sectors where I am not really in at the moment. The dividend yield must be at least 4.5% at the current price, covered ideally twice by earnings (but I will accept a minimum of 1.7 times).

So what have I found? GKN - it's an old, established, solid company in a sector I don't really have much exposure to (aerospace/defence) and has a long history of rising dividends. The share price is not far off current year lows, giving a current yield of 4.8%, rising to 6.2% within two years and more than twice covered by earnings.

I have another couple of ideas, but they are secondary to GKN. At the moment, I think I will have enough funds to buy at September at the latest - let's hope the share price stays down at this level until then! :-)

On a side note, there has been a lot of speculation about the Housebuilders this week. Will their dividends be slashed? Will they be able to cope with land bank write offs etc? Well, I've committed to myself that until something is 100% confirmed by a company I am not going to listen to rumour. So Barratt Devlopments, Taylor Wimpey and Persimmon stay in the portfolio.... for now at least!

First Dividend

Received the portfolio's first dividend today, RDSB.

It's gone to the cash account and I'm up and running building up funds for the next purchase.

A bit stressful with the Housebuilders peformance at the moment. BDEV have just put a statement out to the market saying they expect to meet forecasts. This is reassuring but we can't be sure of any facts until results are annouced in the current market!

OK - Let's Get Started

Right... I am capturing this from the start.

I have just transferred £70,000 from cash ISA's into Equity accounts following the change in rules introduced by HRMC in April this year.

My aim with this is to start a high yielding equity portfolio biased, but not excluded to UK equities to build a reliable and increasing income for retirement. I am 38 years old so have at least 22 years in which to build up the fund.

All dividends will be re-invested to enhance capital and I will track all dividends received and monitor the capital value of the porfolio once a month and report it here. I will also discuss new opportunities I am looking at, which will be purchased using the dividend income received from the income received from start up. I would really value comments and/or suggestions.

I've just set up the initial portfolio thus (detailing companies and the proportion of the overall portfolio at the end of last week):


Admiral Group - 1.55%
Altria Group - 0.43%
Amlin - 1.38%
Aviva - 1.83%
Barclays - 3.22%
Barratt Developments - 0.54%
Braemar Shipping - 1.41%
Brit Insurance Holdings - 1.20%
BT Group - 2.84%
Chesnara - 1.32%
Close Borthers - 1.4%
Dairy Crest - 1.41%
FirstGroup - 1.39%
GlaxoSmithKline- 4.07%
Halfords - 1.41%
Highway Insurance - 1.23%
iShares UK Dividend Plus - 1.4%
Marks and Spencer Group 1.09%
National Grid - 2.73%
Pearson - 1.35%
Pennon Group - 3.01%
Persimmon - 1.57%
Philip Morris International - 1.02%
Primary Health Properties - 1.5%
Prodesse Investment - 2.73%
Provident Financial - 1.2%
Reynolds American - 0.7%
RDSB - 6.31%
Scottish and Southern Energy - 3.91%
Tate & Lyle - 1.4%
United Utilities - 2.27%
William Hill - 1.22%
Alliance & Leicester - 2.2%
Bp - 12.72%
British American Tobacco - 7.9%
Cattles - 1.42%
Clarkson - 1.57%
HSBC - 2.54
Intermediate Capital - 1.92%
Land Securities - 2.41%
Llloyds TSB - 2.76%
Savills - 0.95%
Severn Trent - 1.18%
Taylor Wimpey - 0.84%


.... with the balance in cash and a couple of small legacy holdings.

So, this is where we go from here. Obviously, some of the stocks in the porfolio have been bought a few weeks ago, compared to the final tranche last week. That is why some of the percentages may look low (due to initial capital loss after purchase) but I am looking at income, not capital at the moment. I am a firm believer that if dividend income rises over time then capital values will follow.

Join me as I update the blog regularly with thoughts and ideas!