I'm Bringing FTSE Back: Linking My Portfolio Yield Goal to the FTSE 100 Yield

It is a bank holiday over here in Blighty.* As such, no markets open today. So time for some spring cleaning instead.

As most of you know I have a series of investing goals that I look to achieve over the course of each year.

These I use to assess my performance periodically throughout the year (see, for instance, my Q1 review in April).

These goals are regularly tweaked and changed as appropriate. Sometimes this is because they have been achieved already (great). Other times it is because I want to focus on a new specific goal (keep aiming high). And on other occasions it is because the goals don't quite seem fit for purpose (oh dear).

This current adjustment is due to the last of those reasons. Not being fit for purpose.

2015 Goals: Weaving "Work Freedom Day" into my Annual Goals

A little while back I wrote an article on "Work Freedom Day" and how it is a powerful method by which to increase your saving rate and decrease your expenses.

Already I have started to insert the progress made along the calendar into my monthly dividend update (see February's post, for instance). But now it is time to think targets and to tuck this idea into my investment goals for the year.

So how to do it? Well, first let's see the lay of the land.

Investing by Divesting: Switching Clutter Capital for Investing Capital (UPDATED)

Updated 31 May, 25 June and 6 July and 12 October 2015: Just updated the total again with another series of items sold. Excellent progress is being made!

We all have it. A corner, a room, a shelf, a draw. Within them various things which you are unsure what to do with. Collected over years and months.

As it stands, I currently live in one room in a rented shared house and so these little piles and shelves of unused and unread odds and ends is very physically visible. However, seeing as I both work and live in the same room they have become mentally invisible. They have become part of the furniture.

There are books which are not part of my working research library nor my personal reading library. I have bits of technology such as a LiveScribe pen, IrisPen and more besides slowly becoming outdated. I have a FiloFax collecting dust, deserted by my digital diary diet.

What to do with them? Sell them of course.

BUYS: BP and GSK--Dropping prices and time for a double top up

It's something familiar to most of you in October. A large drop as the market correction pulled down most companies. I was thus a little split. I had two main options:

1. Add new holdings to my portfolio;
2. Average down on my current holdings;

Up to this point I took advantage of the drop to do both. Firstly, I added a new position in the drinks maker Diageo and before then I added to my holding in the banking giant HSBC.

However, I still had additional funds to direct towards my portfolio. Where should these go? In the end, I decided to start a new position in the speciality insurer Lancashire but chiefly to use the money to average down on two of my holdings most affected by the drop in prices but which I considered unfairly so.

What were they? First was the oil giant BP and the second the pharma giant GlaxoSmithKline.

Special Dividend (and an adjusted Annual Target...again)

One of my most recent purchases was the speciality insurer Lancashire Holdings (LSE:LRE). The company I noted had a fairly unimpressive standard dividend history but had the unconventional practice of delivering regular and often significant special dividends.

They have done this again with their Q3 results. The results showed that they intend to pay a $1.20 per share special dividend in December. This is equivalent to about 75p per share and considerably above the 58.8p predicted for the whole year. That is a huge chunk of cash returned on a company I bought into at 664p a share. In fact, it is about 11%.

BUY: Lancashire Holdings--Speciality Insurer with Special Dividends

Price: 664.14
Shares: 78
Predicted annual dividend income: £45.24

I have already pitched in some money into the speciality insurance sector with Catlin back in August. Since then I have kept an eye on Catlin, Amlin and Lancashire waiting to dive into this sector again.

Special Dividends

First and foremost, Lancashire looks like an odd choice. Both Amlin and Catlin are currently yielding around the 6% mark. What is more, both have long-standing records of increasing though yields. In contrast, Lancashire's main dividends only yield about 1.5% and the cash return has remained static at $0.15 for some time.

However, this does not tell the whole story. Lancashire uses the (slightly) unusual model of chiefly returning capital to investors not through ordinary dividends but special ones. The upshot of this is that actual returns from year-to-year can be a little unpredictable but they do tend to be higher than those of Amlin and Catlin.

2014 Dividend Income Target Reached! What Next?

Great news! I have reached my original dividend income target for 2014.

I set it at £200 at the start because I did not expect to be saving and investing quite so heavily. Fortunately I was able to save and thus invest more than I had originally anticipated. As a result, here I am, early November and I have already hit my target.

So what to do next? I have two months remaining of 2014. However, for quite a few of my holdings from this point onward the dividend income will not hit my account until the New Year.

Consequently, I am unsure as to what to do. I could make a new target but this may result in me choosing to invest in a company chiefly because its dividend will be paid before the end of the year. Not a good way to invest.

Dividend Income: August 2014

Every month I am going to be providing a breakdown of the dividend income received from my shares. The overall monthly total will be included on the main “Dividends Received” page.

• Santander--£11.03
• This is a notable decrease from August 2013's dividend (from 13.25p to 11.86p). That being said, the strong pound meant that the Euro to GBP exchange rate (from 0.8606 to 0.7908) also affected total return. In general, the decreasing dividend is encouraging as Santander looks to shift to a more conventional dividend policy.
• Given as 2 new shares (SCRIP)
• HSBC ETFs--£13.49
• This is my first dividend payment from my various HSBC ETFs held in a different fund brokerage account. 

Total for August: £24.52.

Tesco publishes "Trading Statement" and Dividend Cut

UK supermarket giant Tesco has delivered a trading update to the market this morning. For shareholders (such as me) it reads rather badly for the short term. But maybe the longer term still looks a little less disappointing.

Dividend in decline? 

Perhaps most immediately obvious is the declaration regarding the dividend. They state that the "Board anticipates that it will set the interim dividend at 1.16p per share - a reduction of 75% from last year's interim dividend." It is a pretty dramatic slash of the interim dividend. It was 4.63p per share last year.

Assuming that the same 75% drop would occur to final dividend next year as well (which seems likely) we would expect to see a dividend at about 2.5p. What does this mean for the yield? Quite dramatic changes, as it happens.

THOUGHTS: Tesco to slash dividend by 48% to 10p per share?

Analysts are constantly pushing out new views of various companies' futures. Tesco, as one of the biggest and most high profile, is no exception.

However, a recent analysts report from Brewin Dolphin by Nicla di Palma, has suggested that with the price war waging amongst other considerations the Tesco dividend could face cuts to 10p per share.

That is a pretty sharp haircut on the current 14.8p dividend for this year. In fact, it is a 48% cut. That's hefty, but I don't think it marks a dark cloud arriving sort of concern quite yet.

THOUGHTS: The Temptations of SSEs Ex-Dividend Day Drop

I like SSE as a company. I have pretty much spent my entire life living within its chief catchment area and have had little cause to complain. It services are reliable. Though as with anyone, I would have preferred their prices to be more reasonable.

What is more, since placing it to my portfolio as one of my first additions in January it has gained over 10%. This is chiefly thanks to my timing being very fortunate being at the virtual peak of the selling spree which followed the attacks on SSE and others by the Labour Party.

Of course, the capital gain was not as interesting to me as its dividends; these seem almost as reliable as its services. Excellent!

Indeed, today was the ex-dividend day for the juicy 60.7p per share final dividend. This was a welcomed contribution and will see me add a further SSE share to my portfolio through its reinvestment as well as a tidy cash return as well.

BUY: GlaxoSmithKline--Get in quick whilst on naughty step?

Price: 1576.45
Shares: 50
Projected annual dividend income: £40

I finally jumped and made a GlaxoSmithKline purchase. You may remember that previously I have agonised over whether (or rather when) to put money into GSK. Other options certainly crossed my mind. I have also been temped to top up my holding in HSBC whilst its share price is still languishing a little and, more likely, pick up some shares.in BAE Systems.

So why did I end up plumping for GSK?

THOUGHTS: Infinis Energy--An Excellent Green Opportunity?

I have watched the renewable energy company, Infinis Energy (LON:INFI), very soon after its IPO in November 2013. It strikes me as a very interesting prospect for a green energy investment due to its
particular focus and undeniable size.

Of course, with the green subsidies getting a hammering in the recent energy price debate some have begun to see such companies as a little too risky for their taste at the moment. I myself felt much the same about it and started to watch it less intensely (especially after picking up SSE which includes a significant amount of renewable power in its energy portfolio).

However, now it is back in my sights since reading a post on the DIY Income Investor's site earlier this month. On a fresh look I found yet more which was very interesting.

THOUGHTS: BAE Systems--Underpriced Giant?

Price: 427.2

BAE Systems has had something of a torrid time recently with the increasingly dwindling defence expenditure of the US and UK--still their biggest customers. As a result, the share price has been rather depressed recently.

Since the start of 2014, indeed, in general the price has been heading south. Nonetheless, recently it has been recovering somewhat. Consequently, I have taken a look at it to see what the figures suggests.

THOUGHTS: GlaxoSmithKline...Dividend Stalwart

I am unsure what to think with regards GSK. I am looking to bring on board a pharmaceutical firm into my portfolio but they all appear currently on price and--or in the case of AstraZeneca after the Pfizer bid a little overpriced.

GSK does seem to offer plenty of ripe opportunities. It clearly has a number of drugs far along the research pipeline which is encouraging for future growth. But as the price stands (1601p) this appears to be entirely priced in.

Automatic or Targeted Dividend Reinvestment?

Automatic dividend reinvestment or not? It is a question I have asked myself a lot recently.

Do I allow my broker simply to automatically reinvest my dividends into the stock from which it came or do I amass it in my brokerage account until it reaches a value worth reinvesting and find a likely candidate?

BUY: Barclays...Buying for Future Dividends and Growth

Price: 245.38
Shares: 200
Projected annual dividend income: £13 (this purchase) and £26 (entire holding)

I have recently topped up my Barclays investment. I first invested back in January 2014 seeing it as a strong candidate for the medium and long term with a relatively solid and hopefully growing dividend yield.

Barclays has become a favourite amongst stock pickers with many declaring it a buy or strong buy. These declarations did catch my eye, but it was the underlying figures which really hit me and encouraged me to top up my holding (it now amounts to almost a fifth of my entire portfolio).

However, with a drop in the price again--offering a chance to average down--along with my continued interest in their African banking move I felt another purchase was in order.

BUY: Unilever--A stable staple for dividends?

Price: 2494.3 and 2421.65 (average 2457)
Shares: 40
Projected annual dividend income: £36.37

My everyday tea is PG Tips. My everyday soap is Dove. This means that within minutes of waking up every morning I have already used two Unilever brands. Other ones sitting in my house include Radox, Comfort, Persil, Vaseline and more besides. As such, the mantra that you should buy what you know rings very true with Unilever. It was, as a result, a no brainer for me.

In reality though, Unilever was far from a bargain when I bought either of my holdings in the company. Nonetheless, I was fortunate enough to pick them up whilst the Anglo-Dutch consumer giant finds its share price briefly dropping after less than startling--though far from worrying--results.

BUY: BP...Oil and Dividend Giant at a Discount

Price: 478.86
Shares: 100
Projected annual dividend income: £22.32

I can't imagine there are many portfolios--especially amongst individual investors--that do not include an oil giant. Demand for oil remains ubiquitous in our society and does not appear likely to abate anytime soon. As such, I was hoping to get an oil giant into my portfolio very early in order to tap into their notorious dividend records.

So why did I choose BP over that other FTSE 100 giant, Shell? Partly because I felt that BP was still being overlooked due to the fallout from the Deepwater Horizon spill. What is more, because I feel this disaster has forced BP to respond in positive ways including streamlining and safeguarding assets. What is more, the underlying figures still look excellent.

BUY: SSE...My first utility whilst they are cheap

Price: 1323.95
Shares: 40
Projected annual dividend income: £34.68

The utility companies have been hit hard recently with the various debates about household bills hitting the news. As such it opens a great number of opportunities for picking up dividend stalwarts like SSE for--relatively--cheap prices.

So why SSE? For me it is largely because it is a company I know relatively well. They chiefly serve the area that I am from and I constantly see their vans pass by me as I work. As a result, I know how well embedded they are in the utility market around me. What is more, SSE seems to offer good value.