Tate & Lyle Sweetens High Yield Portfolio

Stephen Bland adds Tate & Lyle to his fourth High Yield Portfolio.

It's my first article of the month which means it's time to add another share to my fourth High Yield Portfolio. My eighth selection is Tate & Lyle (LSE: TATE) . As a company involved in food production, it adds a completely new sector to the portfolio, diversifying it nicely. My cost per share for a £5,000 investment including expenses was 586.9p.

Tate has the usual dividend history I seek. Going back to its year ended 31/03/02 the payout was 17.8p, which rose unbroken to the last actual dividend for 31/03/06 of 20.0p. Not large rises but steady.

The forecasts for 07, 08 and 09 are 21.6p, 22.8p and 23.6p, thus, for what it's worth, continuing the trend. Cover is pretty good too especially for the more recent actuals and also the forecasts. In 06 it was over 2 and 1.9 for 05. The three forecast years all show cover over 2 as well.

Forecasts do need to be taken with a truckload of salt of course, but despite that, I do use them for HYP selection when I consider dividend potential in the very near future. They're all I have when I try to ensure I avoid a share that is expected to cut dividends in the near term. After that, as regular readers will know, strategic ignorance takes over and I make no attempt at longer term guesswork.

Tate's share price has fallen substantially in the last six months or so, which no doubt is the factor that has driven it up the FTSE 100 descending yield rankings. But I didn't use that to pick the share, I chose Tate because it was the next company as I worked down the yield list offering a sector that wasn't already in the portfolio, and which otherwise stacked up as a decent HYP play. This is my normal approach to HYP selection though I sometimes step outside of it if the mood takes me.

Note that I paid no attention to Tate's large price fall as part of my selection process. I am not interested in technical analysis of price action to determine which shares I should buy for HYPs. The yield talks to me, not the share price, and I would have also bought the share at this stage if the price had shown a large rise over the last few months instead of a big fall, assuming it occupied the same position in the yield tables.

It's going to be a busy month for HYP stuff generally. In addition to this article, HYP2, my second eternity portfolio, has passed its fourth anniversary so I will be reviewing progress there and in another article I'll be showing my quarterly report of all complete portfolios.

Here's HYP4 to date including the latest purchase. Bought last November, I sold F&C Asset Management (LSE: FCAM) recently following a dividend cut and boughtBritish American Tobacco (LSE: BATS) to replace it which incidentally added a new sector.

Of the shares shown Stephen holds BAT, BP, BT, DSGI, Lloyds, United Utilities