• His late Majesty King Edward VIII: “Never gamble with money you cannot afford to loose.”

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    The late King’s advice to his subjects was sound. The son of one of his subjects (Yours Truly) has chosen NOT to follow this advice in one particular instance.

    This is in relation to a share trade undertaken this morning – and one which I had and still have concerns about. It all started with the election of a certain Mr Jeremy Corbyn as the Labour Party’s new leader.

    Following his election there have been mutterings about nationalising or taking public (aka political) control of the “Big Six” energy companies.

    Long standing British Gazette readers will know that in early 2014, I moved from the West Riding of Yorkshire to Cornwall.

    This involved what is popularly known as “downsizing” – selling one’s property and moving into a smaller (and cheaper) property.

    In my case I achieved one objective in getting the money I asked for and investing exactly half this gross figure into investments to bolster my modest income. I was unable to achieve another objective however.

    It had been my hope that I would be able to purchase additional shares in a certain UK Equity Income Growth investment trust. However, due to the level of the share price at the time (January 2014) the yield was lower that what I really needed. I therefore chose to invest directly in three equities. Two of these are the subject of this article.

    You see, one of the three companies I chose was SSE PLC: one of the “Big Six.”

    SSE PLC had done quite well since the time I purchased the shares. They went up. They then went down, but not down to the level at which I bought them. There was another company: Royal Dutch Shell. I purchased “B” shares. Unlike SSE PLC, Royal Dutch Shell did not do very well. Due to the decrease in the oil price, Saudi Arabia’s high production levels, market concerns over RDS’s takeover of part of British Gas and lastly their ceasing of the oil project in Alaska, their share price has shown a dramatic decline. In July I purchased a few more RDS shares at a much lower price.

    Today however I did something that many of you will regard as monumentally stupid. I sold my entire holding in SSE PLC – Yes, the share that has seen an increase in value – and purchased many more shares in RDS more than doubling my previous holding.

    Taking such action may be regarded as still being within the bounds of sane rational behaviour if the shares form part of a large overall portfolio – let us say one of a dozen or more shareholdings. This however was one of a total of six – now five. One of these, Lloyds Bank no longer pays an appreciable dividend. Three (exclusive of RDS) still do.

    To recap. There were SIX reasons for doing what I have done:

    1. Concern over the medium to long term dividend income of SSE PLC shares due to politicians getting involved in one form or another (the level of shareholder dividend will be at the very bottom of Labour’s list).
    2. A belief (of a cock-eyed optimist?) that Royal Dutch Shell’s travails are temporary, that the oil price will rise at some point in the not too far distant future and the global oil giant’s fortunes will improve – and with it the share price.
    3. The knowledge that it is a company’s actual trading performance and profitability that determines the size of it’s dividend – MY INCOME – and not market sentiment that can and does send a share price way above and/or way below what a rational valuation based on the company’s books of account would suggest.
    4. Due to the dividend payment cycle of both companies, I have already received by twice yearly dividend from SSE PLC and am now in line to receive “an extra” dividend payment in December from Royal Dutch Shell.
    5. Royal Dutch Shell pays quarterly dividends whereas SSE PLC pay dividends twice a year. The switch to quarterly dividends will help with day to day living expenses.
    6. SSE PLC – along with other “energy providers” are very much tied into “Green Energy.” British Gazette Readers know that the wheels of this particular wagon must come off at some point.

    As I publish this article the RDS “B” share price is slightly down on what I paid. I still feel VERY uneasy at what I have done.

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