kempiejon wrote:idpickering wrote:SLA are one that I really should top up maybe, but for some reason I'm reluctant to do so? It's the old, if the yield looks to good to be true etc.....
Ian your reluctance should be if your safety factors, sustainability of dividend and portfolio diversification metrics don't stack up etc... Not just because it's too good to be true, sometimes it can good. If memory serves didn't you top up Shell on 8% plus? I did.
Yield is a factor of dividend amount and share price, the share price varies with market sentiment and looks like it's not been this low for years. HYPing often looks for unloved shares that's what drives the yield higher. SLA offers 8% plus, that's high, they are a big cap in the larger index, dividend is covered 1.4 times according to webfg but forecast to fall by the same source as is next years dividend. SLA is the merged version of Aberdeen and Standard Life so in it's current carnation doesn't have much history. I hold as I chose Aberdeen for my HYP. If I was picking again and using webfg for screening the forecast reduced dividend and slim cover and lack of "proper" history in this current form would probably stay my buying finger. So I agreed with your reluctance to top up but not because the yield is too high.
But... the reason the share price is low, and the yield is high, isn't just some "market" being awkward or testy - it could well be the result of conclusions such as you have just drawn meaning that investors are doing likewise and staying their "buying fingers".
In other words, investors have concluded it's all too risky and the yield becomes too good to be true, or needs to be very high due to the risk - thus confirming that it is too risky for us too.
In my view, high yield makes HYP as high risk policy which is why we mitigate the risk in various ways: we hope to muddle through on capital but achieve a higher level of income. It's very much, you win some and lose some in the short term, but win overall in the long term.
BTW, SLA is in the top-up zone for me, and I might well be doing so. However, I have my own partocular problem in that several financial companies are looking good for top-ups (Aviva, SLA, Lloyds at least) but my financial sector is already at 27% with life insurance being a smidgeon over 10%.