Dividends

[Arborbridge]

remember though , that when the share goes XD , the share price drops accordingly , all other things being equal.

Jackdaww, you naughty boy - trying to needle us As you know, it is quite irrelevant to an income strategy - though it can be useful to pick up some cheaper shares to build the future.

Yes - but how do you get the shares more cheaply?
So my basic point is that both routes help build the future - one by buying shares a bit cheaper, the other by having a bit more money to invest in them - and they can be expected to balance each other fairly accurately. Any effects beyond that are usually so small that I'd recommend treating issues of personal convenience and cost-effective use of one's own time as more important.



Gengulphus

Sorry to axe your post to pieces, but I just wanted to say we broadly agree. I usually buy cum d, but I'm not particularly bothered these days as any topups are usually a small alteration to my larger picture. I would be gallling to misst an xd and find I'm having to wait for six months for the next one, but that's life sometimes.

Buying xd hoping for a price drop, I've always found is a bit of a lottery - it is not guaranteed.

In the grand scheme, it makes no noticeable difference.

Arb.

[Arborbridge]

I'm in retirement and drawing.

Based on the fall in income experienced during the credit crunch by TJH, I did allow 2 years income in cash. However, this was modified to "something a bit like cash or at least not as risky as equity" - such as a bond fund or ZDP income fund. The ZDPs have now been sold as the market for them became less interesting. I think I have around 18 months cash sitting about at any one time. For any emergencies, I have a wife with plenty of cash

As regards drawing income: I have a 25% safety margin (would like more) i.e. I draw 80% of income from HYP.
In addition I draw 90% of income from incITs because they are self-reserving and the income is less prone to be set back. I draw zero percent from the OEICS basket.

If I could afford a 100% margin, I would!

Arb.

[micrographia]

I have (estimating here) 14 years to go before I retire - I'm 50 later this year.

My HYP is with HL (as is all my pension) and leading up to retirement, I will build up a year's worth of income payments - my aim is for my HYP to pay my fixed direct debit costs - in the HL cash account. When I start to draw the monthly required amount to cover direct debits (£770 p.m. or £9,240 p.a.) from the cash account, the HYP dividends should replenish the monthly drawings albeit in a lumpy way as others have described above.

I will also aim for my HYP to generate more than what's required as I have learned from these boards that with potential dividend cutters/cessations etc. drawing perhaps 75% - 80% of what the HYP generates would be sensible.

Cheers, OLTB.

Eerily similar in every respect to OLTB , except I'm with Selftrade and have an occupational pension...

EEM

[Arborbridge]

I have (estimating here) 14 years to go before I retire - I'm 50 later this year.

My HYP is with HL (as is all my pension) and leading up to retirement, I will build up a year's worth of income payments - my aim is for my HYP to pay my fixed direct debit costs - in the HL cash account. When I start to draw the monthly required amount to cover direct debits (£770 p.m. or £9,240 p.a.) from the cash account, the HYP dividends should replenish the monthly drawings albeit in a lumpy way as others have described above.

I will also aim for my HYP to generate more than what's required as I have learned from these boards that with potential dividend cutters/cessations etc. drawing perhaps 75% - 80% of what the HYP generates would be sensible.

Cheers, OLTB.

Eerily similar in every respect to OLTB , except I'm with Selftrade and have an occupational pension...

EEM

Part of the same cohort stumbling towards the Grim Reaper.

[monabri]

Part of the same cohort stumbling towards the Grim Reaper.

https://youtu.be/x__k-aq5SbE

"Only the good" ....

[AJC5001]

My HYP is with HL (as is all my pension) and leading up to retirement, I will build up a year's worth of income payments - my aim is for my HYP to pay my fixed direct debit costs - in the HL cash account. When I start to draw the monthly required amount to cover direct debits (£770 p.m. or £9,240 p.a.) from the cash account, the HYP dividends should replenish the monthly drawings albeit in a lumpy way as others have described above.

Cheers, OLTB.

Given the current interest rates on cash held in a HL account https://www.hl.co.uk/charges-and-interest-rates wouldn't it be worth transferring this buffer account to a conventional bank current/savings account? As an example, the Santander123 account pays 1.5% and pays cashback on the household direct debits I believe you are thinking of. https://www.santander.co.uk/personal/current-accounts/123-current-account. Natwest/RBS have something similar.


Adrian

[vrdiver]

That is why we need a float, of course.

So back nearer topic, how big a float do people keep?

Mrs VRD and I are now living off of our HYP.
Each year I review what is an acceptable withdrawal, based on natural yield. I use the HYPTUS to forecast the expected dividends by month for each account for the coming year, divide that by 12 to get a monthly income and then project that withdrawal, which would normally show a negative cash balance during some months, as some months pay less dividends than others. I ensure that the starting cash balance means that we can withdraw the planned amount each month, with the expected result being that in 12 months time we will be back at square one, with a cash balance in the account sufficient to absorb additional withdrawals in lean months and which will be topped up in fat months. As a pessimist who doesn't like surprises, the cash balance is raised by an additional month's withdrawal, so that any surprise non-payers won't create an emergency, but can be dealt with at leisure.
Because monthly inflow of dividends is a forecast, I assume all dividends are paid on the last day of the month, so withdrawals never rely on payments due in in the same month.

That's the "float" that smooths irregular dividend payments. It's size will differ depending on which shares you hold and their payment regimes.

I have a safety margin, in that the dividend income is 125% of what I pay myself as salary. The excess dividends get ploughed back as reinvestment (leading to a pay rise) or used to replace failed shares (Carillion etc.)

Finally, I hold three years salary as cash or near-cash (premium bonds etc) but this may also include cash being built up for a planned purchase like a car, or next year's holidays: anything that is discretionary spending might be saved up for and included in this bucket.

The most important point, for me, is that I have a view of future cash flow and some scenarios (e.g. market crash=dividend drought) and a plan to survive them.

VRD