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Dividend Payments - Smoothing ?

Practical discussions about equity High-Yield Portfolios (HYP) for income
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monabri
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Dividend Payments - Smoothing ?

#34238

Postby monabri » February 24th, 2017, 1:43 pm

In the table below, I show the months when I (hopefully) will receive dividends from my HYP. I would like to even up the percentages such that there is a more regular income. Some months are "good" (July) and others a trickle (October).

D.A.K. if there is there a website where it lists out dividend payment dates by month? (I will then be able to evaluate potential new HYP candidates for future inclusion).

monabri


kempiejon
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Re: Dividend Payments - Smoothing ?

#34244

Postby kempiejon » February 24th, 2017, 1:58 pm

monabri wrote:D.A.K. if there is there a website where it lists out dividend payment dates
dividenddata.co.uk is my current favourite.
But don't buy a share because of it's dividend payment date. Buy a share because it has the highest yield and suits your income security, safety and diversification factors. Build a smoothing pot of cash. We all have fat and lean months, I suppose all else being equal if you've 2 competing shares and one pay out in January the other in July pick the January payer and hope it doesn't change its reporting period. I forget which of my shares have changed (GSK, IMB or HSBC probably) but a few have switched from twice yearly to quarterly, that has smoothed my annual income a bit.

staffordian
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Re: Dividend Payments - Smoothing ?

#34245

Postby staffordian » February 24th, 2017, 1:59 pm

There were several discussions about this on the "old site", though I don't recall an explicit solution to the question you ask.

The general consensus is always that to select on these grounds is to exclude potentially superior candidates, to the overall detriment of the portfolio, because selecting by date is bound to exclude higher yielding and possibly more secure income simply because the payment dates are similar to others already held.

Then, of course, do you sell if dividend dates change?

A far better approach is to smooth the flow yourself by using an opening float, into which all dividends are paid and from which the income is drawn.

It's not quite the same thing as a safety margin, but by adjusting the initial size of the float one account could do both jobs.

Staffordian

Itsallaguess
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Re: Dividend Payments - Smoothing ?

#34248

Postby Itsallaguess » February 24th, 2017, 2:21 pm

monabri wrote:
In the table below, I show the months when I (hopefully) will receive dividends from my HYP. I would like to even up the percentages such that there is a more regular income. Some months are "good" (July) and others a trickle (October).

D.A.K. if there is there a website where it lists out dividend payment dates by month? (I will then be able to evaluate potential new HYP candidates for future inclusion).

monabri


It's surprising how often this particular issue crops up, and I don't think it's ever a good idea to think like the above and allow something like dividend-payment dates to govern any sort of investment approach at all. It would be a classic case of the tail wagging the dog.

To get around any 'lumpiness' of income, you simply create a secondary account to pay the dividends into, and allow a suitable buffer to accumulate.

Then, work out your expected HYP income over a 12 month period, reduce that by a suitable 'rainy-day' amount to allow the income buffer to be maintained or to even grow if possible, and then divide that remaining expected yearly income into 12. Move that amount from the buffer account into your main bank account once a month via a standing-order, and it will feel like a regular, steady monthly 'wage' from your HYP going into your normal day-to-day bank account, with all the 'dividend payment lumpiness' being catered for by the middle account receiving the dividends themselves and also holding your cash-buffer.

The above sounds complicated on first reading, but it's really quite simple, and a much better solution to this 'lumpiness' issue than selecting HYP shares based on dividend-payment dates...

Please, read the above and ask questions if anything is unclear. The route you're currently looking to go down is not a good idea.

Cheers,

Itsallaguess

AleisterCrowley
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Re: Dividend Payments - Smoothing ?

#34251

Postby AleisterCrowley » February 24th, 2017, 2:32 pm

Yes, this crops up occasionally - I remember discussing on TMF
I have two noticeable peak months (Jun/Sep), and October is the worst
As mentioned above, it's a terrible idea to use payment month as a factor in share selection- build up a buffer and the 'issue' disappears

tjh290633
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Re: Dividend Payments - Smoothing ?

#34252

Postby tjh290633 » February 24th, 2017, 2:40 pm

A further point is that payments can vary, sometimes earlier and sometimes later. Examples have been when payments have been brought forward to avoid a tax increase or delayed to take advantage of a tax reduction.

The best laid schemes, etc.

The comments above about not choosing a company because of its payment dates are very pertinent.

vrdiver
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Re: Dividend Payments - Smoothing ?

#34260

Postby vrdiver » February 24th, 2017, 3:23 pm

Another advocate of ignoring dividend month of payment.

I have a spreadsheet that shows 12 months historic (actual) dividends and a forecast for the next 12 months dividends. I also show a "cumulative dividends to date" for each of the forecast and historic months, and a "cumulative expenses" figure (i.e. the monthly withdrawal I allow myself". Finally I show the nett surplus or deficit expected, which guides me as to how big the cash buffer needs to be (ignoring a safety margin for last minute cutters!).

In a worst case you could end up with all your dividends paid in May and September say, but actually it doesn't matter, as if you are working on at an annual granularity you just make sure the annual dividend total is > the annual withdrawal and look at the cumulative deficit to make sure you have the right amount of cash on hand to cover dividend payment lumpiness.

Think of it another way: if your employer offered you a bonus for accepting a variable monthly salary, but guaranteed the annual sum would be 10% greater than the current regular monthly salary, would you take it (ignoring the quirkiness of said employer!) and implement your own buffer management system, or would you turn down the higher salary?

VRD

AJC5001
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Re: Dividend Payments - Smoothing ?

#34339

Postby AJC5001 » February 24th, 2017, 10:01 pm

monabri wrote:In the table below, I show the months when I (hopefully) will receive dividends from my HYP. I would like to even up the percentages such that there is a more regular income. Some months are "good" (July) and others a trickle (October).


You have the wrong month at the start - try starting with June or July and saving the surplus above the monthly average.

Adrian

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Re: Dividend Payments - Smoothing ?

#34360

Postby 77ss » February 25th, 2017, 12:45 am

[quote="monabri"]In the table below, I show the months when I (hopefully) will receive dividends from my HYP. I would like to even up the percentages such that there is a more regular income. Some months are "good" (July) and others a trickle (October).

D.A.K. if there is there a website where it lists out dividend payment dates by month? (I will then be able to evaluate potential new HYP candidates for future inclusion).

monabri

Terrible idea! My HYP varies by a factor of 10 from month to month. How do I deal with that? I have a cash reserve, so that I am not reliant on monthly dividend income - you need one anyway, for unexpected expenses. Focus on the quality of the companies you with to hold - diverting your attention to this kind of trivial detail risks taking your eye off the ball.


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