HYP development BP or RIO

[Alaric]

The objective of HYP is an increasing income from the received dividends.

Ignoring market value is a flawed concept when trying to accumulate wealth and if you are reinvesting rather than drawing down income, accumulating wealth is what you are doing.

If you invest in stocks that provide a dividend yield of around 3% but the dividend and market price both grow at around 8%, then when you compare resulting market values, you get a higher ultimate portfolio value than if you invested in shares with a dividend yield of 6%, but a more modest dividend and share price growth of say 2%.

It can be pointless for a personal investor buying shares just before the dividend in order to buy the dividend for reinvestment. Hold back the purchase until after the price drop for the x div status, but only buy the same number of shares as when the price was cum div. You then have a cash float equal to the dividend, which can then be added to the next reinvestment pool. That saves stamp duty on purchasing the dividend. Not a practical method really, because market noise will swamp xdiv price movements. Where funds have accounting rules which emphasise income over capital, they might indulge in a game of artificially enhancing their declared income.

[IanTHughes]

The objective of HYP is an increasing income from the received dividends.

Ignoring market value is a flawed concept when trying to accumulate wealth and if you are reinvesting rather than drawing down income, accumulating wealth is what you are doing.

The objective of my HYP Strategy is to build an income stream, not to accumulate wealth. What I am doing is buying that income stream. Any accumulation of wealth that does occur is of secondary importance to me and most definitely NOT the objective of the Strategy that I follow.


Ian

[Alaric]

So what! I only bought in July and August of this year, after the price had dropped sufficiently to make the yield attractive, not a year ago, when I suspect the price was too high!

Why do you suppose the price still isn't too high? If the direction of a share price is downwards, do you expect that it will turn round and if so, why?

There's a variety of effects on share prices, but one of them is presumably net asset value. At least some of the time, the market will spot that if a Company with a net asset value of 100 but no profits pays a dividend of 10, that reduces the net asset value to 90 and adjusts the share price accordingly. That's my suspicion of many of these high yield shares, that the dividend isn't being financed from profits, but from running down the accumulated retained earnings. If it's a declining industry, that may even be a sensible plan, but investors need to be aware that part of their dividend is a return of capital.

[Alaric]

Any accumulation of wealth that does occur is of secondary importance to me and most definitely NOT the objective of the Strategy that I follow.

Well you said it. Big warning. HYP does not increase your wealth, so a pointless exercise if trying to save for retirement, or anything really.

[IanTHughes]

Any accumulation of wealth that does occur is of secondary importance to me and most definitely NOT the objective of the Strategy that I follow.

Well you said it. Big warning. HYP does not increase your wealth, so a pointless exercise if trying to save for retirement, or anything really.

You are wrong ...…. again! What I said, if you would only take the trouble to read what is written, is that the "OBJECTIVE" of the HYP Strategy is to create an income stream.

Furthermore, by following the HYP Strategy, I have so far created that growing income stream, which is of course the "OBJECTIVE" of the Strategy, as well as increasing my wealth, not the "OBJECTIVE" of the Strategy for sure, but it happened anyway.


Ian

[IanTHughes]

So what! I only bought in July and August of this year, after the price had dropped sufficiently to make the yield attractive, not a year ago, when I suspect the price was too high!

Why do you suppose the price still isn't too high?

I believe that the price of ITV PLC (ITV) still offers good value. That is certainly the case for an HYP Investor but I would also suggest that a Value Investor might want to take a look.

If the direction of a share price is downwards, do you expect that it will turn round and if so, why?

Since my two purchases earlier this year, the direction of the share price has been upwards, not downwards. I can only suggest that you re-check the price graph!


Ian

[Alaric]

is that the "OBJECTIVE" of the HYP Strategy is to create an income stream.

Actually I though pyad's original articles were directed towards those with a cash sum at retirement looking to enhance their income. If you use it to create an income stream for reinvestment that is or should be different because capital value should be more of a consideration. That's particularly the case if new money is being added as holding it as cash can be an option.

If you don't need the dividends for income, it's pointless in my view to brag about how much they are and ignore the effect on capital. I've asked this question before. Would your "HYP strategy" prefer to invest in a share with a 6% dividend yield and a 2% dividend growth, to one with a 3% dividend yield and an 8% growth?

[IanTHughes]

is that the "OBJECTIVE" of the HYP Strategy is to create an income stream.

Actually I though pyad's original articles were directed towards those with a cash sum at retirement looking to enhance their income. If you use it to create an income stream for reinvestment that is or should be different because capital value should be more of a consideration. That's particularly the case if new money is being added as holding it as cash can be an option.

My HYP Strategy is for my investment and I set the objective of my Investment Strategy, not you.

If you don't need the dividends for income, it's pointless in my view to brag about how much they are and ignore the effect on capital.

I do not ignore the effect on the capital in my HYP. It is simply that increasing the capital value is NOT THE OBJECTIVE of the Strategy. Why do you find that simple statement so hard to understand?

I've asked this question before. Would your "HYP strategy" prefer to invest in a share with a 6% dividend yield and a 2% dividend growth, to one with a 3% dividend yield and an 8% growth?

My HYP Strategy will always go for the third option: a 6% yield and a growth of 8%.

Of course until I have perfected a faultless way of seeing into the future, the choice you present is meaningless


Ian

[StepOne]

You might like to look at the changes in price of the shares in my HYP since Jan 1st.

You have Unilever and Diageo in there which true believers would sell as the yield is too low.

Hi Alaric,

Think you have got that wrong - Pyad's principle is never to sell. I certainly hold Unilever in my HYP, and I'm not even sure what its current yield is, although I do know it's delivering more pounds to my pocket annually than most of my other holdings.

StepOne

[Alaric]

Of course until I have perfected a faultless way of seeing into the future, the choice you present is meaningless

It's the choice between investing in the likes of Unilever, Diageo, Compass etc. and some of the favourites on the HYP practical board.

But in terms of evaluation of results, the mainstream approach, which should apply on a "general" board is to evaluate success or failure by reference to portfolio values or total return. So a metric of measuring success by just summing up the yearly dividends is not, I think, one to be widely employed .and certainly not one I would use unless it was a sole source of personal income (which it is for some posters and even some of those are adverse to Companies that destroy capital)

[tjh290633]

Moderator Message:
This spat between you two has gone far enough. You will never agree, so I am locking this thread.

Alaric, any more of these convoluted arguments about the rights or wrongs of the HYP strategy must avoid twisting other peoples' remarks to suit your own prejudices must cease, and I will delete any more instances.

TJH