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was "How many shares in a HYP"

General discussions about equity high-yield income strategies
Alaric
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was "How many shares in a HYP"

#217821

Postby Alaric » April 28th, 2019, 1:15 am

Lootman wrote:I "reckon" that if your portfolio yields 6% when the market yields 4% then you would need to have a clear sense of the extra risk that implies. How do you compute that risk? What factors do you take into account when you accept that alleged free lunch?]


It's not unreasonable to select a portfolio to give a dividend yield of 6% when the "market" is 4%. What has to be recognised is that the increased dividend yield is likely to be at the cost of capital appreciation, so not a free lunch unless high dividend stocks are out performers. The point being that if you require 6% on your asset value, tilting your stock selection to achieve this avoids the need to make periodic sales. You should still use total return to determine whether the stock selections were a success.

If you are a buy and hold investor interested in dividend income, price volatility shouldn't be a concern. Total return on the other hand should be. Thus dividend yield isn't the whole story. To what extent is the dividend just a return of capital?

OhNoNotimAgain
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Re: was "How many shares in a HYP"

#218063

Postby OhNoNotimAgain » April 29th, 2019, 8:49 am

Despite Vanguard's apparently low cost, it cannot beat the market because of its costs. If that is what you want, then a broad fund is not what you want. You need something more focused on the higher yields. If you are happy with minimal management, then a DIY HYP will do the job. If you want to be hands off, then one or more suitable ITs are your answer


There is not a lot wrong with just getting the market return. However, you are right that beating the market is not about costs it is about the bias of the portfolio.
For the last 3 years the winning bias was value, for the 7 years before that it was growth.

Alaric
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Re: was "How many shares in a HYP"

#218306

Postby Alaric » April 29th, 2019, 11:51 pm

In the "other" thread,the comment has been made
Yes exactly, I meant that it's the sectors that must be equally weighted at cost, not the shares.


Why should this be a "must"? If the intent is to ignore future capital values, why not weight to generate an equal amount of income from each sector?

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Re: was "How many shares in a HYP"

#218309

Postby IanTHughes » April 30th, 2019, 12:17 am

Alaric wrote:In the "other" thread,the comment has been made
Yes exactly, I meant that it's the sectors that must be equally weighted at cost, not the shares.
What other thread? Does it lead to a full ball of wool?

Alaric wrote:Why should this be a "must"?
Why not? Oh please, do tell us lesser mortals why this simple instruction would be wrong! I for one am hanging on your every word!

Alaric wrote:If the intent is to ignore future capital values,
Who said that?

Alaric wrote:why not weight to generate an equal amount of income from each sector?

Oh please, do tell us? Can you do so without compromising your position?


Ian

Alaric
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Re: was "How many shares in a HYP"

#218310

Postby Alaric » April 30th, 2019, 12:48 am

IanTHughes wrote:Who said that?


pyad and all the other HYP believers.

The "other" thread is "How many shares in a HYP". It's clear enough that being a sceptic on the HYP practical board leads to posts being deleted, so that's why I am posting in "-general". Equally general comments are off topic to the "How many shares" question, so that's also why I'm posting elsewhere.

IanTHughes
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Re: was "How many shares in a HYP"

#218311

Postby IanTHughes » April 30th, 2019, 12:58 am

Alaric wrote:
IanTHughes wrote:Who said that?


pyad and all the other HYP believers.

Really? My God, it is worse than I thought. What exactly did they say? Was it some sort of mantra? Who are the "HYP Believers"? Is it some sort of secret society?

Oh dear me, I certainly hope not, those kind of groups are definitely dangerous! But I guess you already know that.


This is momentous! Please do try and remember


Ian

Alaric
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Re: was "How many shares in a HYP"

#218326

Postby Alaric » April 30th, 2019, 7:31 am

IanTHughes wrote: Who are the "HYP Believers"?


Those like yourself who won't listen to any critical assessment of the particular variant of investing for income which has its own dedicated board on TLF and on the dedicated board would have critical or questioning posts removed as off topic.

If I may repeat the question, why is it necessary to weight by equal market value by sector and not some other method? If I were to raise this point on the HYP practical board, it would be deemed off topic and deleted.

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Re: was "How many shares in a HYP"

#218355

Postby IanTHughes » April 30th, 2019, 9:23 am

Alaric wrote:
IanTHughes wrote: Who are the "HYP Believers"?

Those like yourself who won't listen to any critical assessment of the particular variant of investing for income which has its own dedicated board on TLF

Sorry, you are incorrect, that is most definitely not me. I, and I am sure many others, would welcome any critical assessment of the HYP Strategy which clearly shows how the aims of the Strategy could be met more simply, less expensively and with the same or less risk. You will let us all know if you come across some won't you?

Alaric wrote:If I may repeat the question, why is it necessary to weight by equal market value by sector and not some other method?

In a word, diversification. I am somewhat surprised that you did not know that. You certainly would know that and more besides, if only you would take the trouble to read up about the HYP Strategy. That way, you would at least understand the strategy that you are so determined to criticise.


Ian
Last edited by IanTHughes on April 30th, 2019, 9:30 am, edited 1 time in total.

Alaric
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Re: was "How many shares in a HYP"

#218359

Postby Alaric » April 30th, 2019, 9:29 am

IanTHughes wrote:In a word, diversification. I am somewhat surprised that you did not know that.


Buying lots of sectors is diversification. Why put the same amount by market price at entry in each, particularly if future capital values are going to be ignored, so the longer term outcome is going to be tilted towards the better performing sectors as determined by market value? Why not seek the same amount of income from each sector? As dividends vary less than market values, that's going to be more stable.

Indexes weight by market capitalisation, so that's another way of doing it.

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Re: was "How many shares in a HYP"

#218360

Postby IanTHughes » April 30th, 2019, 9:35 am

Alaric wrote:
IanTHughes wrote:In a word, diversification. I am somewhat surprised that you did not know that.


Buying lots of sectors is diversification. Why put the same amount by market price at entry in each, particularly if future capital values are going to be ignored, so the longer term outcome is going to be tilted towards the better performing sectors as determined by market value? Why not seek the same amount of income from each sector? As dividends vary less than market values, that's going to be more stable.

Indexes weight by market capitalisation, so that's another way of doing it.

As I stated before:
IanTHughes wrote:I, and I am sure many others, would welcome any critical assessment of the HYP Strategy which clearly shows how the aims of the Strategy could be met more simply, less expensively and with the same or less risk.



Ian

Alaric
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Re: was "How many shares in a HYP"

#218388

Postby Alaric » April 30th, 2019, 10:38 am

IanTHughes wrote:I, and I am sure many others, would welcome any critical assessment of the HYP Strategy which clearly shows how the aims of the Strategy could be met more simply, less expensively and with the same or less risk.


But what are the aims of the "HYP Strategy"? It can appear to outsiders that it's to ignore the issue of whether the selected stocks offer a decent total return. Given that, suggestions of the need to avoid Carillion like self destructing stocks or even those where the management is supporting the dividend by returning capital from an unprofitable operation will fall on deaf ears.

The Broker ii gives access to morningstar reports.

On a 5 year view, the FTSE 100 total return is currently quoted as 6% annualised.

Vodafone is -1.76%
Diageo is 13.94%
Unilever is 14.44%

Going back 5 years which of these were the most likely selection according to "HYP Strategy"?

Notoriously, although rescinded, there was an attempt to ban discussion of Diageo and Unilever on the HYP practical board.

Perhaps because they perform so well in terms of increasing dividends, the share prices of Diageo and Unilever are arguably at a premium in comparison to the rest of the market and thus the dividend yield is too "low" for these to be HYP candidates. The FTSE 100 capital index is up around 2% annualised over the last 5 years. So that's approximately 4% in dividend and 2% in growth as a market average for large cap stocks.

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Re: was "How many shares in a HYP"

#218392

Postby OhNoNotimAgain » April 30th, 2019, 10:49 am

Alaric wrote:

If I may repeat the question, why is it necessary to weight by equal market value by sector and not some other method? If I were to raise this point on the HYP practical board, it would be deemed off topic and deleted.


It isn't and it is possible to weight by other measures.

IanTHughes
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Re: was "How many shares in a HYP"

#218395

Postby IanTHughes » April 30th, 2019, 10:55 am

Alaric wrote:But what are the aims of the "HYP Strategy"? It can appear to outsiders that it's to ignore the issue of whether the selected stocks offer a decent total return. Given that, suggestions of the need to avoid Carillion like self destructing stocks or even those where the management is supporting the dividend by returning capital from an unprofitable operation will fall on deaf ears.

I can only repeat:
IanTHughes wrote:... if only you would take the trouble to read up about the HYP Strategy. That way, you would at least understand the strategy that you are so determined to criticise.

and for the third and final time:
IanTHughes wrote:I, and I am sure many others, would welcome any critical assessment of the HYP Strategy which clearly shows how the aims of the Strategy could be met more simply, less expensively and with the same or less risk.



Ian

Alaric
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Re: was "How many shares in a HYP"

#218403

Postby Alaric » April 30th, 2019, 11:15 am

IanTHughes wrote:if only you would take the trouble to read up about the HYP Strategy.


Where would I find these tablets of wisdom? Why cannot you paraphrase them?

On the other thread (How many shares in a HYP) , the original author says he reserves the right to change the rules as he goes along, in this case being more restrictive on having multiple shares in the same sector.

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Re: was "How many shares in a HYP"

#218404

Postby IanTHughes » April 30th, 2019, 11:19 am

Alaric wrote:
IanTHughes wrote:if only you would take the trouble to read up about the HYP Strategy.


Where would I find these tablets of wisdom?


https://www.stockopedia.com/contributors/stephen-bland/


Ian

Alaric
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Re: was "How many shares in a HYP"

#218407

Postby Alaric » April 30th, 2019, 11:33 am



Which contains a recommendation to select Vodafone without considering any of the doubts raised about the maintainability of its dividend or for that matter its five year record of losing money for its investors.

viewtopic.php?f=15&t=17445

I'd like to believe that Vodafone will return to a more "average" yield and that it will do so by maintaining the dividend and the share price doubling. I suspect that it will do so by cutting the dividend though.

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Re: was "How many shares in a HYP"

#218413

Postby IanTHughes » April 30th, 2019, 11:49 am

Alaric wrote:
IanTHughes wrote:https://www.stockopedia.com/contributors/stephen-bland/


Which contains a recommendation to select Vodafone

You will have to give me a direct link to that recommendation as I cannot see any mention of Vodafone (VOD)

Alaric wrote: … without considering any of the doubts raised about the maintainability of its dividend or for that matter its five year record of losing money for its investors.

So? You disagree with the selection, as I believe others do too, but so what?


Ian

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Re: was "How many shares in a HYP"

#218414

Postby TUK020 » April 30th, 2019, 11:52 am

OhNoNotimAgain wrote:
Alaric wrote:

If I may repeat the question, why is it necessary to weight by equal market value by sector and not some other method? If I were to raise this point on the HYP practical board, it would be deemed off topic and deleted.


It isn't and it is possible to weight by other measures.


I find TJH's system for top ups very interesting. I am not sure that the original investment in his portfolio is relevant - he has been running it for sufficiently long this this is fogged by the mists of time.
His top up system starts by looking at portfolio balance by current value, but with modifiers for sunk cost, and for income. Seems more of a balanced approach. This, together with his top slicing criteria, keep his portfolio nicely diversified/balanced

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Re: was "How many shares in a HYP"

#218415

Postby Alaric » April 30th, 2019, 11:53 am

IanTHughes wrote:You will have to give me a direct link to that recommendation as I cannot see any mention of Vodafone (VOD)


It was quoted recently on TLF. The most recent recommended "HYP" contains Vodafone.

IanTHughes wrote:So? You disagree with the selection, as I believe others do too, but so what?


When you disagree with the selection and it's been generated by a mechanical rule, that means the rule itself is disputed.

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Re: was "How many shares in a HYP"

#218419

Postby vrdiver » April 30th, 2019, 11:59 am

Alaric wrote:On a 5 year view, the FTSE 100 total return is currently quoted as 6% annualised.

Vodafone is -1.76%
Diageo is 13.94%
Unilever is 14.44%

Going back 5 years which of these were the most likely selection according to "HYP Strategy"?

Go back a bit further and you'll find HYP investors like me who have all three in their HYP.

At the time of each purchase, all I knew was that they were reasonable candidates for MY HYP, based on MY filters and MY existing holdings.

Obviously, with hindsight, I'd have filled my boots with ULVR and DGE, but who was to know that they would be such stars? The portfolio of a wide selection of shares means that whilst some turn out to be abject failures (e.g. RBS), others more than make up for it.

Hindsight would have been useful, but I haven't figured out how to apply that to my HYP selections, other than the obvious ones of historical performance and meeting a minimum current yield. The system works for me, but then I'm not that sophisticated an investor, but I do live off my HYP, having retired some 17 years early on the strength of my belief in the system. Nearly five years on and so far, so good...

VRD


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