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Whether HYP (as defined in the guidelines) works

General discussions about equity high-yield income strategies
Alaric
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Whether HYP (as defined in the guidelines) works

#220732

Postby Alaric » May 10th, 2019, 6:08 pm

If you buy a share and it makes a loss, you would have been better off not buying at all.
Moderator Message:
This question has been moved from HYP-Practical to HY-General as discussion of the merits of the HYP strategies as set out in the guidelines is off-topic there but on-topic here. - Chris

Itsallaguess
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Re: Whether HYP (as defined in the guidelines) works

#220739

Postby Itsallaguess » May 10th, 2019, 6:50 pm

Alaric wrote:
If you buy a share and it makes a loss, you would have been better off not buying at all.


Makes perfect sense, of course.

Can you explain why HYP (as defined in the guidelines) is singled out here though?

Do other investment strategies guarantee never to lose money on any investments?

Cheers,

Itsallaguess

Alaric
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Re: Whether HYP (as defined in the guidelines) works

#220748

Postby Alaric » May 10th, 2019, 8:07 pm

Itsallaguess wrote:Can you explain why HYP (as defined in the guidelines) is singled out here though?


Because it seeks out shares with a high dividend yield. Nothing directly wrong with that of course, except the filters for establishing whether a Company is just going through a bad patch or is basically junk seem weak to my mind. That's compounded by the advice to ignore capital performance. Again nothing wrong with ignoring volatility, that's sensible for buy and hold. It disregards the issue that at least some high dividend yield shares are high yield because in effect they are returning investors capital, or even worse, borrowing to pay dividends.

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Re: Whether HYP (as defined in the guidelines) works

#220759

Postby Charlottesquare » May 10th, 2019, 9:11 pm

Alaric wrote:
Itsallaguess wrote:Can you explain why HYP (as defined in the guidelines) is singled out here though?


Because it seeks out shares with a high dividend yield. Nothing directly wrong with that of course, except the filters for establishing whether a Company is just going through a bad patch or is basically junk seem weak to my mind. That's compounded by the advice to ignore capital performance. Again nothing wrong with ignoring volatility, that's sensible for buy and hold. It disregards the issue that at least some high dividend yield shares are high yield because in effect they are returning investors capital, or even worse, borrowing to pay dividends.


However does not dividend cover as a selection factor mitigate your latter points?

I can understand the argument if say upon selection the earnings covered the dividends by say 1.5 but since then trading has deteriorated, but at outset such an outcome surely ought not to be possible if criteria like dividend cover, as I believe is advocated, are adhered to by the purchaser- in effect shares displaying the characteristics you describe do not pass the initial filter.

Alaric
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Re: Whether HYP (as defined in the guidelines) works

#220761

Postby Alaric » May 10th, 2019, 9:17 pm

Charlottesquare wrote: in effect shares displaying the characteristics you describe do not pass the initial filter.


Whatever filter was applied to the four shares suggested, it wasn't one that asked whether past investors had made or lost money on their investment.

At the possible risk of stating the obvious, you don't get a return of 9% or whatever on your initial investment if you lose capital.

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Re: Whether HYP (as defined in the guidelines) works

#220762

Postby MDW1954 » May 10th, 2019, 9:18 pm

Alaric wrote:
Itsallaguess wrote:Can you explain why HYP (as defined in the guidelines) is singled out here though?


Because it seeks out shares with a high dividend yield. Nothing directly wrong with that of course, except the filters for establishing whether a Company is just going through a bad patch or is basically junk seem weak to my mind. That's compounded by the advice to ignore capital performance. Again nothing wrong with ignoring volatility, that's sensible for buy and hold. It disregards the issue that at least some high dividend yield shares are high yield because in effect they are returning investors capital, or even worse, borrowing to pay dividends.


There's nothing whatsoever in the guidelines to say that capital performance does not matter.

Get your facts right. If you're going to criticise the guidelines, read them first.

MDW1954

Alaric
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Re: Whether HYP (as defined in the guidelines) works

#220764

Postby Alaric » May 10th, 2019, 9:21 pm

MDW1954 wrote:Get your facts right. If you're going to criticise the guidelines, read them first.


It's not the guidelines so much as the attitudes of posters. Is it not the case that any criticism of HYP on the Bland definition is treated as blasphemy?

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Re: Whether HYP (as defined in the guidelines) works

#220765

Postby MDW1954 » May 10th, 2019, 9:36 pm

Alaric wrote:
MDW1954 wrote:Get your facts right. If you're going to criticise the guidelines, read them first.


It's not the guidelines so much as the attitudes of posters. Is it not the case that any criticism of HYP on the Bland definition is treated as blasphemy?


On this board, no. Criticise away -- although get your facts right, please.

On the HYP Practical board, yes. That should be abundantly clear. The guidelines say what is allowed, and posters report offending posts. If you want to debate HYP, do it here.

MDW1954

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Re: Whether HYP (as defined in the guidelines) works

#220767

Postby Charlottesquare » May 10th, 2019, 9:53 pm

Alaric wrote:
MDW1954 wrote:Get your facts right. If you're going to criticise the guidelines, read them first.


It's not the guidelines so much as the attitudes of posters. Is it not the case that any criticism of HYP on the Bland definition is treated as blasphemy?


Not so, I and many others have reservations re HYP but a dividend cover test is within the criteria re selection to try to deal with the issues you raise.

In your other post you mention four shares, which four shares, the thread I am viewing makes no mention of any particular shares?

Personally I do not go for the ranking for selection by yield approach as this can ,I believe, miss (or at least leave for selection until much later) shares which have regularly increased their dividends year on year but the market keeps price correcting for this very trait and they then often fail to feature in the top yielders, say Unilever, however there are many adherents of yield investment who whilst not following HYP do value some of its features

(I , for instance, currently find it too UK centric but may more revert to the Uk closer to retirement so prefer ITs for international exposure but do like to target a melded yield at circa 4%, some holdings have a yield at 6% whilst others do not pay dividends, however I target an overall investment mix which hopefully, in the longer term, returns 4% re dividends and hopefully near 4% growth, it may not be HYP but it does lean on a fair few HYP ideas.)

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Re: Whether HYP (as defined in the guidelines) works

#220775

Postby Alaric » May 10th, 2019, 11:26 pm

Charlottesquare wrote:
Alaric wrote:
MDW1954 wrote: In your other post you mention four shares, which four shares, the thread I am viewing makes no mention of any particular shares?


viewtopic.php?f=15&t=17609

Date | EPIC | B/S | Concentration | Yield | Reason
10-May-19 | MARS | Buy | 1.57% | 7.48% | Top-Up
10-May-19 | IMB | Buy | 0.57% | 8.75% | Top-Up
10-May-19 | SLA | Buy | 0.95% | 8.07% | Top-Up
10-May-19 | NRR | Buy | 0.38% | 9.22% | Top-Up

MARS = Marstons (Beer, pubs & hotels)
IMB = Imperial Brands (Tobacco)
SLA = Standard Life Aberdeen (Fund managers)
NRR =New River REIT (Property)

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Re: Whether HYP (as defined in the guidelines) works

#220799

Postby csearle » May 11th, 2019, 8:19 am

Alaric wrote:Whatever filter was applied to the four shares suggested, it wasn't one that asked whether past investors had made or lost money on their investment.
To be fair to the poster the shares mentioned were not being suggested, they were merely being reported as the poster's own purchase choices.

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Re: Whether HYP (as defined in the guidelines) works

#220810

Postby Itsallaguess » May 11th, 2019, 9:08 am

I'm just really not sure that pointing at some investments that may have negative total-return, in a portfolio strategy that will be expected to perhaps hold some such investments, really warrants a write-off of the HYP strategy itself....

Surely any investment strategy, whether that be value, growth, income, or whatever else might float an investors boat, is often likely at times to hold negative-total-return components as part of a wider portfolio approach?

I should caveat the above with the point that I've actually walked away somewhat from the HYP 'single-company holdings' approach myself over recent years, and now very much tend to look towards investment-trusts to 'black-box' my income-investment strategy, as it's clear (to me at least...) that I simply don't have the right 'investment-personality' to carry a relatively small 'single-company portfolio' in my HYP, with one of the main issues actually *being* that I don't like doing so when such negative-total-return holdings are so visible, but I'm quite happy that the problem there lies with *me* as an investor, and not with the strategy itself - I'm fully aware that income-investment-trusts will undoubtedly be holding some negative-total-return holdings in their portfolio's, but I very much prefer to see the income-IT-wrapper, and not the gears underneath...

So where someone might want to point at some negative-total-return holdings and decry the HYP strategy, I would suggest that they perhaps look not at the strategy itself, but maybe a little closer to home and try to find a strategy that simply suits them better - it's what I realised anyway - the problem wasn't with the HYP strategy - the 'problem' is very much me!

Cheers,

Itsallaguess

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Re: Whether HYP (as defined in the guidelines) works

#220813

Postby Alaric » May 11th, 2019, 9:18 am

Itsallaguess wrote:- the problem wasn't with the HYP strategy


The problem with the HYP strategy or perhaps those following it, is that it doesn't note that a stock with a 2% dividend yield where the dividend increases at 8% is a higher total return than one that pays 4% increasing at 4% which in turn is a higher return than one that pays 6% with no increase at all. Indeed it would likely rank the 6% stock highest in a selection link.

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Re: Whether HYP (as defined in the guidelines) works

#220815

Postby Itsallaguess » May 11th, 2019, 9:27 am

Alaric wrote:
Itsallaguess wrote:
- the problem wasn't with the HYP strategy


The problem with the HYP strategy or perhaps those following it, is that it doesn't note that a stock with a 2% dividend yield where the dividend increases at 8% is a higher total return than one that pays 4% increasing at 4% which in turn is a higher return than one that pays 6% with no increase at all. Indeed it would likely rank the 6% stock highest in a selection link.


I don't think it is a problem with the HYP strategy - any more than a 'value strategy' might have 'a problem' because it might miss some good 'growth stocks'.....

The HYP strategy has a clear aim - to allow normal people with no investment background to pick up a very simple strategy that allows them, generally and over time, to see good income-returns with very little effort.

To start expounding on issues with such a strategy because it doesn't 'do other things' is missing the point completely - if it tried to 'do other things' then it would be more complicated, and it would not be as simple to pick up by non-investment 'normal people'.

Again - the issue isn't with the HYP strategy here - the issue is with your potential expectations of it.....

It's like complaining that you'd bought a mini and then subsequently discovered that it doesn't do off-road very well - if you want to do off-road, buy a different car.....

Cheers,

Itsallaguess

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Re: Whether HYP (as defined in the guidelines) works

#220817

Postby kiloran » May 11th, 2019, 9:28 am

Alaric wrote:
Itsallaguess wrote:- the problem wasn't with the HYP strategy


The problem with the HYP strategy or perhaps those following it, is that it doesn't note that a stock with a 2% dividend yield where the dividend increases at 8% is a higher total return than one that pays 4% increasing at 4% which in turn is a higher return than one that pays 6% with no increase at all. Indeed it would likely rank the 6% stock highest in a selection link.

I feel that those who criticise the HYP strategy are over-thinking things.
To me, the HYP is about simplicity, income, and (as an alternative to an annuity) a value on death. Hopefully a higher value than cost, but not necessarily so.
By all means define an alternative strategy with more complicated rules, but the Doris's of this world will not want to (or be able to) go through all of the computations.
HYP is not the bee's knees of investing, and was never intended to be, but it generally works OK and suits many people. I just don't understand the apparent need to constantly criticise it.

--kiloran

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Re: Whether HYP (as defined in the guidelines) works

#220819

Postby seagles » May 11th, 2019, 9:35 am

Alaric wrote:If you buy a share and it makes a loss, you would have been better off not buying at all.


I thought HYP as defined in the guidelines was more to do with a rising income than capital value? You only make a "loss" if you sell the share. I have shares in my portfolio that have swung wildly from "loss" to "gain" over the years (and the other way as well), it is part of the process.

As to the title question. HYP as defined has provided me with a good start to HYP, with a rising income. However, I realised that I needed to think forward and decided that IT's would give me a more global spread and take away the need to "manage" the portfolio. I still have a HYP portfolio as I still enjoy a bit of the "managing" side, but am moving gradually to a more IT based portfolio. Currently 73% IT to 27% HYP Shares. Have not added to the HYP for nearly a year, other than in April when I sold TATE (CGT purposes from trading account) and top sliced RIO (too big a part of my portfolio and income), topped up MARS. I call that "managing" my portfolio, which is acceptable under the guidelines.

My personal opinion is that HYP is only part of an overall strategy that contains bits of others. Each person has a "comfort" zone with different parts whether, Value, Income or Growth - Shares, IT's, Bonds etc....

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Re: Whether HYP (as defined in the guidelines) works

#220820

Postby fisher » May 11th, 2019, 9:38 am

kiloran wrote:I feel that those who criticise the HYP strategy are over-thinking things.
To me, the HYP is about simplicity, income, and (as an alternative to an annuity) a value on death. Hopefully a higher value than cost, but not necessarily so.
By all means define an alternative strategy with more complicated rules, but the Doris's of this world will not want to (or be able to) go through all of the computations.
HYP is not the bee's knees of investing, and was never intended to be, but it generally works OK and suits many people. I just don't understand the apparent need to constantly criticise it.

--kiloran


Absolutely.

Alaric
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Re: Whether HYP (as defined in the guidelines) works

#220828

Postby Alaric » May 11th, 2019, 10:56 am

Itsallaguess wrote:The HYP strategy has a clear aim - to allow normal people with no investment background to pick up a very simple strategy that allows them, generally and over time, to see good income-returns with very little effort.


Also it points them in the direction of junk equity such as Carillion.

For someone looking for annuity like returns, price volatility doesn't matter, but complete wipe out does. For that matter so does a dividend cancellation. Elsewhere on the forum it's noted that at the current price, Centrica is on a 13% yield. Or is that a 0% yield if they cancel the dividend?

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Re: Whether HYP (as defined in the guidelines) works

#220845

Postby moorfield » May 11th, 2019, 12:19 pm

Alaric wrote:Also it points them in the direction of junk equity such as Carillion.


I've suggested elsewhere (viewtopic.php?f=15&t=10780&p=127483&hilit=reverse#p127483), and we've discussed it before I think, to select 15 starting from lower (meaning >= FTSE100) to higher yield rather than higher to lower yield. Or put another way, reversing the order in which one's hard-earned capital can be seduced and (potentially) misallocated.

The same notes played, in a different order. But what do I know.

Alaric
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Re: Whether HYP (as defined in the guidelines) works

#220847

Postby Alaric » May 11th, 2019, 12:26 pm

moorfield wrote:
The same notes played, in a different order.


Makes sense. Another benchmark is the return you would get by holding a FTSE 100 ETF. If that's not enough for the income requirement, how far to tilt it in favour either of higher dividends or Companies that have had he highest increase in dividends.


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