Dividend stocks appeal to older investors

[Dod101]

Dod101,

Given that you sold some SMT when it was comically over valued, I would suggest that you have presented yourself with the option to do either, live of dividends or capital gain.

W.

I could have but chances like that do not come too often and certainly not often enough for me to set up any sort of regular income. Instead, the capital gains were reinvested to produce some more dividends.

Dod

[DrFfybes]

Dividends are cash, real money in the bank..

Unless a chunk of your HYP is DLG, I strongly suspect Persimmon aren't going to pay an 18% yield since their price drop, or going back a while Citigroup, MAN Group, General Motors, and Jimsusan's perennial favourite Lloyds.

OK, I haven't gone completely cold turkey on Divis, in fact I have an account that is in Funds that pay regular (some monthly) income, but VEVE and BRKB are my 2 largest holdings now.

When saving for retirement, growth is the aim. So if you retire at 70, you want income, but what if you retire at 60, or 50? At 50 you will probably be living on your investments for longer than you spent acquiring them

Paul

[scrumpyjack]

Dividends are cash, real money in the bank..

Unless a chunk of your HYP is DLG, I strongly suspect Persimmon aren't going to pay an 18% yield since their price drop, or going back a while Citigroup, MAN Group, General Motors, and Jimsusan's perennial favourite Lloyds.

OK, I haven't gone completely cold turkey on Divis, in fact I have an account that is in Funds that pay regular (some monthly) income, but VEVE and BRKB are my 2 largest holdings now.

When saving for retirement, growth is the aim. So if you retire at 70, you want income, but what if you retire at 60, or 50? At 50 you will probably be living on your investments for longer than you spent acquiring them

Paul

BTW, I don’t have an HYP and it would not be suitable for my circumstances, but growth and dividends are not mutually exclusive. Indeed the ability to pay a dividend, that rises steadily each year for many years and is well covered by profit, is a good sign of a healthy growing business, though I would never buy a share based on the dividend.

In the case of Persimmon, the company constantly referred to their Capital Return Plan, which they did by way of dividend and gave a timetable showing the planned ending of it. So no one could reasonably have expected that to be a sustainable normal dividend. I certainly can’t complain about them as the current depressed share price is about 4 times my purchase cost and I’ve had my purchase cost back many times in dividends alone. They’ll bounce back in due course, IMO.

[kempiejon]

BTW, I don’t have an HYP and it would not be suitable for my circumstances, but growth and dividends are not mutually exclusive. Indeed the ability to pay a dividend, that rises steadily each year for many years and is well covered by profit, is a good sign of a healthy growing business, though I would never buy a share based on the dividend.

Markus of this parish regularly updates on shares that have good dividend growth that pulls the sp along with it or vv.
https://lemonfool.co.uk/viewtopic.php?f=56&t=5335

[ignotus20]

My thought with this was a bit like yours though and the intention was to have enough income in the early years (via dividends) to not need to sell loss-making assets while they (hopefully) accrue some capital gains which can be harvested later. This stuff is a bit of a sliding puzzle, for sure.

Loss making assets do not accrue capital gains.

Dod

True, but you can't spend the profits from loss-making assets either though.

[Dod101]

BTW, I don’t have an HYP and it would not be suitable for my circumstances, but growth and dividends are not mutually exclusive. Indeed the ability to pay a dividend, that rises steadily each year for many years and is well covered by profit, is a good sign of a healthy growing business, though I would never buy a share based on the dividend.

Markus of this parish regularly updates on shares that have good dividend growth that pulls the sp along with it or vv.
https://lemonfool.co.uk/viewtopic.php?f=56&t=5335

I would cite Diageo, BAT, Unilever, National Grid and 3i Infrastructure and of the ITs, Alliance and Murray International. Obviously, the dividend increases and the share price do not march in tandem but these are the sort of shares that I look for. Overseas, the Canadian banks are in much the same category. Chasing the dividend is not a good idea. None of these is particularly high yield but they grow their dividend almost every year and over the years as scrumpjack implies, with a reliable growth in the dividend the share price will follow.

Dod

[Alaric]

. None of these is particularly high yield but they grow their dividend almost every year and over the years as scrumpjack implies, with a reliable growth in the dividend the share price will follow.

Which is what happens and makes a current high dividend yield not a partcicularly good selection criterion for a reliable income producing portfolio. The stocks mentioned usually feature in the top holdings in funds, ITs and OEICs which are managed to generate dividend income. That's a plausible explanation for why the price of such shares is driven up thus reducing the running yield below that of Companies where the dividend yield is high because the market price is depressed.

[88V8]

None of these is particularly high yield but they grow their dividend almost every year and over the years as scrumpjack implies, with a reliable growth in the dividend the share price will follow.

The stocks mentioned usually feature in the top holdings in funds, ITs and OEICs which are managed to generate dividend income. That's a plausible explanation for why the price of such shares is driven up thus reducing the running yield below that of Companies where the dividend yield is high because the market price is depressed.

I don't hold MYI but I do have MUT and it's one of the few IT's where the SP has risen significantly. Because of the relatively low yield I only bought a relatively small holding, in contrast to HFEL for instance where I have a large holding that is largely underwater.
I'm afraid that Luni's admonition not to chase the yield also a[plies to ITS....

Unilever (hold) and Diageo (don't) are nice portfolio embellishments if one can afford the low yield but at least they do pay a divi; two years ago, heeding the comments about North America being the place to be, I bought into Mid Wynd MWY and USA, both so-called growth ITs that haven't. They perfectly illustrate why I don't buy growth stocks, a one-trick pony that offers nothing if the growth is not forthcoming.

Divis with yields in the Goldilocks zone seem to me the ideal investment, now if I could just put that into practice...

V8

[Dod101]

. None of these is particularly high yield but they grow their dividend almost every year and over the years as scrumpjack implies, with a reliable growth in the dividend the share price will follow.

Which is what happens and makes a current high dividend yield not a partcicularly good selection criterion for a reliable income producing portfolio. The stocks mentioned usually feature in the top holdings in funds, ITs and OEICs which are managed to generate dividend income. That's a plausible explanation for why the price of such shares is driven up thus reducing the running yield below that of Companies where the dividend yield is high because the market price is depressed.

Indeed, and your point is?

[Dod101]

None of these is particularly high yield but they grow their dividend almost every year and over the years as scrumpjack implies, with a reliable growth in the dividend the share price will follow.

The stocks mentioned usually feature in the top holdings in funds, ITs and OEICs which are managed to generate dividend income. That's a plausible explanation for why the price of such shares is driven up thus reducing the running yield below that of Companies where the dividend yield is high because the market price is depressed.

I don't hold MYI but I do have MUT and it's one of the few IT's where the SP has risen significantly. Because of the relatively low yield I only bought a relatively small holding, in contrast to HFEL for instance where I have a large holding that is largely underwater.
I'm afraid that Luni's admonition not to chase the yield also a[plies to ITS....

Unilever (hold) and Diageo (don't) are nice portfolio embellishments if one can afford the low yield but at least they do pay a divi; two years ago, heeding the comments about North America being the place to be, I bought into Mid Wynd MWY and USA, both so-called growth ITs that haven't. They perfectly illustrate why I don't buy growth stocks, a one-trick pony that offers nothing if the growth is not forthcoming.

Divis with yields in the Goldilocks zone seem to me the ideal investment, now if I could just put that into practice...

V8

I hold both Murray ITs and they are doing me well (despite both being managed by abrdn, an investment house that is undistinguished at best). Growth shares whether held via ITs or not, have done nothing for the last couple of years or so but their time will come again. I do not know what is meant by the Goldilocks zone but shares with modest and increasing dividends are doing fine.

Dod

[ADrunkenMarcus]

Markus of this parish regularly updates on shares that have good dividend growth that pulls the sp along with it or vv.
https://lemonfool.co.uk/viewtopic.php?f=56&t=5335

Thanks Kempiejon.

I'll probably next do my annual portfolio update around May 2023 but it looks like I have got at least three shares which are showing double digit *real terms* dividend growth for the past year: Diploma; Evolution AB; and MasterCard (the latter in £ terms, if not $).

Best wishes


Mark.

[pyad]

BTW, I don’t have an HYP and it would not be suitable for my circumstances, but growth and dividends are not mutually exclusive...

Quite. I'd go further to say that good yields can actually accompany capital growth so you get the best of both worlds, if capital growth matters to you.

Many HYPs have beaten the FTSE100 long term.

I recall aeons ago when researching HYPs as a long term strat., I first looked at funds cos they were the only source of info on the matter. This is pre internet so I used fund perf. tables at the back of some print magazine, I think Money Management. Anyway what stuck out strongly for me was that HY equity funds, long term on average had better capital growth than so-called growth funds. An amazing fact I thought.

But not only that, even more amazing was that the standard deviation of capital growth was better on average for the HY funds than the growth funds. In other words not only did HY funds deliver better capital growth long term, but they did so at lower risk. This was a revelation for me and not a conclusion of which many people, I mean market knowledgeable people, not Clapham Omnibus types, seemed to be aware. It flew in the face of the black and white yield vs growth share argument which I see is still perpetuated on this board here.

So HY funds on average had a higher yield, higher long term growth and lower risk than growth funds. Naturally not every HY fund was superior in these ways to every growth fund it was just an average, but the trend was clear to me. As so often in life and investment, especially value investing which is where I came from, the majority was wrong. You likely stood a better chance of long term gains, though no guarantees of course, with a properly diversified portfolio of HY shares than a port of low/zero yield growth shares, even if growth rather than income was your aim. Plus of course you received a higher income along the way which would boost that growth if reinvested.

I've said repeatedly that HYPs should be approached as income investments and that capital doesn't matter, but the likelihood of good long term growth as well sure don't hurt any. I just didn't want to promote the capital potential because short term that can very disappointing and capital players are more likely to become disillusioned with short term poor perf., in contrast to the income which will flow from day one.

[OhNoNotimAgain]

BTW, I don’t have an HYP and it would not be suitable for my circumstances, but growth and dividends are not mutually exclusive...

Quite. I'd go further to say that good yields can actually accompany capital growth so you get the best of both worlds, if capital growth matters to you.

Many HYPs have beaten the FTSE100 long term.

I recall aeons ago when researching HYPs as a long term strat., I first looked at funds cos they were the only source of info on the matter. This is pre internet so I used fund perf. tables at the back of some print magazine, I think Money Management. Anyway what stuck out strongly for me was that HY equity funds, long term on average had better capital growth than so-called growth funds. An amazing fact I thought.

But not only that, even more amazing was that the standard deviation of capital growth was better on average for the HY funds than the growth funds. In other words not only did HY funds deliver better capital growth long term, but they did so at lower risk. This was a revelation for me and not a conclusion of which many people, I mean market knowledgeable people, not Clapham Omnibus types, seemed to be aware. It flew in the face of the black and white yield vs growth share argument which I see is still perpetuated on this board here.

So HY funds on average had a higher yield, higher long term growth and lower risk than growth funds. Naturally not every HY fund was superior in these ways to every growth fund it was just an average, but the trend was clear to me. As so often in life and investment, especially value investing which is where I came from, the majority was wrong. You likely stood a better chance of long term gains, though no guarantees of course, with a properly diversified portfolio of HY shares than a port of low/zero yield growth shares, even if growth rather than income was your aim. Plus of course you received a higher income along the way which would boost that growth if reinvested.

I've said repeatedly that HYPs should be approached as income investments and that capital doesn't matter, but the likelihood of good long term growth as well sure don't hurt any. I just didn't want to promote the capital potential because short term that can very disappointing and capital players are more likely to become disillusioned with short term poor perf., in contrast to the income which will flow from day one.

That's what Barclays has been saying for years. But it doesn't suit many people to believe it.

[Alaric]

I've said repeatedly that HYPs should be approached as income investments and that capital doesn't matter,

Is there any point of investing in Companies that sustain their dividend by burning the capital? That may make sense for an investor looking to replace or supplement an annuity, but not for investors seeking to accumulate who are just misleading themselves as to their returns.

[Newroad]

Afternoon All.

Let's take what Pyad says at face value. At risk of over-simplifying, it appears to distil to

(1) The focus is on an income flow from day one, but nevertheless
(2) That (high) yield focused funds perform better over the long-term than growth focused funds, and
(3) That the outperformance in (2) above is achieved at lower risk (volatility)

The question becomes for those who wish to broadly advocate/defend a HYP strategy - on what basis they do so? Anecdotally, the majority appears to focus on (1) alone. With that group, there seems little point in debating in round terms, as the point is somewhat moot.

However, if there are HYP'ers who (continue to?) believe (1) & (2), or (1) & (2) & (3), there is a potentially interesting debate to have - vs other types of total return strategy . I would be interested in HYP'ers who consider themselves in the 1/2 or 1/2/3 camp?

I suspect there is plenty of room for debate, as

The frame of reference of Pyad and others (when they did their research to form their views), and
The timeframe over which any current total return measurement is taken for a given strategy

may both meaningfully affect the outcome.

As a related aside, I continue to dislike the straw-man oft cited of beating the FSTE100. If that is what is meant by (2) and perhaps (3) above, then the point once again becomes fairly moot - as many and perhaps most are not prepared to restrict themselves to only FTSE100 investments.

Regards, Newroad

[Lootman]

BTW, I don’t have an HYP and it would not be suitable for my circumstances, but growth and dividends are not mutually exclusive...

Quite. I'd go further to say that good yields can actually accompany capital growth so you get the best of both worlds, if capital growth matters to you.

Many HYPs have beaten the FTSE100 long term.

If a particular HYP beats the FTSE-100 then credit is due to that individual stockpicker for beating the average of the universe that he is selecting from.

But that does not prove that HY investing gives you a higher total return, since other HYPs can and do under-perform the FTSE-100.

And more importantly it does not prove that limiting yourself to only the FTSE-100 gives better returns than investing globally. UK HY shares are about 2% of global market cap. It would be remarkable if restricting yourself in such a manner consistently out-performed, and of course it has not done so.

The fact that UK market cap has gone from 10% of global market cap to 4% of global market cap in the last 25 years is a clue there.

[Bubblesofearth]

But that does not prove that HY investing gives you a higher total return, since other HYPs can and do under-perform the FTSE-100.

Can you provide a link to one please?

Thanks
BoE

[Lootman]

But that does not prove that HY investing gives you a higher total return, since other HYPs can and do under-perform the FTSE-100.

Can you provide a link to one please?

That is another problem because there is no standardised HYP in the public domain that can be examined, in the same way that fund returns are. So anyone can claim anything.

But it seems highly unlikely that every HYP that has ever been run has beaten the UK market. Heck, even Pyad would not dare make that claim! Ohno might, of course.

[1nvest]

For some perspective, someone who initially divided their original £75,000 into three equal piles, Pound coins, gold coins, and a FT250 accumulation index fund, spent the Pounds first, then the gold coins ... would to recent in total return terms have outperformed the total returns from the FT100, HYP1 and 'tweaked' TJH HYP (broadly aligned/compared to the HYP's).

For income, perhaps 5% of the start date amount drawn as the first year spending, and then the prior years income amount uplifted by inflation as the amount of income drawn in those subsequent years, maybe drawn monthly pro rata. A regular inflation adjusted income (monthly 'wage').

[kempiejon]

But that does not prove that HY investing gives you a higher total return, since other HYPs can and do under-perform the FTSE-100.

Can you provide a link to one please?

Thanks
BoE

I think there's a good number of once HYPers hanging around here, probably more that have moved on becasue the method didn't work for them. Now whether that's becasue they coldn't match of better the FTSE100 or another reasdon is not for me to say but I'd expect there would be HYPs that failed to beat a 100 tracker. My HYP has definately had times of underperformance, but I like the income it thows off and the growth is good enough for me.