XIRR Question

[doug2500]

I've been calculating the XIRR of some of my shareholdings for interest.

I've not bothered digging out 20 years of didvidends and just concentrated on capital growth.

Is it accurate to view a holding with an XIRR of 7% which has had a fairly stable yield of around 3% as equivalent to a holding with an XIRR of 9% and a yield of 1%?

I'm not worried about minor inaccuracies or small points of difference just whether this is roughly correct, or total hogwash?

For example SSE has an XIRR of 8%, but has a yield of 6% and always has had a good yield. An XIRR of 8% is not quite good enough to satisfy me, but 8% plus a high yield of 4 - 6% for 23 years is. If I actually plugged in 23 years of dividends would the XIRR come out in the range of 12 - 14%, or could it be completely different?

I realize any inaccuracies would be even larger in companies with highly variable or growing yields, but I'm only after a rule of thumb to save me plugging in years worth of dividends.

Thanks

[tjh290633]

For example SSE has an XIRR of 8%, but has a yield of 6% and always has had a good yield. An XIRR of 8% is not quite good enough to satisfy me, but 8% plus a high yield of 4 - 6% for 23 years is. If I actually plugged in 23 years of dividends would the XIRR come out in the range of 12 - 14%, or could it be completely different?

I have held S SE since 2010. Had I held a single share since that date and calculate the XIRR including dividends, I get an XIRR of 10.28%.

If I just look at the SP, then the calculation is:

Dates         Price
28-Sep-10     11.22 
23-Apr-17    -14.28 
XIRR           3.74%

So for the last 7 years, having had a starting yield of 6.7%, your assumption would appear to have been born out.

TJH

[77ss]

For example SSE has an XIRR of 8%, but has a yield of 6% and always has had a good yield. An XIRR of 8% is not quite good enough to satisfy me, but 8% plus a high yield of 4 - 6% for 23 years is. If I actually plugged in 23 years of dividends would the XIRR come out in the range of 12 - 14%, or could it be completely different?

I have held SSE since 2002.

My notional 'untinkered, with dividends' XIRR is 12.05%
A 'capital only, untinkered' XIRR would have been 5.68%

Historic yield at initial purchase was 4.7%.

So, in my case, your approximation could be rather on the low side - but certainly not 'completely different'.

[doug2500]

Thanks for the replies.

Your examples sound promising, so as a very rough and ready 'rule of thumb' it's okay.