Capital

[IanTHughes]

My apologies but when you stated:

That implies rather the opposite to what you were saying i.e. that higher relative dividends means greater capital values. Experience indicates otherwise.

I thought you would be prepared to discuss why you believed that

Because that has been my experience. I fully accept that you might perceive a different pattern, depending on your start and end dates, and how lucky you were in your picks.

Actually what I said was:

What evidence of that experience can you provide? Evidence pointing to the opposite of your experience has already been supplied, earlier in this thread:

It might be instructive for you to follow the fortunes of the total return versions of the FTSE350LY and the FTSE350HY indices. Both started at the same value on the same day. You can find the current values by Googling "World markets at a glance". The HIX TR value is 5439 while the LIX TR value is 4761. I accept that in recent years the differential has narrowed, but they didn't get that way by accident.

viewtopic.php?p=331397#p331397

I am sorry, I thought you must have read it.

No, it was you that made an unsubstantiated claim about your experience, not me.

But to the point: Do you believe that only dividends drive capital returns? Yes or no?

What on earth has that got to do with your unsubstantiated claim that investing in lower yielding shares would garner a better capital result?


Ian

[Lootman]

What evidence of that experience can you provide? Evidence pointing to the opposite of your experience has already been supplied, earlier in this thread:

It might be instructive for you to follow the fortunes of the total return versions of the FTSE350LY and the FTSE350HY indices. Both started at the same value on the same day. You can find the current values by Googling "World markets at a glance". The HIX TR value is 5439 while the LIX TR value is 4761. I accept that in recent years the differential has narrowed, but they didn't get that way by accident.
viewtopic.php?p=331397#p331397

I am sorry, I thought you must have read it.

I did not see that but have seen his similar claims in the past. I have no reason to doubt his numbers. However I do not believe that the only alternative to UK HY shares is UK LY shares. For growth I'd much rather invest in the US and emerging markets since that is where the growth is.

The evidence of my experience is my testimony of my experience!

You know, these days I usually avoid these "is HYP great or crap?" debates because of their endless tediousness. But since this was on the Investment Strategies board I had hoped for a broader and more mature debate. I only contributed at all, against my better judgement, because of the claim made that only dividends drive capital values. I notice that you continue to decline to state whether you agree with that claim or not.

[IanTHughes]

What evidence of that experience can you provide? Evidence pointing to the opposite of your experience has already been supplied, earlier in this thread:

It might be instructive for you to follow the fortunes of the total return versions of the FTSE350LY and the FTSE350HY indices. Both started at the same value on the same day. You can find the current values by Googling "World markets at a glance". The HIX TR value is 5439 while the LIX TR value is 4761. I accept that in recent years the differential has narrowed, but they didn't get that way by accident.
viewtopic.php?p=331397#p331397

I am sorry, I thought you must have read it.

I did not see that but have seen his similar claims in the past. I have no reason to doubt his numbers. However I do not believe that the only alternative to UK HY shares is UK LY shares.

Nobody has said that to my knowledge. All that was being pointed out was that, based on those two indices, the total return was better for Higher Yielding shares than Lower Yielding shares.

For growth I'd much rather invest in the US and emerging markets since that is where the growth is.

The evidence of my experience is my testimony of my experience!

You are simply going to rely on the "It is true because I say it is true" argument! I was hoping you might have been able to provide something useful for us all to consider. Oh well, at least I now know you just made it up and I can ignore it. Shame though.

You know, these days I usually avoid these "is HYP great or crap?" debates because of their endless tediousness. But since this was on the Investment Strategies board I had hoped for a broader and more mature debate.

In point of fact this particular thread is about "Capital" not "HYP". Did you not know?

And it would be a more mature, indeed a more useful debate, if only people would not rely on backing up claims with the argument of "It is true because I say it is true"!


Ian

[Lootman]

The evidence of my experience is my testimony of my experience!

You are simply going to rely on the "It is true because I say it is true" argument!

Yes, if someone here relates that they are an eye witness to something then I take that at face value. I do not assume that they are lying. What do you do?

If nobody said anything here unless they could prove it beyond reasonable doubt in a court of law then this would be a very quiet discussion forum. And in a court of law, personal testimony is an accepted form of evidence.

Investing, like politics, is about the clash of different opinions.

I notice that you have now for the third time refused to state whether you agree that capital values are driven only by dividends. Readers are entitled therefore to infer that you do not know, and that is fair enough.

[Wizard]

You are wrong. It is not the market which changes the differentials between shares. It is usually other factors, like stake building or increased profits and dividends.

Had BT.A been above my weight limit, then I would have trimmed it back and reinvested in a share paying a dividend giving it a higher yield. That way I increase the income flow. It doesn't matter what the price of the share you trim is, it is how it stands relative to the rest. It will have got to the top of the midden because its relative price will have risen. It may actually have fallen, but less so than the other shares.

I am just as happy applying my methods on a falling market as on a rising market, simply because the level of the market as a whole is irrelevant.

TJH

You say I am wrong with no caveat, just wrong absolutely and unequivocally. But then go on to say it is in your view it is "usually" other factors that cause changes in relative values. This suggests that even you think that maybe sometimes it is not those factors and could be the market.

Your problem is that you do not recognise that "The Market" is an agglomeration of a number of individual shares. The Market as a whole moves up or down. The individual shares move relative to each other due to factors, other than those driving the market as a whole.

You say I am wrong about the market changing the relative values of your shareholdings, that seems to imply you think the market moves broadly in lock step, which is decidedly odd. Looking at your portfolio I see you hold Imperial Brands (IMB) and Aviva (AV.). In the last week I see IMB was down about 1%, in the same time AV. was up 11%. That would seem to have made a meaningful change in the relative size of these two shareholdings. Too short a period? In the last month IMB is down 13% and AV. up 4%, so an even bigger relative movement. In the last three months IMB is down 23%, AV. up 21%. There would have had to have been a pretty big top up to outweight that three month change in relative value. And of course that is only looking at the relative position of two of what I believe is a c.40 share portfolio. Maybe you need to think about this again.

Interestingly back in 2012 you seemed to accept the impact of the market on share values. In a TMF article recently linked to you wrote:

As things developed, it became obvious that some shares had outgrown their usefulness in terms of income generation, because their yields were now well below that of the market. Accordingly, I developed my own criteria for disposing of share holdings completely. The criteria are:

1. The share has grown to such an extent that its yield is now less than about half that of the market, typically less than 2%...

viewtopic.php?p=89919#p89919

That is not a function of top ups, topping up a share in your portfolio will not change its yield, that only happens if the dividend or the price change. You don't mention the dividend changing, so I can only take your comment to be a recognition of market price changes.

Absolute rubbish. The share price has risen faster than the dividend has risen. This has nothing to do with the movement of the market.

Much more recently you wrote:

I explained why I made the changes. Everything is relative. According to market sentiment some shares move up the rankings, while others move down. Just because the market is volatile, that does not mean you sit on your posterior and do nothing. The name of the game is a high and increasing dividend. This is the first occasion I have had cause to trim UU. since I first bought in 2001, although there was a return of capital in 2008. People have criticised UU. for its lack of dividend growth in the past. Now I get criticized for taking advantage of its resilience in a falling market to enhance my income.

viewtopic.php?p=290077#p290077

So as recently as March this year you yourself were saying the market can move shares up (and presumably down) your relative ranking. Again, this seems to be an explicit recognition on your part of the relative value of your shareholdings changing due to market price movements.

If, as you say I am wrong, then presumably you also think your past self was equally misguided

If a share price rises on a falling market, clearly this cannot be the result of the market movement.

TJH

Looking past your continued rudeness, it seems what you are now saying you are calling "the market" is what I would describe as one of the many indices. To my mind "the market" is a term similar to when people talk of "Mr Market" or "the invisible hand of the market", i.e. the aggregate of market forces that move share prices, up or down. I think the very specific choice of meaning you now claim is rather odd. Indeed, I would go further, I suspect you are making it up as you go along. To illustarte, again quoting you from a recent post you said:

I explained why I made the changes. Everything is relative. According to market sentiment some shares move up the rankings, while others move down. Just because the market is volatile, that does not mean you sit on your posterior and do nothing. The name of the game is a high and increasing dividend. This is the first occasion I have had cause to trim UU. since I first bought in 2001, although there was a return of capital in 2008. People have criticised UU. for its lack of dividend growth in the past. Now I get criticized for taking advantage of its resilience in a falling market to enhance my income.

My bold.

In that quote you are referring to "market sentiment" moving shares in your ranking, that is a very weird choice of words if you think the market refers to "an agglomeration of a number of individual shares", as you said in your last post. It rather feels like you are tying yourself in knots just so you can disagree with me.

[tjh290633]

it seems what you are now saying you are calling "the market" is what I would describe as one of the many indices. To my mind "the market" is a term similar to when people talk of "Mr Market" or "the invisible hand of the market", i.e. the aggregate of market forces that move share prices, up or down.

Precisely, it is the aggregate of those forces, and the market is the aggregate of those shares which comprise it.

My comment:

If a share price rises on a falling market, clearly this cannot be the result of the market movement.

is something that you seem unprepared to discuss, except to indulge in a personal attack.

TJH

[IanTHughes]

The evidence of my experience is my testimony of my experience!

You are simply going to rely on the "It is true because I say it is true" argument!

Yes, if someone here relates that they are an eye witness to something then I take that at face value. I do not assume that they are lying. What do you do?

If nobody said anything here unless they could prove it beyond reasonable doubt in a court of law then this would be a very quiet discussion forum. And in a court of law, personal testimony is an accepted form of evidence.

Investing, like politics, is about the clash of different opinions.

Whoever said anything about "beyond reasonable doubt"? I certainly did not. All I was asking for was some information as to how you came to your opinion, especially as it seems to contradict the only piece of evidence that I am currently aware of.

I notice that you have now for the third time refused to state whether you agree that capital values are driven only by dividends.

If you wish to discuss what drives the valuation of company shares, why not start an appropriate thread, rather than simply raising it here so as to obfuscate your refusal to back up your so far unsubstantiated claim that investing in lower yielding shares produces a better capital result than higher yielding shares?

Readers are entitled therefore to infer that you do not know, and that is fair enough.

Of course! I do not think that I will lose any sleep over that!


Ian

[Lootman]

I notice that you have now for the third time refused to state whether you agree that capital values are driven only by dividends.

If you wish to discuss what drives the valuation of company shares, why not start an appropriate thread, rather than simply raising it here

Because I did not raise it here. That bizarre idea was raised in an earlier post (not by you) and I entered this debate only to refute that claim.

Since you do not appear to support it and the original proponent has scurried away, I am willing to agree the topic is now dead.

[Wizard]

it seems what you are now saying you are calling "the market" is what I would describe as one of the many indices. To my mind "the market" is a term similar to when people talk of "Mr Market" or "the invisible hand of the market", i.e. the aggregate of market forces that move share prices, up or down.

Precisely, it is the aggregate of those forces, and the market is the aggregate of those shares which comprise it.

My comment:

If a share price rises on a falling market, clearly this cannot be the result of the market movement.

is something that you seem unprepared to discuss, except to indulge in a personal attack.

TJH

No attacks from me, I have not said you are speaking absolute rubbish.

Using the term in the way you do, a market is made up of the shares in it, so some shares can be rising while others fall. Yet you now only refer to the market as a singular thing seemingly ignoring the component parts, but let us move away from that definition. What you said a few posts up was:

It is not the market which changes the differentials between shares. It is usually other factors, like stake building or increased profits and dividends.

Whether it is called the market, or market forces, or whatever, you said that is not what changes the relative values of your shares. Yet, as everyone well knows (and I demonstrated previously) one share price can move up while another moves down, that has the power to change the relative value of your shares by far more than a top up using dividends received can. Are you really trying to say that is not the case? If so I am not sure there is really any basis for a discussion.

[Itsallaguess]

You know, these days I usually avoid these "is HYP great or crap?" debates because of their endless tediousness.

But since this was on the Investment Strategies board I had hoped for a broader and more mature debate.

Great or crap based on what metric though Lootman?

Those who suggest it's 'crap' often want to frame that discussion around total return, pointing out that there are 'better' ways to achieve improved results in that specific area using different investment strategies..

Those who suggest it's 'great' often want to frame that discussion around more personal reasons that apply to them as personal investors, and never claim that total return is a primary driver...

The two will never meet Lootman, because the question is being framed in two completely different ways for both sets of parties, with the 'total return' party often sticking their fingers in their ears and not really listening to what they're being told...

Put it this way -

Which is the greatest car?

If we consider that the 'total return' of a car journey is the overall cost and efficiency with which it can get someone from A to B, then you'd think that we'd all be driving the same car by now, as we'd all have quickly found which one does that the most efficiently...

But we don't...

We all drive different cars....

Why is that, do you think?

I think one of the primary reasons that we drive different cars is that the 'total return' efficiency of a car is clearly not the only driver when someone buys one...

Car drivers might consider other things to be important too, and sometimes even *more* important than the 'total return' efficiency of it...

They'll perhaps consider how big it is, or what colour it is, or the shape of the bodywork, or how it drives, or where it was made, or what types of wheels it's got, or what it feels like when they're sat inside, or how much room the boot has got, or even whether it's got a boot at all...

Many, many things might be more important when buying a car than the 'total return' efficiency of it...

There is little outcry that this is the case, because people seem to simply accept that these are sometimes important to people buying cars. We don't see endless threads on this car-buying aspect being raised on these boards, because it's broadly accepted that for the purchase decision of a car, there are many different reasons why we might, as individuals, prefer one particular car to another....

Why does that not also apply to investment strategies Lootman?

Why are people 'allowed' to choose a car that's 'great' for themselves, when based against reasons that are important to them, and not just the primary 'total return' efficiency of the vehicle, and yet when it comes to investment strategies, people are forced to justify their decisions against a single 'total return' metric, which they repeatedly say is not a primary driver in their choice of investment strategy in the first place, and which they never claim is better than any other strategy anyway?

They might often choose an income-investment approach in the same way that we all choose our cars Lootman - for personal reasons above 'total return' reasons...

So when you're looking for a 'broader and more mature debate' on this subject, I'd perhaps start with the people with the 'total return' obsession first, because that's about as useful to me as a starting point for that debate as someone persistently insisting that I'm 'driving the wrong car', just because they can point at a different car and tell me that it does 5 miles-per-gallon more than the one I'm driving...

It might do - but I don't like that car, and much prefer the one I'm driving, thanks....

Cheers,

Itsallaguess

[hiriskpaul]

Companies find ways to destroy the value of retained capital using all sorts of wonderful methods...

To do so by returning some of that capital to shareholders has always seemed to me to be one of the better ones....

So companies should not should not retain capital?

I wonder how that would have worked out for companies such as Apple?

Perhaps you would prefer it if companies returned all their capital to shareholders? That way they could not destroy any of it.

I don't think anyone's suggested such a thing...

Yet again the black and white nature of this type of discussion tends to ignore the large expanse of the workable area within those two extremes..

Cheers,

Itsallaguess

Oh the irony! So what are your views then on the black and white statement "Companies find ways to destroy the value of retained capital using all sorts of wonderful methods.."?

[Itsallaguess]

So what are your views then on the black and white statement "Companies find ways to destroy the value of retained capital using all sorts of wonderful methods.."?

My view is that it's not a black and white statement, and I'm really not sure how a reasonable view of what I've said could be taken as such...

If someone were to suggest that every single penny of retained capital is destroyed, then that would of course be a black and white statement, but that's not what I've said..

Cheers,

Itsallaguess

[tjh290633]

What you said a few posts up was:

It is not the market which changes the differentials between shares. It is usually other factors, like stake building or increased profits and dividends.

Whether it is called the market, or market forces, or whatever, you said that is not what changes the relative values of your shares. Yet, as everyone well knows (and I demonstrated previously) one share price can move up while another moves down, that has the power to change the relative value of your shares by far more than a top up using dividends received can. Are you really trying to say that is not the case? If so I am not sure there is really any basis for a discussion.

You have now introduced another nonsense argument.

I have never claimed that a top-up by me can change the relative value of my shares. It will increase the value of that holding, but in terms of the market it has no effect whatsoever. What it may do, and usually does, is to increase the dividend income, because the share being topped up will almost certainly have a higher yield than that trimmed, or any other top-up option.

TJH

[Alaric]

Those who suggest it's 'crap' often want to frame that discussion around total return, pointing out that there are 'better' ways to achieve improved results in that specific area using different investment strategies..

Total Return is a measuring rod. Those who reject its use and claim that £ 1 of income has a higher worth than £ 1 of capital are stating views well outside the norm. It's no wonder then that they acquire a siege mentality with the whole world against them. Those who reinvest their dividends can measure against total capital value anyway.

[Wizard]

What you said a few posts up was:

It is not the market which changes the differentials between shares. It is usually other factors, like stake building or increased profits and dividends.

Whether it is called the market, or market forces, or whatever, you said that is not what changes the relative values of your shares. Yet, as everyone well knows (and I demonstrated previously) one share price can move up while another moves down, that has the power to change the relative value of your shares by far more than a top up using dividends received can. Are you really trying to say that is not the case? If so I am not sure there is really any basis for a discussion.

You have now introduced another nonsense argument.

I have never claimed that a top-up by me can change the relative value of my shares. It will increase the value of that holding, but in terms of the market it has no effect whatsoever. What it may do, and usually does, is to increase the dividend income, because the share being topped up will almost certainly have a higher yield than that trimmed, or any other top-up option.

TJH

I am bored with your rudeness and speaking in riddles but never seeking to address a simple question.

[tjh290633]

What you said a few posts up was:


Whether it is called the market, or market forces, or whatever, you said that is not what changes the relative values of your shares. Yet, as everyone well knows (and I demonstrated previously) one share price can move up while another moves down, that has the power to change the relative value of your shares by far more than a top up using dividends received can. Are you really trying to say that is not the case? If so I am not sure there is really any basis for a discussion.

You have now introduced another nonsense argument.

I have never claimed that a top-up by me can change the relative value of my shares. It will increase the value of that holding, but in terms of the market it has no effect whatsoever. What it may do, and usually does, is to increase the dividend income, because the share being topped up will almost certainly have a higher yield than that trimmed, or any other top-up option.

TJH

I am bored with your rudeness and speaking in riddles but never seeking to address a simple question.

What is the above reply other than an answer to your question? (Highlighted above).

You are just being argumentative for the sake of it.

TJH

[1nvest]

It might be instructive for you to follow the fortunes of the total return versions of the FTSE350LY and the FTSE350HY indices. Both started at the same value on the same day. You can find the current values by Googling "World markets at a glance". The HIX TR value is 5439 while the LIX TR value is 4761. I accept that in recent years the differential has narrowed, but they didn't get that way by accident.

For US data since the 1920's, cap weighted non dividend were terrible. Equal weighted was great. Without looking I suspect the LIX TR is based on cap weighting.

I suspect that non dividend is a sign of potential stress, dividends totally cut and either the firm will continue down into oblivion, or it recovers and the price rebounds strongly when it resumes paying dividends etc. The indicated high volatility of such stocks somewhat bears that out. In which case you're being rewarded for taking on higher risk/volatility, but only where that's averaged out equally, not if applied in a biased (cap weighted) like manner. High (above average) yield is perhaps a less extreme of that, higher yield due to relatively low price, where either the price rebounds (yield realigns with the broader average), or the firm goes on to totally cut dividends. Less risky than the zero dividend extreme, but still perhaps above average reward in view of the higher risks.

[Itsallaguess]

You know, these days I usually avoid these "is HYP great or crap?" debates because of their endless tediousness.

But since this was on the Investment Strategies board I had hoped for a broader and more mature debate.

Great or crap based on what metric though Lootman?

Those who suggest it's 'crap' often want to frame that discussion around total return, pointing out that there are 'better' ways to achieve improved results in that specific area using different investment strategies..

Those who suggest it's 'great' often want to frame that discussion around more personal reasons that apply to them as personal investors, and never claim that total return is a primary driver...

The two will never meet Lootman, because the question is being framed in two completely different ways for both sets of parties, with the 'total return' party often sticking their fingers in their ears and not really listening to what they're being told...

And, like the little shopkeeper in Mr. Benn - as if by magic, a fine example suddenly appears (to be fair, we never have to wait too long nowadays...) -

Total Return is a measuring rod. Those who reject its use and claim that £1 of income has a higher worth than £ 1 of capital are stating views well outside the norm.

https://www.lemonfool.co.uk/viewtopic.php?f=8&t=24699&start=100#p331899

So there's both the 'saying people claim things that they never actually claim' box well and truly ticked, as well as the 'ignoring other drivers that might be more important' box ticked too..

It really is amazing to behold, in all honesty....

You'll struggle to see a finer example of the 'fingers in their ears' brigade this side of Christmas, Lootman...

Cheers,

Itsallaguess

[IanTHughes]

Those who suggest it's 'crap' often want to frame that discussion around total return, pointing out that there are 'better' ways to achieve improved results in that specific area using different investment strategies..

Total Return is a measuring rod. Those who reject its use and claim that £ 1 of income has a higher worth than £ 1 of capital are stating views well outside the norm. It's no wonder then that they acquire a siege mentality with the whole world against them. Those who reinvest their dividends can measure against total capital value anyway.

Nobody, apart from you of course, has ever claimed that:

£ 1 of income has a higher worth than £ 1 of capital

Why do you persist in using this argument?

Oh well, I guess ignorance will always out


Ian

[Alaric]

Nobody, apart from you of course, has ever claimed that:

£ 1 of income has a higher worth than £ 1 of capital

Why do you persist in using this argument?

Is the assertion that income is more valuable than capital not a central tenet of the "HYP Stategy"? It's stated often enough by the defenders of the faith. Why else would shares be selected sorting by dividend yield?