This is a hard thread to make sense of! I'm a long-term HYP builder. I've only ever bought "anomalously high" yields at times of major economic upheaval - so the Great Crash and the current COVID/brexit/Ukraine mash-up. In less interesting times it's usually pretty clear why a share price is getting a kicking and feeling able to take a contrarian position on this while also being able to reconcile such a purchase with my existing portfolio composition has never coincided. I've had my share of the same imploding companies as everyone else. So, a few more data points then.
I've picked up some bits in the current situation, again only if they fit into my portfolio (no life insurers for example). From the list in the OP (with a tenth of the FTSE100 to choose from when does a yield stop being anomalous
?) I've topped up existing holdings in RIO (yes, usual cyclicals arguments) and PSN (yes, perennial UK housing market arguments) and added MNG (yes, a little punt). Held on to existing holdings in LGEN, IMB and TW. Dipping into the FTSE250 (where about 10% of shares currently yield over 6%) I also took a minor holding in SYNT on the assumption that it would return to an OK yield after the COVID bubble burst, while in the meantime it would pay a big divi to put into something else and would add a holding in an underrepresented sector. All of the above buys were made in the context of other purchases on much less controversial yields. All were bought on double figure yields after the next big divi payout had been announced. They represent less than 4% of the current value of my HYP.
Back at the end of the noughties I picked up TATE and RDSB yielding north of 9%. My HYP was much smaller so both were a much bigger financial commitment than my recent buys. Both did well until recently. I just top-sliced TATE after pocketing the special, not so much because of the divi cut but because I'm not clear where it's going now and I was sitting on significant capital appreciation. I also bought BP above 7% at around the same time as these purchases, then shortly afterwards Deepwater Horizon happened. The resulting fallout was nothing to do with why its yield was so high when I bought it. Still hold, didn't buy any more for a decade. So
based on the info available at the time, I was 3/3 with those buys. Was the market wrong?
I didn't add more very high yielders back then as I didn't have the same level of divi income to reinvest and unlike today there were big blue chips that never usually entered HYP territory to be picked up. ULVR above 5% for example - been part of the bedrock of my HYP income ever since, as hoped.
This was as confusing a post to write as this thread was to read
. TL;DR? For me yield alone is not a basis on which to make a buying decision, regardless of how high it is. This is not restricted to considering other company-specific fundamentals, because existing portfolio composition and the level and source of panic in the market has a direct bearing on my tolerance of risk.
EEM