tjh290633 wrote:Wizard wrote:So does that come out as an average mean increase of c.7.2% across the period covered? If so it does not conflict with the assumption of 10% growth in the original calculations, and whilst a healthy margin above 5% also consistent with the assertion that 10% average growth over a ten year period is unlikely to be achieved in the real world?
I wasn't sure if you had posted your increases to support the OP's point or refute it.
Terry.
The average of the medians is 5.13% and of the means it is 8.04%. Take whichever answer suits your meaning. The average of both medians amd means is 6.6%, so I'm not sure where your 7.2% comes from. Oops, apologies. I see that I have since edited the table to exclude shares which had been sold for another purpose, so your figure may well be correct.
The OP was looking at the propect of a 4% yield increasing by 10% annually. I gave an actual example of the increases in dividends per share achieved from an HYP with over 30 holdings. I think that he was over-optimistic.
TJH
In which case we may be violently agreeing
My take was that the OP compared preference shares to a bundle ordinary shares and said that even with an assumed 10% annual rate of growth in the ordinary share's dividend, over 9 years the preference shares would generate more income. He then said 10% growth was probably unrealistic, which your data bears out. What he then left unsaid, but I inferred was that as the 10% assumptions was overly optimistic (as was the assumption of reinvesting at the original purchase price for the ordinary shares), the time it would take the ordinary shares to 'catch up' with the preference share would in the real world be much longer than his modelling suggested.
In other words, in some cases preference shares may be a better investment option than an HYP ordinary share portfolio.
However, there is a wider point about starting dividends and dividend growth, i.e. it will take some time for a low starting point with higher growth to catch up with a higher starting point and lower growth. This is a point that I will keep in mind even when choosing between HYP candidates.
Terry.