Introduction to the High Yield Portfolio

[Breelander]

For new readers, you may like to know that the High Yield Portfolio (or HYP for short) was introduced on The Motley Fool back in 1999 by these two articles:

Minimise the Downside By Stephen Bland (TMFPyad) August 20, 1999
https://web.archive.org/web/20120521063 ... 990820.htm

Maximise the Upside By Stephen Bland (TMFPyad) August 27, 1999
]https://web.archive.org/web/20100304065349/http://www.fool.co.uk/valueinvesting/1999/vi990827.htm

and the first anniversary report for pyad's HYP is here...
Happy Birthday to the HYP By Stephen Bland (TMFPyad) November 16, 2001
http://web.archive.org/web/200603240012 ... 011116.htm

[Breelander]

Many more articles on HYP were published over the years (far too many to list here). You may like to explore them as archived by the Wayback Machine. Start at their snapshot of TMF's index to discontinued publications. Stephen Bland (aka pyad) wrote for both the Value Investing and High Yield sections.
http://web.archive.org/web/201205200525 ... eltwo.aspx
For 2006 onwards you could also look at TMF's Archives: Investing index.
http://web.archive.org/web/201203292016 ... &year=2006

[Breelander]

One more article should be pointed out for those unfamiliar with the HYP way...
How To Pick A High Yield Portfolio By Stephen Bland (TMFPyad) March 4, 2005
https://web.archive.org/web/20160609102 ... 050304.htm

And (of course) there's one article without which any introduction to HYP would be incomplete...

Doris By Stephen Bland
Published in High Yield on 20 December 2006
http://web.archive.org/web/201004211949 ... doris.aspx

[Breelander]

Pyad's High Yield Portfolio (now known as HYP1) was unveiled in a two-part article in November 2000. Part 1 explains the principles and Part 2 lists the selected shares.

Fool's Eye View [ November 6, 2000 ]
Retirement Pays Dividends By Stephen Bland
https://web.archive.org/web/20140219210 ... 01106c.htm

Fool's Eye View [ November 13, 2000 ]
Retirement Pays Dividends -- 2 By Stephen Bland
https://web.archive.org/web/20140528041 ... 01113c.htm

[Gengulphus]

For new readers, you may like to know that the High Yield Portfolio (or HYP for short) was introduced on The Motley Fool back in 1999 by these two articles:

Minimise the Downside By Stephen Bland (TMFPyad) August 20, 1999
https://web.archive.org/web/20120521063 ... 990820.htm

Maximise the Upside By Stephen Bland (TMFPyad) August 27, 1999
https://web.archive.org/web/20100304065 ... 990827.htm

Sorry, Bree, but those two articles are most definitely NOT about HYPs. They're about pyad's Value strategy - Value strategies being primarily aimed at buying shares when the market is undervaluing them and selling them for a capital gain once it realises its mistake (with the risk that it's instead you, the investor, who has made the mistake in believing them to be undervalued). Among major ways that pyad's Value strategy differs from a HYP strategy are that:

* the dividend yield is merely considered a sweetener on the way to that capital gain - quite reasonably given that the strategy's aim is typically somewhere of the order of a 25-100% gain in a few-months-to-few-years timeframe: whether the capital gain is achieved is a far more important consideration to the Value investor than the dividends received while waiting for it;

* diversification is not important to it - the second article mentions that pyad frequently only had one Value shareholding (this is a feature of his particular Value strategy, by the way, not of Value strategies in general).

I should add that I'm not saying anything against either pyad's Value strategy or against Value strategies in general: I had some success myself with a Value strategy after I started actively investing in shares in late 1999, and from late 2000 to late 2002 was experimentally running a Value strategy and a HYP strategy in parallel with each other to see which suited me better. HYP eventually won - not on investment performance, which was similar for the two strategies, but because the Value strategy involved me taking a weekly look around the market to see whether it indicated a trade. After two years, I was finding it a very boring routine job that I was not infrequently skipping because I had something more interesting to do, and it had become clear to me that I was going to end up skipping it more and more often as time went by... (That particular experience incidentally lies behind quite a few of my decisions about how to run my demo HYPs: I know that for me to successfully see a long-term project through, I must strictly ration its demands on my time.)

What I am saying is simply that Value strategies (pyad's one especially) and HYP strategies have significant differences from each other, so that mixing them up with each other is a recipe for confusion and misunderstandings! I can very easily see an investor ending up going for either, or indeed both in parallel - indeed, I have a smallcap portfolio that I run in parallel with my HYP, and which I initially ran along Value lines (though it's evolved into something more like Growth At a Reasonable Price). But it is important to be clear in one's own mind about what the objectives are for any portfolio one is running, and that isn't helped by getting confused about which type of strategy is which.

As far as I am aware, the first clear description pyad gave of his HYP strategy was in the November 2000 articles which created HYP1, that you've identified later in the topic. And I should say that I fully support what you're doing in this topic, and thank you for it - it's just a pity that the very first pair of links have the potential to sow a lot of confusion...

Gengulphus

[Jon46]

This is a new web site, it is about the future.

Do we need to constantly go back to TMF past.

For us HYP has always been a simple thing so obvious that it is hardly worth defining, a High Yield Portfolio. It has existed for decades, and today contains individual shares, ITs, the odd fund, pref, bond. It looks for a high sustainable yield well above market yield, and overall reasonable divi increase. It works very well(both in total return and yield terms), it is dead simple, it is different from GDHYP, it does not follow HYP1 philosophy, for example, but it is a HYP run in a practical and pragmatic way. Are we to continue to be told to post on another board? By whose authority?

Jon

[toofast2live]

This is more like it! Handbags at dawn between posters.

[Vision25]

This is a new web site, it is about the future.

Do we need to constantly go back to TMF past.

For us HYP has always been a simple thing so obvious that it is hardly worth defining,

In this case, yes we do.

HYP1 works and it is reasonable that we provide evidence that it does.

HYP's may be obvious to you but TMF boards were not gaining in popularity because MF couldn't make any money from them.

Now that straitjacket has been removed hopefully Lemon Fool will turn into what TMF boards were once.

Vision25

[88V8]

This is more like it! Handbags at dawn between posters.

Handbags?? Just wait till Luni arrives !!

Thankyou Bree.
I think it a good thing to recall where and with whom this all began, even if HYP1 has had a few subsequent biffings for its drift into imbalance.

V8

[Jon46]

This is more like it! Hand...

Handbags?? Just wait till Luni arrives !!

That was not my intention.

I think now is a good chance on this brand new, and full of possibilities, site, to think more 'broadly' about HYP, that's all. Because there is not 'the High Yield Portfolio', there are many such variations, many as valid as the next. Its common essence is about reinvesting divis.

It should not require much more 'cult' than that to be admitted.

Jon

[Dod1010]

Before this becomes an unseemly row, can we all just agree to be civil with each other?

As it happens, I completely agree with Jon. This site does not need to replicate the TMF site and its philosophies. Jon's comments re a HYP are pretty much my own philosophy. I have never followed pyad's guidance because I do not think any investment philosophy can be prescribed to such an extent as to become the 'bible' and if you do not follow the true path you are clearly off topic. pyad has a lot of good ideas but they are not unique to him in broad outline. In fact they are to a large extent common sense, excepting of course his Strategic Ignorance ideas.

So however well intentioned, I think Bree is mistaken to regurgitate pyad's now quite dated articles and comments and I think it is a pity that they were even mentioned.

[Raptor]

It is always worth looking back occasionally but we move on. Maybe now is a good time with the new forum to realise that there is no one HYP strategy. We all have our own interpretations of what makes a HYP, as well as to tinker (or pinker) or not and at what level. We should all thank PYAD for starting most of us on this road but to be honest I have changed my "strategy" along the way as I start to move to using some of the dividends to supplement my earnings. We could go down the route of diversification, sectors etc. To be honest I am happy with my current methods and trends, although have decided for HYP to remove my IT's from the equation on here and stick to share picks, but each to his own. I enjoy the rivalries but do, on occasion, wish we could all agree to disagree and move on and not dwell on one particular aspect.....

As we do not yet have an IT board, just topped up MRCH, 5.8%, nav of -10.59 at 417.11

Raptor.

[Lootman]

Before this becomes an unseemly row, can we all just agree to be civil with each other?

As it happens, I completely agree with Jon. This site does not need to replicate the TMF site and its philosophies. Jon's comments re a HYP are pretty much my own philosophy. I have never followed pyad's guidance because I do not think any investment philosophy can be prescribed to such an extent as to become the 'bible' and if you do not follow the true path you are clearly off topic. pyad has a lot of good ideas but they are not unique to him in broad outline. In fact they are to a large extent common sense, excepting of course his Strategic Ignorance ideas.

So however well intentioned, I think Bree is mistaken to regurgitate pyad's now quite dated articles and comments and I think it is a pity that they were even mentioned.

Dod, I agree with you and Jon, so thirded.

Not that I think that Bree is wrong to cite references. But as you say, they were neither as original and ground-breaking as suggested, nor have they not been refined and amended by others subsequently. And part of the progress made is due to determining the faults in what is sometimes presented as timeless gospel.

[idpickering]

"or pinker"

That'd be "picker" Raptor.

Ian.

[Raptor]

"or pinker"

That'd be "picker" Raptor.

Ian.

I would edit it but that option has gone, 5 minute rule perhaps...

[Gengulphus]

This is a new web site, it is about the future.

Do we need to constantly go back to TMF past.

For us HYP has always been a simple thing so obvious that it is hardly worth defining, a High Yield Portfolio. It has existed for decades, and today contains individual shares, ITs, the odd fund, pref, bond. It looks for a high sustainable yield well above market yield, and overall reasonable divi increase. It works very well(both in total return and yield terms), it is dead simple, it is different from GDHYP, it does not follow HYP1 philosophy, for example, but it is a HYP run in a practical and pragmatic way. Are we to continue to be told to post on another board? By whose authority?

And it's not what the vast majority of the users of the TMF High Yield - HYP Practical board understand by the term "HYP" - and they're currently almost certainly also the vast majority of the users of this forum. The fact that it was derived as an abbreviation of "high yield portfolio" doesn't imply that it means exactly the same as that phrase - any more than "ISA" means exactly the same as "individual savings account". In each case, the acronym carries extra implications that are not in the ordinary English phrase.

The result is that if you use the term "HYP" in your preferred sense around here, you will almost certainly be repeatedly misunderstood. And if people see it as an attempt to surreptitiously change the topic of this existing forum, which has been carried over from the TMF board by its users, you will seriously annoy those who like it as it is. Far better to openly propose the change of topic, using the language as it will be understood by those you're proposing it to. And better still IMHO, to propose a new forum with the topic you want, leaving the existing forum untouched - then when you get it, invite people to join you in it. Some will be interested and some won't - and you'll get the participation of the former without also getting the opposition of the latter.

To sum up - the TMF past that we've 'inherited' is currently a very major part of us. We can and should go forward into the future, but it will be a much smoother path if care is taken to communicate effectively, without unnecessarily antagonising people.

Gengulphus

[toofast2live]

Yes, keep this for TMF HYP posts. Plenty of opportunity to discuss other approaches on the HY Strategies board. Hopefully there will also be an Investment Trust board as well.

[AJC5001]

Its common essence is about reinvesting divis.

It should not require much more 'cult' than that to be admitted.

Jon

I hate to introduce another point of difference, but several HYP investors use the dividends as their retirement income, and do not reinvest all their dividends.

A HYP has often been referred to as an Annuity replacement.

Adrian

[grimer]

Personally I think the broad HYP safety criteria and stock picking methods are the 'essence' of HYP. I also think that some safety criteria are missing from the original HYP - e.g. ROCE.

It seems, at times, that the rigid adherence to Pyad's original HYP stifles debate and is quite arbitrary - for example 'tinkering' is fine, but buying a share with a slightly lower yield in a company with a strongly growing dividend 'isn't HYP'.

I don't see why buying a high yield investment trust is 'not HYP'. I'd argue that potentially the dividend (CTY) is potentially 'safer' than that provided by a single company (Deep Water Horizon?).

I think this board should focus on the outcome - high sustainable yield that can be taken as income or reinvested. That might allow the purchase of a variety of products and shares outside of Pyad's original criteria, but no less successful in delivering the goods. If there are ways to refine my tactics to make more money, I'd like to hear them!

[Arborbridge]

or example 'tinkering' is fine, but buying a share with a slightly lower yield in a company with a strongly growing dividend 'isn't HYP'.

Depends what you mean by "slightly lower". In my case, I set the limit at around 5% or so below my average HYP yield. That gives plenty of choice.

I'd argue that potentially the dividend (CTY) is potentially 'safer' than that provided by a single company (Deep Water Horizon?).

It certainly is, and that's why many of us have a basket of ITs. However, these can hardly be said to be part of HYP in its traditional form and were not normally discussed in the old place. HYP is about a basket of shares, not a basket of ITs. We should carry on that good practice here, in my view.

However, I guess I shouldn't stray into HYP strategy! Darn it - I've just done that:)

Arb.