Gengulphus wrote:Itsallaguess wrote:There never seems a good reason to do a similar 'quantum theory' paper on any market-cap filters, or filters regarding dividend-cover that candidates should satisfy, so I always wondered why it was deemed necessary to do it for comparing a potential HYP-share yield to that of the FTSE yield at any particular time.
There's good reason to try to study all of them - but studying them properly requires a large investment of time and effort
and careful design of the study to avoid hindsight bias and confirmation bias. Few private investors can afford that investment, far fewer are willing to prioritise it over other uses of the time and effort, and even fewer have the detailed understanding of the various pitfalls required to do the design properly. And the net result is that we don't have even one proper "'
quantum theory' paper" about Luniversal's yield < 1.5 * (FTSE AllShare yield) test, let alone similar ones about other tests.
Gengulphus
Completely agree with all of the above, but I think it's over-complicating my position on the topic.
I think that
even if empirical evidence existed today that there was some
1xx% FTSE-yield figure that could be proven to foresee relatively high danger with regards to the safety or predictability of future dividend-income from potential HYP purchases, I still can't see the justification for the whole '
Zonal' theory, with its accompanying words and threads over the years. All that stuff is/would be using a hammer to crack a nut at that point, as far as I'm concerned.
Why don't we have a '
Zonal' theory for dividend-cover? Anyone who looks at dividend-cover, and I do myself sometimes, might want to see a cover of over 1 and might begin to sweat a little over an ultra-high yielding candidate with a cover of less than 0.9, let's say by way of an example.
So in a way we might look to see that 0.9 figure, for the sake of this discussion, to represent the magic 150% FTSE-yield figure of this yield metric. Why then, don't those who look at dividend-cover as this type of filter need to also use some sort of '
Dividend-cover Zonal Theory' to go along with that test?
They don't need it because they can look at it instantly, on a per-candidate basis, and make a judgement
in seconds as to the relevance of it.
They don't need to spend hours and hours compiling Zonal lists of FTSE shares and their
Optimum/Danger/etc. Zones that their specific dividend-cover-level is sitting in; they can simply look at the figure, in exactly the same way that we can look at a current or forecast-yield figure, and make a judgement on a case by case basis.
I don't need to know that Royal Mail might be in the
Yield-Danger-Zone if Royal Mail is never going to be a potential candidate for my HYP purchase, but if Carrillion pop up on my candidate list, then I can take the whole five seconds it takes, if it's important to me, to view the current or forecast-yield of Carrillion against the current yield of the FTSE, and make a judgement in those five seconds whether I need to carry out more due-diligence, or whether I want to simply dismiss the candidate from the list.
So my issue wasn't ever really with the lack of real evidence that the Zonal theory worked, or the quality of the '
evidence' that did exist, although I agree that those issues are clearly very important; my issue was that
even if someone did think it worked, then they don't really need to rely on someone coming up with a regularly updated list of shares, along with their Yield Zones, to use it....
The whole thing created a dependency that was, in my view, wholly unwarranted. It was the antithesis of everything the Fool used to stand for, in terms of helping people to help themselves....
Cheers,
Itsallaguess
. All I would add is that as you go from the "building phase" to the "taking income phase" keep an open mind to "changes" to your "checks and balances". Strange how your "mindset" changes as you start to look at taking income........