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too high?

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moorfield
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Re: too high?

#509638

Postby moorfield » June 25th, 2022, 10:12 pm

Itsallaguess wrote:
IanTHughes wrote:
All this discussion of individual share failures, whether ultra-high yield or not, is meaningless unless it is put into the context of the overall portfolio progress, detail which is noticeable only by its total absence!


I wouldn't agree that it's 'meaningless'.

Long-term portfolio investing usually offers the opportunity to perform a high number of granular 'nudges' throughout the life of that portfolio, and I think trying to find ways to help avoid at least *some* of those nudges that might be more detrimental to that portfolio performance over the long-term than others, has got to be worth considering at some level, surely...

If one of those levels is to consider that a prospective yield of 12% might indicate that the market doesn't actually believe that such a yield is sustainable over the long term (and if it did, why isn't the yield being arbitraged down by that market...), then simply dismissing such considerations as 'meaningless' just because 'at portfolio level' progress might still be made, doesn't feel like the best long-term approach in my view.

It's one thing to accept that stumbles are inevitable, and it's another to consider that many stumbles can be broadly absorbed over time when taking a portfolio view, and I'm happy to agree that those two points are really quite valid, but to then willingly lose sight of the fact that those granular, holding-level nudges are still very important over the expected lifespan of a portfolio is a step too far, I think. It's not 'meaningless' to consider them...

If there's an income-investment equivalent of 'look after the pennies and the pounds look after themselves', then surely, this is it...

Cheers,

Itsallaguess



What do you mean here by "nudges" ?

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Re: too high?

#509640

Postby Itsallaguess » June 25th, 2022, 10:17 pm

moorfield wrote:
What do you mean here by "nudges" ?


I think we posted at the same time -

https://www.lemonfool.co.uk/viewtopic.php?f=15&t=34915#p509637

I've never seen 'top-ups' as just being top-ups.

They're also portfolio nudge-opportunities, however small, and a decision can be taken each time a top-up is made to help the steered direction of travel for the income-portfolio over the long term...

Nudge into higher-risk, or nudge to maintain more moderate risk?

Cheers,

Itsallaguess

moorfield
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Re: too high?

#509646

Postby moorfield » June 25th, 2022, 10:44 pm

Itsallaguess wrote:Put it this way Ian - I absolutely wish that I'd read a thread like this at the very start of my HYP involvement, because I am absolutely convinced that reading the types of collective warnings coming out of it regarding really high yields would have helped prevent me make some of the worst income-investment decisions that I did whilst starting out,



All you - we - had to go on at the very start of our HYP involvement was this single sentence from the Stone Tablets:

I would do it by ranking the shares in the index by descending yield, then work down the list choosing one from each sector, but doing a bit of research on each potential candidate.

In hindsight, irresponsible and misleading advice, a Siren call for many a DIY investor who have ended up wrecking some of their hard earned and saved on the Rocks of Scylla. "A bit of research" not really qualified or well understood, or misinterpreted, by the unqualified.

Anyway, you know my workaround for resisting the enchanting music: Rank the shares in the index by ascending yield, then work up the list.

But what do I know.

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Re: too high?

#509658

Postby MDW1954 » June 25th, 2022, 11:45 pm

moorfield wrote:
Itsallaguess wrote:Put it this way Ian - I absolutely wish that I'd read a thread like this at the very start of my HYP involvement, because I am absolutely convinced that reading the types of collective warnings coming out of it regarding really high yields would have helped prevent me make some of the worst income-investment decisions that I did whilst starting out,



All you - we - had to go on at the very start of our HYP involvement was this single sentence from the Stone Tablets:

I would do it by ranking the shares in the index by descending yield, then work down the list choosing one from each sector, but doing a bit of research on each potential candidate.

In hindsight, irresponsible and misleading advice, a Siren call for many a DIY investor who have ended up wrecking some of their hard earned and saved on the Rocks of Scylla. "A bit of research" not really qualified or well understood, or misinterpreted, by the unqualified.

Anyway, you know my workaround for resisting the enchanting music: Rank the shares in the index by ascending yield, then work up the list.

But what do I know.


This is frankly bizarre. The "stone tablets" are 20 years old -- that particular excerpt is 22 years old. The advice proffered in terms of share selection was simplistic at the time, and (as you say) hasn't worn well, over time. Yet we're still talking about it.

Despite this, most of us follow distinctly unPyad-like share selection processes in practice.

Even so, Stephen's core insight was brilliant: you don't need an annuity in retirement.

Personally, I found Luni's approach to risk very persuasive. It certainly mirrors what I now do in practice, and I'm indebted to Luni for helping me to crystalise those thoughts. But it didn't catch on, because -- hey -- the thought-police at the time judged otherwise.

When we set up the HYP board, we went to considerable trouble to recognise how HYP in practice had differed from HYP as expounded by Stephen Bland. All this harking back to Stephen Bland's "tablets" does rather miss that point.

MDW1954

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Re: too high?

#509661

Postby moorfield » June 26th, 2022, 12:31 am

MDW1954 wrote:This is frankly bizarre.


Not the first time I've been accused of that. Good. I aim to test boundaries here.

The "stone tablets" are 20 years old -- that particular excerpt is 22 years old. The advice proffered in terms of share selection was simplistic at the time, and (as you say) hasn't worn well, over time. Yet we're still talking about it.


Of course we are, and we will continue to while pyad continues to post his "HYP1 is XX" updates here. Why would you expect otherwise?

Despite this, most of us follow distinctly unPyad-like share selection processes in practice.


What I suggest above is no different.

Even so, Stephen's core insight was brilliant: you don't need an annuity in retirement.


No you don't. But Stephen's core insight was also (I believe) incomplete. Why no discussion of ITs at the time?

Anyone with a lump sum available to invest for income upon which they depend must therefore try and find a source that will grow that income and also offer some easy access to the capital.

(My bolds.) HYP1 has spent eight of its twenty years in what I would call "recovery mode", where income has been less than the previous high. Many ITs (and therefore portfolios of) can demonstrate none. Not a convincing pitch of that original aspiration, is it?

When we set up the HYP board, we went to considerable trouble to recognise how HYP in practice had differed from HYP as expounded by Stephen Bland. All this harking back to Stephen Bland's "tablets" does rather miss that point.


Well its a good thing pyad didn't copyright the acronym. Only he can tell us I guess if he believes the practice of his insight has been misappropriated here.

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Re: too high?

#509669

Postby Itsallaguess » June 26th, 2022, 6:02 am

MDW1954 wrote:
Personally, I found Luni's approach to risk very persuasive.

It certainly mirrors what I now do in practice, and I'm indebted to Luni for helping me to crystallise those thoughts. But it didn't catch on, because -- hey -- the thought-police at the time judged otherwise.


The major problem I had with Luni's 'DangerZone' idea was that it was a very simple concept wrapped, at that time and as regularly demonstrated by him, in a set of huge up-front processes that turned the whole idea into a data-centric monster, when it really didn't need to be...

In my view the idea of a pre-purchase 'DangerZone' sniff-test is fundamentally a good one, but it's one that only needs to be carried out once any more regular pre-purchase filters had been carried out, and so it always made sense to me to have that type of 'hang on, this looks like a risky yield-anomaly' test simply bolted onto an income-investors normal selection processes.

I saw the whole thing as being no different in essence as to what most income-investors are likely to already do with potentially 'too-low' yielding options. We don't set up a huge exercise to hunt out and examine those 'too-low yielders' - we simply carry out our normal processes to draw up a list of potential investment candidates, and then strike a line through the list at a certain point to discount any in that initial list that wouldn't provide a useful enough yield.

For me, the 'DangerZone' idea was fundamentally no different to that, but just carried out at the top of the yield list instead of the bottom. Decide a yield that looks too risky to want to go beyond, and then strike a line at the top of that existing candidate list drawn up using quite normal and regular processes. Simple, quick, and effective in terms of ending up with the same 'yield sniff test' result...

As it was implemented at the time, the 'DangerZone' idea turned into a huge, regular data-centric model in and of itself, which to me always seemed like a pointless and time consuming implementation of a very good and simple initial idea, so I thought it was worth pointing out that even some critics at that time weren't actually critical of the idea - just the extremely over-complicated and unwarranted implementation of it...

Cheers,

Itsallaguess

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Re: too high?

#509680

Postby IanTHughes » June 26th, 2022, 8:43 am

With regard to the sustainability or otherwise of its dividend, the 'risk' inherent in the purchase of a particular share at a yield of 10.00% IS NO GREATER THAN if the same share were priced at a yield of 5.00%! What DOES differ between those two scenarios, is the 'reward' on offer which, from the point of view of the projected dividend, is twice as much with the yield of 10%.

Claims that yields can be categorised as being in a so-called Danger Zone or, even worse in my view, a so-called Goldilocks Zone, are no more based in fact than the selling technique one might expect from a snake-oil salesman!


Ian

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Re: too high?

#509684

Postby Itsallaguess » June 26th, 2022, 9:23 am

IanTHughes wrote:
With regard to the sustainability or otherwise of its dividend, the 'risk' inherent in the purchase of a particular share at a yield of 10.00% IS NO GREATER THAN if the same share were priced at a yield of 5.00%!

What DOES differ between those two scenarios, is the 'reward' on offer which, from the point of view of the projected dividend, is twice as much with the yield of 10%.

Claims that yields can be categorised as being in a so-called Danger Zone or, even worse in my view, a so-called Goldilocks Zone, are no more based in fact than the selling technique one might expect from a snake-oil salesman!


Taken to it's logical conclusion, your view would surmise that a potential income-investment with a yield of 95% would carry no higher risk to the sustainability of that dividend, because the market 'could always price it differently with a lower yield'.

Now *that's* the logic of an income-investment snake-oil salesman, surely...

Cheers,

Itsallaguess

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Re: too high?

#509689

Postby IanTHughes » June 26th, 2022, 9:35 am

Itsallaguess wrote:
IanTHughes wrote:With regard to the sustainability or otherwise of its dividend, the 'risk' inherent in the purchase of a particular share at a yield of 10.00% IS NO GREATER THAN if the same share were priced at a yield of 5.00%!

What DOES differ between those two scenarios, is the 'reward' on offer which, from the point of view of the projected dividend, is twice as much with the yield of 10%.

Claims that yields can be categorised as being in a so-called Danger Zone or, even worse in my view, a so-called Goldilocks Zone, are no more based in fact than the selling technique one might expect from a snake-oil salesman!

Taken to it's logical conclusion, your view would surmise that a potential income-investment with a yield of 95% would carry no higher risk to the sustainability of that dividend, because the market 'could always price it differently with a lower yield'.

Now *that's* the logic of an income-investment snake-oil salesman, surely...

I can only repeat, with added emphasis for those hard of reading:

With regard to the sustainability or otherwise of its dividend, the 'risk' inherent in the purchase of a particular share at a yield of 10.00% IS NO GREATER THAN if the same share were priced at a yield of 5.00%!

The foregoing is true at whatever level of yield the 'market' decides it will buy/sell at, even your absurd 95%!

The higher yield on offer, simply indicates that the so-called 'Market' deems the 'risk' to be higher and is demanding/offering a higher reward. It does not in any way indicate that the 'risk' is actually higher!

There is of course no disgrace in following the 'market', but for me I prefer to make my own decisions.


Ian

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Re: too high?

#509694

Postby Dod101 » June 26th, 2022, 9:53 am

I think that IAAG is in danger of over egging the lessons here. After all, ITH has said that he would follow the HYP doctrine of only investing in shares which he can 'reasonably believe to provide a high and sustainable dividend'. I doubt that anyone would argue with that. The question is how does one judge that? Personally I do not believe that there is any mechanical way of doing this and so I come back to what I have posted above; know your company. Those who come to grief are usually those with expectations that are too high or at least certainly too optomistic. It is of course a matter of judgement and for those who do not feel they have sufficient experience to make that judgement then a mechanical measure might be better, The idea of treating any share yielding more than say twice the FTSE100 yield with great caution is probably not a bad measure, although a certain investment trust's yield is used by some.

I think we all go through the sort of experience that IAAG has referred to as part of the learning process.

Dod

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Re: too high?

#509698

Postby Itsallaguess » June 26th, 2022, 10:08 am

Dod101 wrote:
ITH has said that he would follow the HYP doctrine of only investing in shares which he can 'reasonably believe to provide a high and sustainable dividend'.

I doubt that anyone would argue with that.

The question is how does one judge that?

Personally I do not believe that there is any mechanical way of doing this and so I come back to what I have posted above; know your company.

Those who come to grief are usually those with expectations that are too high or at least certainly too optimistic.


Which all makes perfect sense on the face of it Dod, but the main issue I've always got with these types of counterpoints is that both Ian's 'checks' to make sure that he can 'reasonably believe [they] provide a high and sustainable dividend', and even your own 'know your company' statements don't actually offer any real value as to how either of those processes are carried out...

So with regards to an income-strategy that's meant to be simple enough for the man in the street to pick up, that lack of detail in a clearly important area of the strategy is just 'words', with no meaningful detail as to just what they practically mean...

And so *in the absence* of such important detail, that's where I think it's much simpler to just avoid that more difficult ultra-high-yield 'judgement area' of the market completely, and play the percentage-shots by expecting more moderate income-based returns.

You mention me perhaps 'over-egging' my case, but I frankly don't accept that when those raising conflicting arguments to the case can only offer what are in reality just weasel-words as to how such risks can actually be diminished.

'Simply carry out a confidence-building process that is of such importance, that it cannot actually be discussed or articulated in detail....'

What was Ian saying about snake-oil salesmen?

Cheers,

Itsallaguess

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Re: too high?

#509710

Postby IanTHughes » June 26th, 2022, 11:08 am

Itsallaguess wrote:
Dod101 wrote:ITH has said that he would follow the HYP doctrine of only investing in shares which he can 'reasonably believe to provide a high and sustainable dividend'.

I doubt that anyone would argue with that.

The question is how does one judge that?

Personally I do not believe that there is any mechanical way of doing this and so I come back to what I have posted above; know your company.

Those who come to grief are usually those with expectations that are too high or at least certainly too optimistic.

Which all makes perfect sense on the face of it Dod, but the main issue I've always got with these types of counterpoints is that both Ian's 'checks' to make sure that he can 'reasonably believe [they] provide a high and sustainable dividend', and even your own 'know your company' statements don't actually offer any real value as to how either of those processes are carried out...

So with regards to an income-strategy that's meant to be simple enough for the man in the street to pick up, that lack of detail in a clearly important area of the strategy is just 'words', with no meaningful detail as to just what they practically mean...

And so *in the absence* of such important detail, that's where I think it's much simpler to just avoid that more difficult ultra-high-yield 'judgement area' of the market completely, and play the percentage-shots by expecting more moderate income-based returns.

You mention me perhaps 'over-egging' my case, but I frankly don't accept that when those raising conflicting arguments to the case can only offer what are in reality just weasel-words as to how such risks can actually be diminished.

'Simply carry out a confidence-building process that is of such importance, that it cannot actually be discussed or articulated in detail....'

The checks that an HYPer are advised to make in order to ascertain whether a particular share’s dividend is/is not sustainable, have been reported and even debated many, many times, both on here and in the Other Place. Your insistence that the Dividend Yield is a factor that one must consider is surely proof of that!

The fact that you have not read, or is that refused to read, any ideas as to how one can attempt to select shares that one can reasonably conclude have a sustainable dividend, does not mean that no such ideas exist! Anyone interested in finding such articles will no doubt manage to do so.

Itsallaguess wrote:What was Ian saying about snake-oil salesmen?

All I was saying was that, only a Snake-Oil Salesman would disagree with:
With regard to the sustainability or otherwise of its dividend, the 'risk' inherent in the purchase of a particular share at a yield of 10.00% IS NO GREATER THAN if the same share were priced at a yield of 5.00%!

So, do you disagree?


Ian

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Re: too high?

#509712

Postby Itsallaguess » June 26th, 2022, 11:22 am

IanTHughes wrote:
With regard to the sustainability or otherwise of its dividend, the 'risk' inherent in the purchase of a particular share at a yield of 10.00% IS NO GREATER THAN if the same share were priced at a yield of 5.00%!

The foregoing is true at whatever level of yield the 'market' decides it will buy/sell at, even your absurd 95%!

The higher yield on offer, simply indicates that the so-called 'Market' deems the 'risk' to be higher and is demanding/offering a higher reward. It does not in any way indicate that the 'risk' is actually higher!

There is of course no disgrace in following the 'market', but for me I prefer to make my own decisions.


[Deletion]

Well done you, and in the absence of any further useful details, I think we'll leave it to readers to make their own minds up at that point...

Cheers,

Itsallaguess
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Assertion regarding another poster removed. - Chris

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Re: too high?

#509719

Postby IanTHughes » June 26th, 2022, 11:41 am

Itsallaguess wrote:
IanTHughes wrote:With regard to the sustainability or otherwise of its dividend, the 'risk' inherent in the purchase of a particular share at a yield of 10.00% IS NO GREATER THAN if the same share were priced at a yield of 5.00%!

The foregoing is true at whatever level of yield the 'market' decides it will buy/sell at, even your absurd 95%!

The higher yield on offer, simply indicates that the so-called 'Market' deems the 'risk' to be higher and is demanding/offering a higher reward. It does not in any way indicate that the 'risk' is actually higher!

There is of course no disgrace in following the 'market', but for me I prefer to make my own decisions.

[Deletion]

I have never claimed that I have any 'secret personal process' that enables the safe identification of a sustainable yield for any share, whether ultra-high yield or otherwise. Your suggestion that I have claimed such is a complete nonsense[Deletion]! You, on the other hand, are constantly promoting the idea that all an HYPer has to do is look at the yield on offer to determine whether a dividend will be sustainable or not! In my opinion, more complete nonsense on your part!

"Hard of Reading" was intended as a joke, but maybe it is an apt description for you! Rather than reading what others actually post, you appear to prefer to make it up so that your pre-determined arguments will make sense!


Itsallaguess wrote:Well done you, and in the absence of any further useful details, I think we'll leave it to readers to make their own minds up at that point...

By no 'further useful details', I can only assume that you mean 'no counter argument'.

I agree, let the readers decide.


Ian
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Re: too high?

#509725

Postby Itsallaguess » June 26th, 2022, 11:54 am

IanTHughes wrote:
You, on the other hand, are constantly promoting the idea that all an HYPer has to do is look at the yield to determine whether a dividend will be sustainable or not.


A willing misinterpretation of my position, as you well know...

For the avoidance of doubt, my position is that beyond a certain high-yield point, the amount of additional due diligence required to potentially remove the additional risk to dividend-sustainability in the ultra-high-yield area of the income-investment market is generally beyond the capability of the target-audience of the HYP strategy, and so a simpler, safer, alternative approach might be to actively avoid that ultra-high-yield area of the market if possible, and fish in more moderate areas where the market-based risk/reward metrics aren't as tightly stretched from the outset...

Cheers,

Itsallaguess

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Re: too high?

#509727

Postby moorfield » June 26th, 2022, 12:08 pm

IanTHughes wrote: You, on the other hand, are constantly promoting the idea that all an HYPer has to do is look at the yield on offer to determine whether a dividend will be sustainable or not! In my opinion, more complete nonsense on your part!


I think what IAAG is arguing is more nuanced than that, he wrote:

I think it's much simpler to just avoid that more difficult ultra-high-yield 'judgement area' of the market completely, and play the percentage-shots by expecting more moderate income-based returns.


I get that. None of our respective methods - checks, zones, ceilings, culture, medians etc. etc. - are flawless and can determine absolutely whether a dividend will be sustainable or not. But I do think the simpler mechanical methods make it easier (and less time consuming) for people to play those percentages if they wish to. In my case that is a ceiling, it is not perfect and I deliberately describe it as "coarse", but I can point to specific periods where it has worked for me in not chasing dividends, that in earlier days I might have, that have subsequently been cut and accompanied a trashed share price. I accept that someone can probably find plenty of other examples where that has not been the case. But one has to start somewhere, and I believe I have a quick method that works reasonably well, for me. OMMV.
Last edited by moorfield on June 26th, 2022, 12:17 pm, edited 2 times in total.

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Re: too high?

#509730

Postby Dod101 » June 26th, 2022, 12:10 pm

Itsallaguess wrote:e]

Which all makes perfect sense on the face of it Dod, but the main issue I've always got with these types of counterpoints is that both Ian's 'checks' to make sure that he can 'reasonably believe [they] provide a high and sustainable dividend', and even your own 'know your company' statements don't actually offer any real value as to how either of those processes are carried out...

So with regards to an income-strategy that's meant to be simple enough for the man in the street to pick up, that lack of detail in a clearly important area of the strategy is just 'words', with no meaningful detail as to just what they practically mean...


It is very difficult to find a definitive test for these factors, or lack of them (which help to reassure the investor re a 'sustainable yield') In fact I would say it is not possible. I have always claimed that investing is more art than science and it is judgement that matters. That can only be honed with experience and even then no one is likely to get it right all the time. For anyone who is not prepared to accept the risk of getting it wrong at times, nor to take the time to gain, (sometimes expensive!) experience, then they are better off keeping well away.

Dod

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Re: too high?

#509731

Postby IanTHughes » June 26th, 2022, 12:11 pm

Itsallaguess wrote:
IanTHughes wrote:You, on the other hand, are constantly promoting the idea that all an HYPer has to do is look at the yield to determine whether a dividend will be sustainable or not.

A willing misinterpretation of my position, as you well know...

For the avoidance of doubt, my position is that beyond a certain high-yield point, the amount of additional due diligence required to potentially remove the additional risk to dividend-sustainability in the ultra-high-yield area of the income-investment market is beyond the capability of the target-audience of the HYP strategy, and so a simpler, safer, alternative approach might be to actively avoid that ultra-high-yield area of the market if possible, and fish in more moderate areas where the market-based risk/reward metrics aren't as tightly stretched from the outset...

For the avoidance of doubt, you are still disagreeing with:
With regard to the sustainability or otherwise of its dividend, the 'risk' inherent in the purchase of a particular share at a yield of 10.00% IS NO GREATER THAN if the same share were priced at a yield of 5.00%!

Or do you now agree with that statement?

Moderator Message:
Less than polite bit removed. - Chris


ian

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Re: too high?

#509736

Postby moorfield » June 26th, 2022, 12:33 pm

IanTHughes wrote:You are also still standing by your erroneous statement, a lie in fact, that I have claimed to have:
Itsallaguess wrote:[Deletion]

[Deletion]



Again I suspect what IAAG means (<- correct me if I'm wrong) is that he's not been able to find any post of yours here in which you describe in more depth how you analyse and determine whether a high yield dividend is sustainable or not.

Is there one?

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Re: too high?

#509740

Postby Itsallaguess » June 26th, 2022, 12:43 pm

moorfield wrote:
IanTHughes wrote:
snip



Again I suspect what IAAG means (<- correct me if I'm wrong) is that he's not been able to find any post of yours here in which you describe in more depth how you analyse and determine whether a high yield dividend is sustainable or not.

Is there one?


Thanks, and yes, that's part of it, but it's also a little more nuanced than that, because my main point isn't even hinged on whether such analysis is even possible, or if an investor of such obvious high esteem as Ian has managed to perform it with reliable and long-term beneficial results, but whether such a reliable risk-reducing process (if it exists..) can actually be carried out by the target-audience of the HYP strategy...

So two questions to answer, not just the one.

Over to Ian then, I suppose, to hopefully answer them both...

Cheers,

Itsallaguess
Last edited by Itsallaguess on June 26th, 2022, 12:44 pm, edited 1 time in total.


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