How does yield on cost sit in the HYP world?

[tjh290633]

It's a comfort blanket metric based on historical facts. A bit like your uncle telling you that he used to pay 10p for a pint in 1966....

That's great Uncle Bill - but knowing that isn't going to get me a 10p pint today, is it...

Cheers,

Itsallaguess

Well, that was 2 Bob as we hadn't gone metric yet. I was living in Rochdale at that time, when there was a vast range of beer available. 2/= was London price. It was still only about 1/6d for Sam Smiths, or John Willy Lee's, or whatever you fancied, which did not include Cornbrook, one of the foulest beers it has been my misfortune to taste.

None of which has anything to do with the topic, except to point out that we suffer from inflation. In my view we should judge dividends by relation to the RPI, not one of these usurper price indices.

TJH

[Itsallaguess]

because anyone using it can be blinded to the potentially lost 'opportunity cost' of alternative uses of their invested capital

I don't see it like that. There is no free lunch (or at least its not completely free), so all you are doing there is doubling down on the risk that the 'new' investment won't turn out to be a clunker.

HYP runs its winners and cuts its losers in a particular way that is similarly to the PYAD value investment approach. You need those running winners to offset the inevitable clunkers.

Switching around increases the clunker risk.

But given that we're on the 'High Yield' HYP Practical Board, then we might assume that the reason the share was bought initially was because it was a good use of capital at that time, with which to purchase a relatively high, future income-stream.

That initial purchase itself was not without risk, so why would an income-investor wish to continue using that capital in a low 'current-yield' investment, when there might be improved 'current-yields' available with which to make better use of that capital?

Cheers,

Itsallaguess

[Itsallaguess]

subsequent increases in the price of a share begin to seriously distort these 'yield on cost' figures

I'm confused! Surely the subsequent share price has no impact at all on the "yield on cost"? In your example, pick any price ten years down the line (100p, 400p, whatever) and the yield on cost is still 15%!

However, it's certainly true that the yield on cost tells us nothing about current yield, which is probably what you mean?

Yes, sorry, but you've got the drift of my point - that using the initial price of a historically-bought share to then provide a 'yield on cost' figure using the level of any current dividends, begins to seriously distort the size of the 'comfort-blanket' yield-on-cost figure...

I think "dangerously meaningless" is a bit OTT!

Have we actually read of anyone who has made a tinkering decision for their HYP based on the "yield on cost" of one of their holdings? I'd like to give people a little more credit than that.

Well I'm claiming the 'dangerously meaningless' label because we're discussing this specifically on a 'High Yield' income-investment board, and allowing capital to sit in potentially 'Low Yield' investments, as per my earlier example, because we've perhaps lost sight of that 'Low Yield' due to using dangerous 'Yield on cost' metrics does need highlighting as a risk of using it...

That's how it sits with me, and that was the question being asked, afterall..

Cheers,

Itsallaguess

[NeilW]

so why would an income-investor wish to continue using that capital in a low 'current-yield' investment, when there might be improved 'current-yields' available with which to make better use of that capital?

You don't know that chasing risk is a better use of capital. You are swapping a winner for a potential dividend cutter. That's for new money, not for existing.

[NeilW]

. In my view we should judge dividends by relation to the RPI, not one of these usurper price indices.

Given the suppression of consumer price inflation via asset price inflation, the House price index is probably better...

[Gengulphus]

But, as I understand it, the HYP philosophy is that the current share price doesn’t matter, nor yesterday’s not the day after tomorrow, so what does it matter which price you compare the yield to? In fact on that basis what you paid for it is the only price that is actually real isn’t it?

It depends which shares you're talking about... Some HYPers take a "capital doesn't matter" approach, others take other approaches such as my own "capital matters, but is best looked after by looking after the income" approach, but in all of those approaches, "capital" refers to the capital value of the shares you're already holding and not contemplating selling. For those shares, the share price basically doesn't matter, nor does the yield: what matters is the income and how it grows and shrinks.

As far as the prices of shares you're considering buying is concerned, the price at the actual point of purchase always matters with regard to the shares you might buy (any shares of the same type that you already own are covered by the last paragraph), because it affects the number of shares you can buy with your available cash and thus the amount of future income you expect to be buying. The yield is basically a shortcut for that calculation: roughly (i.e. neglecting the small effects of trading costs and rounding), it involves dividing by the share price to get the number of shares, then multiplying by the expected future dividend to get the income, which is equivalent to multiplying the cash available by the yield. And assuming the cash available is a fixed amount, as it usually is ;-), that means you can compare the amounts of income available for purchase by just comparing the yields. For that reason, the yield to use when contemplating a purchase is always the expected future dividend divided by the share price at the time of the prospective purchase - or to make it practical as befits this board, as close to that time as reasonably possible. (Note though that that doesn't dictate the use of forecast yields - rather, it says to use whichever of the historical yield, the rolling historical yield, the forecast yield or possibly even others you regard as the best guide to the expected future dividends.)

Similarly, when contemplating selling shares, the price at the actual point of sale generally (*) matters with regard to the shares you're contemplating selling (but not any shares of the same type you're continuing to hold) because it affects the cash you'll receive from the sale, and the yield on that price is a similar shortcut if you want to compare that cash with the future income you're giving up by no longer owning the shares.

So basically, the practical details of holding shares don't really benefit from using any type of yield at all, and those of buying and selling shares need to involve the price at or close to the time of the trade. None of them benefit from using yield on cost. The only thing that yield on cost is of any real use for is judging how good past purchase decisions have turned out to be, and at least on its own it's a pretty crude tool for that job. In particular, it really needs augmenting with how long it has been since the purchase - e.g. if one typically buys shares that are on a yield of 5% at the time, a yield on cost of 10% is pretty impressive for a share bought 5 years ago, indicating dividend growth by nearly 15% per year compounded, but much less impressive for one bought 35 years ago, indicating dividend growth by about 2% per year compounded. Furthermore, what income and other returns the shares have produced in the intervening years makes a big difference: that 35-year holding which started with a yield of 5% and ends up with a yield on cost of 10% will have produced income equal to about 250% of its cost over the years if its income progression was smooth, but only 15% of its cost if it spent all the intervening years as a non-payer.

Judging how good past purchase decisions have turned out to be is potentially of a bit more use than just as a 'comfort blanket': one could use them to try to learn lessons about which types of purchase decisions are good ones to make and which are not. But if one is going to try that in a HYP, I would strongly advise both allowing at least five years (preferably ten or even more) to pass before trying to judge whether a decision was a good one and using a better method than yield on cost to try to judge it.

(*) I don't say "always" about this case because there are possible reasons for selling that say that you want to sell regardless of the price - e.g. if a company moves into an area of business that you find ethically totally unacceptable, to the point that in your view not receiving any income at all from it is the overriding consideration.

Indeed if, as some assert, today’s share price is the current discounted value of all future dividends and returns from that share, the current yield doesn’t matter either because, if it is low, it simply means the market expects it to rise in future more quickly than another share with a higher current yield.

The idea that the value of a share is the current discounted value of all future dividends and returns it will produce in the future is a perfectly valid theoretical concept, but that current discounted value is either impossible or next to impossible to determine in practice. In particular, it's easily provable that the share's market value isn't the same thing or anything close to it: if it were, Carillion's share price would have been 0.00p or very close to it from 11 May 2017 (the date that its last dividend payment went ex-dividend) onwards, but it actually stayed in the rough region of 200p until early July 2017, then in the rough region of 50p until mid November 2017, and was still about 14p when the company finally went bust... No matter how complex a discounting scheme you develop, it won't make the discounted value of no future returns whatsoever be anything other than zero!

Or there are many examples of companies whose future dividends and other returns are still exactly the same as they were at the start of this year: if the idea that the market price is a reasonably accurate estimate of that current discounted value were true, the only changes to share prices since the start of the year would have been the very slow steady rise due to the discounting applying to a slowly-diminishing period plus whatever margin for error "reasonably accurate" allows. Looking at a few such shares that I happen to have been looking at recently: Aviva's share price has varied between about 206p and about 427p ("about" because these are prices read off a chart), Barratt Developments' between about 340p and about 890p, DS Smith's between about 245p and about 390p, and HSBC's between about 370p and about 600p. For those observations to be compatible with the theory, one has to allow margins for error that IMHO stretch "reasonably accurate" well beyond breaking point! That could be resolved by a sufficiently complex discounting scheme, but it would have to tailor the discounting to both the date and which specific share you were looking at, which becomes a circular argument: you 'explain' the share price as being the current discounted value of future returns under a discounting scheme that is chosen to produce that share price or something close to it... That sort of circular argument doesn't help with practical decisions!

Or more briefly, although that assertion is based on a valid theoretical concept, it isn't true because it makes the faulty assumption that market value = long-term value to a holder of the share. Furthermore, that assumption is so far from being true in practice that the only advice I feel I can give on this HYP Practical board is not to use the assertion that the market price of a share is the current discounted value of all of its future dividends and other returns.

Gengulphus

[funduffer]

Comparing the current yield on cost to the yield when you bought a share is only the same as looking at the dividend compound annual growth rate, which I do look at.

The CAGR is useful for seeing which dividends are increasing faster or slower than inflation over long periods - an important factor if you live off dividends.

FD

[tjh290633]

. In my view we should judge dividends by relation to the RPI, not one of these usurper price indices.

Given the suppression of consumer price inflation via asset price inflation, the House price index is probably better...

I don't see why. It is purchasing power that matters, not the ability to buy houses. The RPI takes care of that by including mortgage costs in its composition.

TJH

[Gengulphus]

I don't select on Yield, nor follow a strict rules based system.

I do keep records of my investments. My ideal timeframe is very short, and hope never to hold a share long enough to receive a dividend, though of course that is a rare occurrence!

One of the things I will do though is make a note of every dividend, as that is part of my Total Return, and in so doing I also note the "progress" of that dividend stream, such that I know how much that total dividend received is as a % of my initial investment, and also how much the current dividend is forecast to be as a similar % of that initial investment.

As I say I don't use yield as an investment metric anyway, and I wouldn't be using either of these "on cost" measures as part of any criteria for selection were I disposed to use "yield". They do however prove a useful "simple" benchmark (in addition to change in price - hopefully upwards!) as a quantifier of the "success" of the investment. Of course "time invested" is a huge part of this too, so needs to be factored in as well. But that is part of the less simple benchmark of success such as XIRR/Total Return.

I don't see why a HYP investor couldn't do something similar to measure "success" (even if that ignored capital value change), but can't see its relevance to any decision to select shares. I can see how it might be a tool in deciding how successful a share previously selected might be, in the potential position of choosing to sell (if that's allowed) or not. I suspect there are alternative, and perhaps easier ways, of making this analysis though. I am on shakier ground here though as I don't follow this strategy.

(Posted as it has been pointed out to me by Gengulphus that the guidelines addresses the issue of "for the use" of HYP followers, so doesn't exclude non-HYPers on this Board so long as they are providing useful information to HYPers)

On that last point, you should beware of two points: firstly, that providing useful information to HYPers should be restricted pretty much to that useful information (e.g. not other stuff about what type of non-HYP strategy you use), and secondly, that I wasn't speaking authoritatively on what this new board's guidance means, just giving my opinion! I.e. I'd suggest being cautious about how you follow it - and I won't accept any responsibility if trying to follow it goes wrong!

But on your main point about potentially using 'on cost' measures to measure 'success' in a HYP, yes, but they're of limited use. There are basically two situations when they measure 'success' quite well, provided (as you indicate) that they take account of 'time invested', e.g. by suitable annualisation. The first of them is if the position has been closed: even with HYP being an LTBH approach, short holding periods can happen. For example, HYP1's original share Blue Circle Industries was taken over in July 2001 after being held for about 8 months: my calculations in the TMF thread about it indicate that for £5,000 invested on 13 November 2000, it received about £610 in a special dividend + share consolidation on 19 December 2000 and then around £4,757 in the takeover on 11 July 2001. Between those, it received 961 * 11.65p = £112 on 20 April 2001 from the dividend described in https://investegate.co.uk/blue-circle-i ... 34274325Z/. Overall, it made a profit of £489 on a cost of £5,000, i.e. a 9.78% profit on cost, on which 2.24% was yield on cost due to the April 2001 dividend and the remaining 7.54% was basically a capital gain (a special dividend + share consolidation having a similar effect to a sale of the shares lost to the consolidation, other than for tax purposes. Annualising it as an "internal rate of return" using the spreadsheet XIRR() function, that's a 17.19% rate of return - so I think one can reckon that the original purchase of Blue Circle was a 'success' for HYP1, albeit a small one and one in which capital was the dominant factor, not income. The capital movement dominating the income is typical when a HYP holding turns out to have a short holding period, by the way, basically because the income is small and the capital movement is often large - but unfortunately it can be in either direction.

The second way an annualised 'on cost' measure can be useful to judge the 'success' of a HYP investment is if the purchased shares have been held long enough for the accumulated income to be a decent return even if the company went bust tomorrow, or less extremely, even if it suffered from a complete cancellation of dividends for several years and the consequent major share price fall. E.g. suppose someone bought 1000 BATS shares twenty years ago. The closing share price on Friday 23 June 2000 was 422p; adding reasonable trading costs, the shares would have cost them about £4,250. Since then, I'm fairly certain their number of shares would have remained unaltered by corporate actions, so they'll have received 1000 times all of the dividends in https://dividenddata.co.uk/dividend-his ... ?epic=bats that have gone ex-dividend in those 20 years. That's all of the dividends listed for 2000 to 2019 plus the Q1 dividend for 2020; the total income received amounts to £20,696, getting on for 5 times the original investment (which it will exceed if the next two intended 52.6p interims are paid as planned). A good outcome for that purchase decision in 2000, and the 'internal rate of return' at the current share price of 3055p is a very impressive 18.59%. And even if BATS somehow went bust tomorrow, taking the current capital value of £30,550 out of that rate-of-return calculation, it would still produce a 15.01% rate of return - or if it suffered a complete dividend cut immediately, no dividends for the next five years and an overall 80% loss of capital value over those five years, the resulting rate of return on 24 June 2025 would be 15.51%. Basically, whichever way you look at it, that original June 2000 purchase decision is a very good one...

To deal with an apparent flaw in that argument, by the way, there is a way it could appear to go wrong, namely that the holding could request a further investment by doing a massive rights issue or some similar type of corporate action: such an investment could make the total of the investments into the holding more than the total of its returns, and if the company subsequently went bust without paying any further returns, the overall rate of return would be negative. But the limited-liability nature of shares means that the holding can only request a further investment, not demand one, and that means that the decision whether or not to make the further investment is another purchase decision. So what would basically have happened if one made the further investment and the company subsequently went bust without paying any further returns is that the June 2000 purchase decision was a very good one, but the further-investment purchase decision was a very bad one, more than losing what the June 2000 purchase decision had gained...

It seems just about inconceivable that anything as BATS going bust tomorrow will happen, of course - but the point is that the June 2000 purchase decision will turn out to be a very good one even in the absolute worst case for what happens next: the HYPer can throw away the gains from that decision, but not have them 'stolen' by investment events beyond his or her control. The method does eventually give a firm indication of the 'success' of a HYP investment... But there is a practical problem with using it, namely that it takes many years to arrive at a reasonably firm conclusion. Even for what has turned out to be one of the most outstanding HYP purchase decisions, to buy BATS in June 2000, it would have taken nine years for the if-BATS-went-bust-tomorrow worst case to be sure of not losing money in nominal terms - the June 2009 payment of £616 would have made the cumulative dividends more than the original cost (or equivalently, the cumulative yield-on-cost greater than 100%) and the worst-case rate of return just positive at 0.20%. Another year would have taken that worst-case rate of return up to 3.61%, basically making it inflation-beating, and the next three years beyond that would take it up to 6.28%, then 8.36%, then 9.95%, which are the sorts of levels I think can reasonably be regarded as indicating clearly 'successful' investments.

So basically, even for a HYP share as outstandingly good as BATS in 2000 has turned out to be, it takes something of the order of twelve years to very firmly conclude that the purchase decision was a good one. For HYP shares that have been good, but not that outstandingly good, it will take longer. Of course, one can get a less firm (but still pretty good) indication after rather fewer years - for instance, six years after that BATS purchase, after it had paid its May 2005 dividend, it had returned just over half of the initial £4,250 cost in dividends, its historical dividend had risen nearly 80% since purchase and its share price had more than tripled to 1358p on 23 June 2006. It would have taken a pretty major disaster striking the company to get rid of that success, so one could have been reasonably confident that the original purchase decision was a good one - but not certain.

To try to summarise this, one can get a decent indication of investment 'success' from yield-on-cost type calculations, but basically only after either the position has been closed (as occasionally happens by takeover even in the most 'purist' HYPs) or the position has been running for a considerable number of years - in round number terms, think 5+ years for a decent indication about an outstandingly good HYP share, and double that number of years for each of a really firm indication or a less good HYP share. And when it takes multiple years, you essentially need to annualise the yield-on-cost for all of those years, not look at the yield-on-cost for the final year.

Gengulphus

[torata]

Comparing the current yield on cost to the yield when you bought a share is only the same as looking at the dividend compound annual growth rate, which I do look at.

The CAGR is useful for seeing which dividends are increasing faster or slower than inflation over long periods - an important factor if you live off dividends.

FD

I'm happy to be proven wrong, but I don't think they are comparable at all.

My understanding is YoC will (usually) decrease as you make more purchases over the years, each time ratcheting back towards the current yield at time of purchase.
I see this with HFEL, in my HYP as a single purchase and in my SIPP with several purchases.
CAGR should be unaffected by making new purchases, and should be the same for both accounts (over the same time period).

Fully agree with your point about the importance of checking if dividends are increasing at least in line with inflation.

torata

[richfool]

How does yield on cost sit in the HYP world? I would imagine that it is more important than current or future yield. Do HYPpers use this measure? If no, why not.

This question is NOT to try to undermine/question/debate HYP in any way but rather to understand more about how HYP is managed.

Moderator Message:
This topic split off from a discussion that started out elsewhere. - Chris

EssDeeAitch, the answer to your question is constrained by the fact the question posed refers to the "HYP world" and has been posted on the "HYP - Practical" board. Had it been on a more broadly based board, then the implications of capital growth could have been brought into the discussion (and I would have been able to add my input).

[Arborbridge]

How does yield on cost sit in the HYP world? I would imagine that it is more important than current or future yield. Do HYPpers use this measure? If no, why not.

This question is NOT to try to undermine/question/debate HYP in any way but rather to understand more about how HYP is managed.

Moderator Message:
This topic split off from a discussion that started out elsewhere. - Chris

EssDeeAitch, the answer to your question is constrained by the fact the question posed refers to the "HYP world" and has been posted on the "HYP - Practical" board. Had it been on a more broadly based board, then the implications of capital growth could have been brought into the discussion (and I would have been able to add my input).

Why? Yield on cost is intimately wrapped into capital growth and has been discussed previously on HYP-P. Indeed, HYP-P reports often or almost always mention capital growth, so unless you wanted to say something really wild (!) I don't see the problem. Even Pyad mentions it, as in:-

"Capital
This is irrelevant or very much secondary depending on your viewpoint."
and proceeds to give the low down on capital growth of HYP1.


Arb.

[vrdiver]

How does yield on cost sit in the HYP world? I would imagine that it is more important than current or future yield. Do HYPpers use this measure? If no, why not.

This question is NOT to try to undermine/question/debate HYP in any way but rather to understand more about how HYP is managed.

Moderator Message:
This topic split off from a discussion that started out elsewhere. - Chris

Despite some of the comments above, I think this is an interesting question that many HYP followers actually do pay attention to, but not quite in the format mentioned.

I've seen posts in the past refer to Yield on Cost, and it's usually been recognized that the metric is narcissistic rather than useful, since for the purpose of HYP, yield is a tool to focus buying decisions, but thereafter the holder is interested in income received and whether that income could be improved (if a tinkerer).

However, as torata mentioned, when yield on cost is replaced by CAGR (of the yield) then the initial purchasing decision is further validated (or not!) by how that initial income has grown over time.
Neither CAGR nor current yield-over-inital-cost are impacted by any changes to the current share price, but whereas YoIC is anchored to the original purchase price, CAGR is not, rather it measures the rate of change of the dividends received. Moreover it is not biased by longevity, unlike the other measure, where duration of holding can flatter an otherwise pedestrian share.

VRD

[ADrunkenMarcus]

How does yield on cost sit in the HYP world?

If a share has been purchased to deliver a high and rising dividend then the dividend yield on cost is one indicator of whether the investment has met its objective, because you would wish to see it rising steadily over time (in both nominal and real terms).

Best wishes

Mark.

[Gengulphus]

How does yield on cost sit in the HYP world?

If a share has been purchased to deliver a high and rising dividend then the dividend yield on cost is one indicator of whether the investment has met its objective, because you would wish to see it rising steadily over time (in both nominal and real terms).

However, calculating yield on cost is at best unnecessary extra work and at worst downright deceptive about whether a share has delivered rising dividends.

The simplest case is when you've bought a holding of a share and then neither bought extra shares for the holding nor sold any from the holding, including neither having done anything with effects equivalent to a purchase or sale nor had any such thing done by the company - examples include choosing to deal with a rights issue in a non-capital-neutral way (taking up rights adds capital, selling them or letting them lapse removes capital, and they need to be balanced against each other if you want to deal with the rights issue in a capital-neutral way). In that case, you can see whether you've had a rising dividend simply by looking at what's happened to your income from it: dividing all of those income figures by the unchanging cost of the holding to get yields on cost won't change whether they're rising or falling. Or you can just look at how the dividend-per-share figures announced by the company compare with the comparative figures they give for the previous year, which include the adjustments needed for things like share splits, share consolidations and rights issues. Or even better, various third-party sources such as dividenddata produce tables and charts that show the dividend progress with the cumulative effects of those adjustments taken into account: for example, if I want to see whether my 2003 purchases of Halma, Greene King and United Utilities have delivered rising dividends to me, I just have to look at https://dividenddata.co.uk/dividend-his ... ?epic=hlma, https://dividenddata.co.uk/dividend-history.py?epic=gnk and https://dividenddata.co.uk/dividend-history.py?epic=uu. to see that the answers are "yes", "mainly yes, though with a few holds and near-holds" and "not really - there have been rises in most years, but the few cuts have pretty much cancelled them out overall (and certainly to less than the rate of inflation overall)" respectively.

If I make a top-up purchase at some point, yield on cost becomes deceptive as an indicator of whether the share has delivered rising dividends. For instance, suppose I spend £3k on a share with a price of 100p and a dividend of 5p. Neglecting the small effects of trading costs for the sake of simplicity, I've now got a holding of 3000 shares with value £3k, cost £3k, annual dividend income £150, yield 5% and yield-on-cost 5%. Suppose the share then delivers dividends that rise to 10p over the next few years and the share price rises correspondingly to 200p, so that my holding is now of 3000 shares with value £6k, cost £3k, annual dividend income £300, yield 5% and yield-on-cost 10%. At this point I spend another £3k on a top-up of 1500 shares, and my holding changes to one of 4500 shares with value £9k, cost £6k, annual dividend income £450, yield 5% and yield-on-cost 7.5%. After that the company continues to be successful, and some years later its dividend and share price have both doubled again, to 20p and 400p respectively, so I now have a holding of 4500 shares with value £18k, cost £6k, annual dividend income £900, yield 5% and yield-on-cost 15%.

If I use yield-on-cost as an indicator of whether the share has produced rising dividends, I get told that it has produced an overall x3 rise from 5% to 15% - a good record, but one that appears blemished by that drop from 10% to 7.5% at the point when I topped up. But the reality is that the dividends have had a x4 rise from 5p to 20p, unblemished by any cuts...

What about sales? They're a bit more complicated than purchases, because there are two ways people commonly calculate their effect on the cost of a holding: either they reduce the cost by the amount of the sale proceeds, or they reduce it in proportion to how the number of shares in the holding is reduced. If the latter is used (which I would recommend for more reasons than just this one, among them that unlike the former, it never results in nonsensical figures due to the cost becoming zero or negative), it's pretty harmless: the number of shares in the holding, its value, its cost and its annual dividend income all reduce by the same fraction, and so both its yield and its yield-on-cost remain unchanged. For example, suppose that instead of topping up in the above example, the HYPer decides to trim the holding of 3000 shares with value £6k, cost £3k, annual dividend income £300, yield 5% and yield-on-cost 10% by a third (perhaps because they've decided its become an uncomfortably large part of their HYP, or because they've become a bit too worried about the dividend safety, or a combination). If they reduce the cost of the holding by a third as well, then it becomes one of 2000 shares with value £4k, cost £2k and annual dividend income £200, and so still has yield 5%, yield-on-cost 10%.

The other treatment would instead reduce the cost of the holding by the 1000 * 200p = £2k sales proceeds, so they reckon it becomes one of 2000 shares with value £4k, cost £1k and annual dividend income £200, and so has yield 5%, yield-on-cost 20%. A massive rise in the yield on cost, which isn't caused by a dividend rise. And if the company subsequently cuts its dividend by 65% to 3.5p and the share price halves as a result, for example, they'll reckon it has value £2k, cost £1k and annual dividend income £70, and so has yield 3.5%, yield-on-cost 7%: overall, they'll see the yield-on-cost having risen 40% (from 5% originally to 7% now), a decent-looking overall rise despite the dividend cut, whereas the reality is that the dividend has dropped overall by 30%, from the original 5p to 3.5p. So if that HYPer uses yield-on-cost as an indicator of rising dividends, they get a downright deceptive picture!

To sum up, if you want to know whether you've had rising dividends, go to the horse's mouth: the dividend figures produced by the company, taking any adjustments they make in the comparatives for share splits, share consolidations, rights issues, etc, into account, or use sites like dividenddata to take the adjustments into account for you. Calculating your own yield-on-cost figures is at best more work to obtain the same basic information, and introduces distortions in some circumstances such as top-up purchases, or sales if you use the wrong method to account for their effects on cost.

Gengulphus

[ADrunkenMarcus]

Calculating your own yield-on-cost figures is at best more work to obtain the same basic information.

It's no more work, as I record my dividends received (on a per share basis) in any case.

Best wishes

Mark.

[tjh290633]

Calculating your own yield-on-cost figures is at best more work to obtain the same basic information.

It's no more work, as I record my dividends received (on a per share basis) in any case.

It's a column in my spreadsheet, which I put in many years ago for no obvious reason or, if there was one, it has been forgotten.

Keeping it updated requires no effort on my part, but I see no reason to delete that column.

TJH

[Gengulphus]

To sum up, if you want to know whether you've had rising dividends, go to the horse's mouth: the dividend figures produced by the company, taking any adjustments they make in the comparatives for share splits, share consolidations, rights issues, etc, into account, or use sites like dividenddata to take the adjustments into account for you. Calculating your own yield-on-cost figures is at best more work to obtain the same basic information, ...

It's no more work, as I record my dividends received (on a per share basis) in any case.

I've corrected your quote of what I said, to restore the context that it was all conditional on wanting to know whether you've had rising dividends. Given that context, it should be clear that I wasn't talking about the work involved in recording the dividends, which is pretty obviously needed, but instead about the work required to process them into yield-on-cost figures. And as regards TJH's point about it already being in his spreadsheet, I agree that the extra work might all be in the past for that reason - but it was still extra work and would be completely wasted if all that the yield-on-cost figures were wanted for is to establish whether shares have delivered rising dividends. Of course, if they were wanted for other reasons, those reasons might have been a good justification for the extra work.

Also, when you quote an incomplete sentence, please don't edit in a full stop to make it appear to be a complete sentence. I have also corrected your quote of what I said to indicate that it is a quote of an incomplete sentence.

Gengulphus

[ADrunkenMarcus]

Also, when you quote an incomplete sentence, please don't edit in a full stop to make it appear to be a complete sentence.

Apologies - this was intended to be '...' to signify that I had cut it. The perils of responding using a mobile!

Moderator Message:
I suspect Gengulphus will understand the issue, but it it quite important when quoting other posters to cite complete sentences and, if necessary, always indicate where sentences have been truncated. - Chris

To sum up, if you want to know whether you've had rising dividends, go to the horse's mouth: the dividend figures produced by the company, taking any adjustments they make in the comparatives for share splits, share consolidations, rights issues, etc, into account, or use sites like dividenddata to take the adjustments into account for you. Calculating your own yield-on-cost figures is at best more work to obtain the same basic information, ...

It's no more work, as I record my dividends received (on a per share basis) in any case.

I've corrected your quote of what I said, to restore the context that it was all conditional on wanting to know whether you've had rising dividends. Given that context, it should be clear that I wasn't talking about the work involved in recording the dividends, which is pretty obviously needed, but instead about the work required to process them into yield-on-cost figures. And as regards TJH's point about it already being in his spreadsheet, I agree that the extra work might all be in the past for that reason - but it was still extra work and would be completely wasted if all that the yield-on-cost figures were wanted for is to establish whether shares have delivered rising dividends. Of course, if they were wanted for other reasons, those reasons might have been a good justification for the extra work.

On the issue of whether shares have delivered rising dividends, I simply compare the dividend yield on cost against the original dividend yield on a per share basis to see whether it is higher.

Best wishes

Mark.