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Forecast Yields - do we believe them yet?

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funduffer
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Forecast Yields - do we believe them yet?

#354154

Postby funduffer » November 6th, 2020, 3:25 pm

Since Covid struck in March, I have done precisely nothing to my HYP, mainly because I realised that forecast yields (the underlying parameter in HYPTUSS for ranking top-ups), were going to be unreliable because of the unknowns at the time.

Eight months on, forecast yields should be more reliable. The pandemic effects are better understood, and the period has revealed which companies can thrive in these conditions, and which will struggle.

I am now contemplating starting to top-up my HYP again (most income this year has gone into my IT portfolio), so I thought I would look at a comparison of forecast yield (from HYPTUSS / Sharecast), versus historic yield for my HYP. Historic yield is defined as the dividends received in the last 12 months (from today) divided by the current share price - the same metric used in the dividenddata.co.uk website:



Looking at this table, I think the forecast yields do look sensible in most cases. The companies seem to fall broadly into 3 categories:

1. Those that have not cut their dividend, and are forecast to grow their dividend modestly (those with a ratio of between 1.0 and 1.2. Examples - LGEN, SSE, BHP

2. Those that have cut but stabilised at a new level (ratio between 0.5 and 1.0). Examples - IMB, RDSB, BLND

3. The no hopers - which have suspended their dividend with no prospect of recovery in the short term (ratio of 0.0 or just above). Examples - SGC, MARS.

Some interesting points from this table:

- LGEN and SLA have not cut their dividends but have yields over 8%, but are not forecasted to cut. If you believe the forecasts, these are great value. If not, are these the next cutters?

- The banks HSBA, LLOY are both forecast to resume dividends modestly - probably worth hanging on to for now to see what happens

- The no hopers SGC, MARS, VSTY look unlikely to restart dividends in the short-term. I should probably get rid, but I think housebuilders will probably resume dividends soon, but I am less confident about buses and pubs, even if the pandemic is defeated.

My conclusion is to start taking forecast yields more seriously again, as they look reasonable to me - at least in my HYP.

FD

tjh290633
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Re: Forecast Yields - do we believe them yet?

#354165

Postby tjh290633 » November 6th, 2020, 4:12 pm

I do not believe in using "forecast yields". I use the latest available data, as issued by the company concerned. My portfolio with the yields as we know them at the moment is:

Rank   EPIC   Yield 
1 IMB 11.13%
2 BP. 10.20%
3 LGEN 9.03%
4 BATS 8.42%
5 VOD 7.42%
6 RIO 6.62%
7 SSE 5.97%
8 BHP 5.90%
9 AV. 5.70%
10 GSK 5.70%
11 BA. 5.37%
12 RDSB 5.22%
13 NG. 5.11%
14 ADM 5.05%
15 UU. 4.87%
16 TSCO 4.56%
17 TATE 4.54%
18 PHP 3.91%
19 PSON 3.60%
20 ULVR 3.11%
21 IMI 3.10%
22 DGE 2.63%
23 AZN 2.53%
24 RB. 2.47%
25 SGRO 2.24%
26 S32 2.13%
27 BLND 2.07%
28 WMH 0.00%
29 MKS 0.00%
30 MARS 0.00%
31 TW. 0.00%
32 BT.A 0.00%
33 SMDS 0.00%
34 CPG 0.00%
35 KGF 0.00%
36 LLOY 0.00%

There are one or two assumptions in there, like the level of the dividends of IMB to be announced on the 17th. The order of the bottom 9 is arbitrary, with very small numbers added to avoid spreadsheet problems. WMH is an odd case, as it is the share whose price has grown the most, 45%, since 1st January. It was helped by the recent bid, but was still top before that.

Some of the bottom 9 have promised to restart dividends soon. SMDS is one. Others have hinted at it. For now they are persona non grata as far as topping up is concerned. I have disqualified certain shares from topping up because they have already either absorbed too much capital or their share of dividend income is above what I consider to be an acceptable limit. Here is my expanded top-up table, to show more than I usually publish.

Top-up          Income                     Cost                
Rank EPIC Rank EPIC % Income Rank Epic % Cost
1 IMB* 1 LGEN 6.38% 1 AV. 4.65%
2 BP.*+ 2 BATS 5.86% 2 PSON 4.34%
3 VOD* 3 BP. 5.66% 3 BP. 4.33%
4 BATS* 4 IMB 5.19% 4 RDSB 4.32%
5 LGEN* 5 RIO 4.98% 5 LLOY 4.28%
6 RDSB+ 6 SSE 4.89% 6 MARS 4.23%
7 RIO* 7 ADM 4.67% 7 GSK 4.12%
8 AV.*+ 8 VOD 4.62% 8 BT.A 4.07%
9 BHP 9 GSK 4.52% 9 MKS 3.91%
10 MKS° 10 NG. 4.50% 10 PHP 3.70%
11 BA. 11 AV. 4.32% 11 S32 3.61%
12 MARS+° 12 BHP 4.11% 12 TSCO 3.56%
13 GSK* 13 BA. 4.10% 13 BLND 3.53%
14 SSE* 14 UU. 4.09% 14 BHP 3.42%
15 PSON+ 15 TATE 3.63% 15 LGEN 3.32%
16 BT.A° 16 TSCO 3.56% 16 SSE 3.18%
17 LLOY+ 17 PHP 3.44% 17 KGF 3.06%
18 S32 18 RDSB 2.88% 18 BATS 2.93%
19 BLND 19 ULVR 2.70% 19 VOD 2.91%
20 CPG° 20 PSON 2.68% 20 ADM 2.69%

I have indicated those disqualified by share of income (*), by share of cost (-) and by lack of dividends (°). Some, like BP., have multiple disqualifications.

You will see that the consequent top ranking shares for topping-up are BHP, BA., S32 and BLND. Others may, in time rejoin them.

The data are based on Friday's closing prices, by the way.

TJH

Arborbridge
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Re: Forecast Yields - do we believe them yet?

#354173

Postby Arborbridge » November 6th, 2020, 4:48 pm

tjh290633 wrote:I do not believe in using "forecast yields". I use the latest available data, as issued by the company concerned. My portfolio with the yields as we know them at the moment is:



TJH


I thought you used historic yields, whereas it seems you are using forecasts yields - it's just that they are your own forecasts.

Arb.

Itsallaguess
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Re: Forecast Yields - do we believe them yet?

#354186

Postby Itsallaguess » November 6th, 2020, 5:24 pm

Arborbridge wrote:
tjh290633 wrote:
I do not believe in using "forecast yields". I use the latest available data, as issued by the company concerned. My portfolio with the yields as we know them at the moment is:


I thought you used historic yields, whereas it seems you are using forecasts yields - it's just that they are your own forecasts.


If it's not a 'forecast' of some sort, then it must be a guaranteed future dividend, and hopefully if the past 12 months have taught us income-seekers anything at all, it's that there *are* no guarantees when it comes to future dividends, including ones that might have already been declared....

Everything is a 'forecast' if we're talking about future dividend expectations, whether we choose to call them that or not...

Cheers,

Itsallaguess

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Re: Forecast Yields - do we believe them yet?

#354189

Postby dealtn » November 6th, 2020, 5:31 pm

I'm happy to use forecast numbers (although yield is somewhat low down the list of importance), but only from a source I trust (which I'm afraid dividenddata.co.uk doesn't meet my requirements), and only as part of my "DYOR". In other words its a very initial screening filter that limits the work I will do myself, and I then produce my own "forecast" numbers.

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Re: Forecast Yields - do we believe them yet?

#354192

Postby moorfield » November 6th, 2020, 5:41 pm

What TJH said. I use either the dividends paid in previous 12 calendar months (eg. RIO 297.21p), what a company has announced otherwise (eg. IMB 137.71p, HSBA 0.00p), or sometimes a pro-rata combination of both following a cut (eg. WPP = 10.00/22.70 * 60.00 = 26.40p). These forecasts are updated following a company announcement.
Last edited by moorfield on November 6th, 2020, 5:47 pm, edited 2 times in total.

tjh290633
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Re: Forecast Yields - do we believe them yet?

#354193

Postby tjh290633 » November 6th, 2020, 5:43 pm

Arborbridge wrote:I thought you used historic yields, whereas it seems you are using forecasts yields - it's just that they are your own forecasts.

Arb.

No, I use the data provided by the company. I caveated the IMB final dividend(s), which I have assumed will follow their usual practice in relation to the interims. At the moment I have 15 dividends to come which have been announced, some at zero, and I have used the past announcements for the like of BT.A, for example, that they will not pay dividends until 2022. I have put no prediction in for BLND, just the single dividend so far announced.

TJH

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Re: Forecast Yields - do we believe them yet?

#354195

Postby Itsallaguess » November 6th, 2020, 5:47 pm

funduffer wrote:
My conclusion is to start taking forecast yields more seriously again, as they look reasonable to me - at least in my HYP.


I personally think you're right to do that, but I'd still be very wary of outliers no matter how any yield information is gathered...

Cheers,

Itsallaguess

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Re: Forecast Yields - do we believe them yet?

#354200

Postby Arborbridge » November 6th, 2020, 5:59 pm

The straight answer for FD is "no". Personally, I make a range of alterations which you can see in the table below. Firstly, I show my chart which shows income per unit - one line (mauve) is based on broker forecasts, the other line (yellow) is using broker forecasts plus my own corrections to those forecasts. Those corrections were gleaned from company announcements featured on TLF. You can see that the two lines are only just beginning to draw closer together, which they would do if the forecasts and myself were beginning to agree. That could be because I'm just plain wrong, or because the brokers haven't updated yet. So my comclusion is that it's to early too trust the forecasts - the difference in my total income forecast from broker yields, and my own estimated ones is around 15%. I think the same conclusion would be drawn from TJH's information also.

Image


The following tables show broker forecasts yields, followed in the next two columns, my estimate, then TJH's forecast yield. I notice that in most cases TJH's yield is slightly lower than mine, but I would expect his process to be more rigorous and more reliable.



As myex- mother in law used to say: life's to short to stuff a mushroom. One can always go to the bother of chasing up each individual company notice, but in normal times, quite frankly broker forecasts (which are in any event, based on company guidance) are good enough for my purpose. I don't need an overall accuracy looking forward of better than a few percent - I would question whether anyone could be sure of their dividend income to better than 5-10% a year out. I need the estimate to set my pension drawdown, and this is good enough since I can always alter what I draw if necessary, as it has been this year.


Arb.

Arb.

Gengulphus
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Re: Forecast Yields - do we believe them yet?

#354216

Postby Gengulphus » November 6th, 2020, 7:33 pm

tjh290633 wrote:... I use the latest available data, as issued by the company concerned. ...

Exactly what do you mean by that? Data about dividends that have actually been paid? Data about dividends the company has declared, but not yet paid? Data about dividends the company has said it intends to declare, but has not yet actually declared? They're all data issued by the company, but the dividends those data are about have varying degrees of certainty of actually ending up being paid (only the first category has a 100% chance, as e.g. the banks demonstrated early this year), various amounts of useful detail (e.g. DS Smith's statement that it intends to pay an interim dividend this year is not very useful because it doesn't say a thing about the size of that dividend), and various other things affecting its reliability and usefulness...

tjh290633 wrote:There are one or two assumptions in there, like the level of the dividends of IMB to be announced on the 17th. ...

Is that an example of an irregular verb phrase? - something like "I make assumptions, you make forecasts, he makes wild guesses"? ;-)

dealtn wrote:I'm happy to use forecast numbers (although yield is somewhat low down the list of importance), but only from a source I trust (which I'm afraid dividenddata.co.uk doesn't meet my requirements), ...

Hardly surprising, because dividenddata.co.uk has data about historical dividends and yields, not forecast dividends and yields! (*) Admittedly historical dividends and yields are by convention about dividends that have been declared or paid rather than only those that have been paid, meaning that they are strictly speaking forecasts to the extent that they are about dividends that have been declared but not yet paid. But that's almost always a rather pedantic, very minor caveat - earlier this year was a pretty exceptional period for declared dividends ending up not being paid, and even then it only happened for a fairly small proportion of companies. So to a very large extent, I think the sensible reason for not trusting dividenddata.co.uk as a source for forecast numbers is that it doesn't even try to be such a source!

(*) Or at least, it says clearly on its main "Dividend Yields" tab that its annual yields are "... based on the current share price and the total dividends declared in the previous 12 month period. In general, the dividend declaration date is used as the cut off date." If there are forecast dividends or yields elsewhere on its site, I would welcome being told where they are...

Gengulphus

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Re: Forecast Yields - do we believe them yet?

#354228

Postby kempiejon » November 6th, 2020, 8:27 pm

dealtn wrote:I'm happy to use forecast numbers (although yield is somewhat low down the list of importance), but only from a source I trust (which I'm afraid dividenddata.co.uk doesn't meet my requirements), and only as part of my "DYOR". In other words its a very initial screening filter that limits the work I will do myself, and I then produce my own "forecast" numbers.


Don't Dividenddata only use historic and declared dividends no forecasting, just published numbers.

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Re: Forecast Yields - do we believe them yet?

#354230

Postby Arborbridge » November 6th, 2020, 8:32 pm

kempiejon wrote:
dealtn wrote:I'm happy to use forecast numbers (although yield is somewhat low down the list of importance), but only from a source I trust (which I'm afraid dividenddata.co.uk doesn't meet my requirements), and only as part of my "DYOR". In other words its a very initial screening filter that limits the work I will do myself, and I then produce my own "forecast" numbers.


Don't Dividenddata only use historic and declared dividends no forecasting, just published numbers.


Yes, I believe so. I've found them to be rather slow in posting the data too - I've have on a number of occasions found a declared dividend is not mentioned for a while - probably days, though I have never made a note of the delay.

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Re: Forecast Yields - do we believe them yet?

#354242

Postby dealtn » November 6th, 2020, 9:20 pm

kempiejon wrote:
dealtn wrote:I'm happy to use forecast numbers (although yield is somewhat low down the list of importance), but only from a source I trust (which I'm afraid dividenddata.co.uk doesn't meet my requirements), and only as part of my "DYOR". In other words its a very initial screening filter that limits the work I will do myself, and I then produce my own "forecast" numbers.


Don't Dividenddata only use historic and declared dividends no forecasting, just published numbers.


Maybe I didn't express myself clearly enough then.

I am happy to use data sources that provide forecasts. (That's a general statement).
Yields and dividends might be in that subset of forecasts. (But a relatively minor one as far as I am concerned).
Any data source has to be one I trust. (dividenddata.co.uk doesn't meet that requirement).
Whatever data source I use, and by implication trust, is only a filter. (To limit the otherwise large amount of work I would have to do myself).
I then do my own work to produce my own forecasts.

I am not making a statement about didvidenddata.co.uk using forecast dividends.

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Re: Forecast Yields - do we believe them yet?

#354248

Postby funduffer » November 6th, 2020, 10:11 pm

dealtn wrote:I'm happy to use forecast numbers (although yield is somewhat low down the list of importance), but only from a source I trust (which I'm afraid dividenddata.co.uk doesn't meet my requirements), and only as part of my "DYOR". In other words its a very initial screening filter that limits the work I will do myself, and I then produce my own "forecast" numbers.


Except dividenddata don’t make forecasts, they just report historic yields.

It is Share ast that supply forecast yields.

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Re: Forecast Yields - do we believe them yet?

#354253

Postby funduffer » November 6th, 2020, 10:20 pm

Up until this year, I have found that HYPTUSS has provided a decent forecast of HYP portfolio income for about a year ahead.

This year the pandemic threw all that into chaos.

I think now however, the yield forecast at portfolio level is starting to make sense again.

The forecasts come from Sharecast and my understanding they are some sort of average of various brokers/forecasters, who undoubtedly are better placed to forecast dividends than I will ever be.

FD

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Re: Forecast Yields - do we believe them yet?

#354269

Postby Itsallaguess » November 7th, 2020, 6:53 am

funduffer wrote:
The forecasts come from Sharecast and my understanding they are some sort of average of various brokers/forecasters, who undoubtedly are better placed to forecast dividends than I will ever be.


I agree - I decided to stop wasting time tracking legacy payments and individual RNS dividend announcements years ago, and am more than happy to use the aggregated data from the various brokers who will follow these companies much more closely than I can ever hope to do.

Over the years, at portfolio level, it's been a good decision for me to have made, because the dividend-payment metrics I've tracked since making that decision have been well within an acceptable margin of error for the process to be more than useful to me, given the time and effort saved. Yes, this year has seen a few blips, but when some companies have been cancelling dividends that they'd already actually *declared*, then those blips will have been seen by people using any type of dividend and yield data at all. These things happen, unfortunately, and there is simply no 'magic wand'...

But I've got to be honest and say again that the actual origins behind any of the dividend or yield data that we might collectively use is actually a red herring, because it's not where the dividend or yield data might come from that's the issue, or what the data is being portrayed as (forecast, legacy, RNS, etc...) - the fact of that matter is that once in possession of any dividend or yield data that we might want to use to help inform actual purchasing or top-up decisions, it's at that point that all of that collective data becomes a forecast anyway, because we're all 'forecasting' that such collective data will continue to be relevant in the future, and as such, absolutely everything turns into a forecast at that point...

Cheers,

Itsallaguess

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Re: Forecast Yields - do we believe them yet?

#354273

Postby Arborbridge » November 7th, 2020, 7:39 am

funduffer wrote:Up until this year, I have found that HYPTUSS has provided a decent forecast of HYP portfolio income for about a year ahead.

This year the pandemic threw all that into chaos.

I think now however, the yield forecast at portfolio level is starting to make sense again.

The forecasts come from Sharecast and my understanding they are some sort of average of various brokers/forecasters, who undoubtedly are better placed to forecast dividends than I will ever be.

FD


Well, you might say that they are "starting" to make sense, in an approximate way. If you look at the data I've supplied, the difference between the raw broker forecast and my corrected version is 14%, and if you take TJH's version the gap may be slightly wider. But the gap across the chart is very similar - about 15% difference - so I wouldn't say that my finding supports the conclusion that they are starting to making any more sense than they were, on average across my HYP.

Having said that, I must add that the HYPTUSS tool is marvellous for this purpose, and even the uncorrected run gives a reasonable picture. I'm qute happy to have an error -even of 15% - than have the need to trawl through endless RNS announcements or company accounts. God forbid!


Arb.

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Re: Forecast Yields - do we believe them yet?

#354275

Postby Dod101 » November 7th, 2020, 7:53 am

Why do investors need a forecast dividend anyway? What is the purpose? In normal times I use the trailing yield (actual income for the last 12 months/ current value) but currently that does not work for all shares because as we know same have cancelled their dividends and others have drastically reduced them. For me that applies only to Imperial Brands and Shell having reduced their dividends and to HSBC having cancelled them. Otherwise for the sake of comparison, I can continue to use the trailing yield.

That avoids my having to worry about forecasts and how to check them and avoids worrying about the reliability of any particular site. Keep it simple.

Dod

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Re: Forecast Yields - do we believe them yet?

#354278

Postby dealtn » November 7th, 2020, 8:27 am

Dod101 wrote:That avoids my having to worry about forecasts and how to check them and avoids worrying about the reliability of any particular site. Keep it simple.



Keep it simple to me is looking forwards not backwards, but we are all different in how we approach these things I guess.

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Re: Forecast Yields - do we believe them yet?

#354279

Postby scrumpyjack » November 7th, 2020, 8:28 am

I do try to estimate dividend income approximately for the tax year, but mainly so I can ensure investments are switched between Mrs Scrumpy and me to optimise tax allowances. other than that, given that anyone relying on dividends for spending should have set up a substantial cash buffer, I too can't see the point of obsessing about forecast dividends. What will be, will be.

Similarly I can't see the point of trying to work out XIRRs of previous years investment returns. It doesn't change anything and as we are often told 'the past is no guide to the future', though perhaps it is with SMT?


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