The Lemon Fool

I did flag that the number of holdings will affect the median holding value and thus the ratio versus the annual dividends, but I'm grateful to Stephen/pyad for the clear explainer. Quoting myself...

It will differ by the number of stocks held - we currently hold 32, and peaked at 35.

That aside, WHY is this ratio important? A lot of HYPSter posters here are either no longer adding new monies, or are drawing an income and not reinvesting dividends or 'recycling' sales funds (forced and discretionary). I haven't spotted any/many newbie HYPster starting out. I was that noobie a decade ago. We've been investing relatively moderate amounts into ISAs, barely scratching the maximum annual allowances. For us, the first time we had £100 in dividends in a single month was a milestone. When we hit £1000 total dividends it was a milestones (I still track the £1000x thresholds, which come around faster year by year, excepting Covid era). Those dividends felt like "free money" (certainly when reinvested!) - we owned a bit of a business and it was paying us out. I mark each year when the dividends received exceed the prior year's (again, happened every year except 2020/21).

So yes, I do look at the total annual dividends and compare to the median average holdiing value (YMMV). It's an interesting ratio to me, and shows a measure of HYP growth and maturity. Ten years ago we started a vegetable patch - not every seed took; some bolted; some were slow to get established; the birds and slugs took a few; one or two grew into prize specimens. Of course we're going to check and weigh the crops as they yield a harvest. We'll also replant some of the seeds for the future.

It is easy to demonstrate this effect (of how many new holdings could be bought with the annual income).

I have 36 holdings, the median being 2.8%. The portfolio yield is 4.5%, so it is possible to add 4.5/2.8 new holdings in the current year. Near enough 1.6 new holdings at median weight.

As I have more than enough holdings, this is academic. For someone building a portfolio, then the point will be reached at about 22 holdings with that yield. Adding more capital is obviously a faster method.

TJH

tjh290633 wrote:It is easy to demonstrate this effect (of how many new holdings could be bought with the annual income).

I have 36 holdings, the median being 2.8%. The portfolio yield is 4.5%, so it is possible to add 4.5/2.8 new holdings in the current year. Near enough 1.6 new holdings at median weight.

As I have more than enough holdings, this is academic. For someone building a portfolio, then the point will be reached at about 22 holdings with that yield. Adding more capital is obviously a faster method.

I think there's a somewhat less academic way of looking at it for you, which is that you can make about eight purchases per year, each at about 20% of median weight. IIRC, that's roughly the size of your top-up purchases, so you can top up about eight times per year.

Gengulphus

Gengulphus wrote:I think there's a somewhat less academic way of looking at it for you, which is that you can make about eight purchases per year, each at about 20% of median weight. IIRC, that's roughly the size of your top-up purchases, so you can top up about eight times per year.

Gengulphus

Agreed. I was looking at the number of new holdings that you could get in a year, but the mechanism of how it is done is just as you say.

TJH