too high?

[kempiejon]

Over on the Rio topic there was the perennial question about yields too high to be sustainable and for a HYPer uninvestable or for the never sell builders not applicable for more money.
From the top 100 here https://www.dividenddata.co.uk/dividend ... ld&order=1
I pinched this list of those offering more than 7% because I prematurely thought the yield on the 100 was around 3.5% rather than the documented 3.98%

RIO  | Rio Tinto              | Industrial Metals and Mining              | £61,360.05 | 13.20%
PSN  | Persimmon              | Household Goods and Home Construction     |  £5,832.23 | 12.87%
ANTO | Antofagasta            | Industrial Metals and Mining              | £11,549.07 |  9.94%
MNG  | M&G                    | Investment Banking and Brokerage Services |  £4,955.35 |  9.46%
ABDN | Abrdn                  | Investment Banking and Brokerage Services |  £3,538.37 |  9.00%
PHNX | Phoenix Group Holdings | Life Insurance                            |  £6,119.37 |  7.99%
LGEN | Legal & General Group  | Life Insurance                            | £14,089.87 |  7.82%
AAL  | Anglo American         | Industrial Metals and Mining              | £40,944.35 |  7.72%
IMB  | Imperial Brands        | Tobacco                                   | £17,269.21 |  7.68%
TW.  | Taylor Wimpey          | Household Goods and Home Construction     |  £4,128.50 |  7.36%
BDEV | Barratt Developments   | Household Goods and Home Construction     |  £4,682.45 |  7.23%

I've got a good handful of that lot and wouldn't necessarily rule them out for a top up to my income investments just because a trend of downward sp pressure and growing dividend but a deeper check for a 5 year history of increasing dividends knocks most out. RIO, Phoenix and LGEN look unblemished and I take a view on Covid-19 halting some of the others like Barratt and MNG with forcast income nearly makes the cut.

[Itsallaguess]

Over on the Rio topic there was the perennial question about yields too high to be sustainable and for a HYPer uninvestable or for the never sell builders not applicable for more money.

From the top 100 here https://www.dividenddata.co.uk/dividend ... ld&order=1

I pinched this list of those offering more than 7% because I prematurely thought the yield on the 100 was around 3.5% rather than the documented 3.98%

RIO  | Rio Tinto              | Industrial Metals and Mining              | £61,360.05 | 13.20%
PSN  | Persimmon              | Household Goods and Home Construction     |  £5,832.23 | 12.87%
ANTO | Antofagasta            | Industrial Metals and Mining              | £11,549.07 |  9.94%
MNG  | M&G                    | Investment Banking and Brokerage Services |  £4,955.35 |  9.46%
ABDN | Abrdn                  | Investment Banking and Brokerage Services |  £3,538.37 |  9.00%
PHNX | Phoenix Group Holdings | Life Insurance                            |  £6,119.37 |  7.99%
LGEN | Legal & General Group  | Life Insurance                            | £14,089.87 |  7.82%
AAL  | Anglo American         | Industrial Metals and Mining              | £40,944.35 |  7.72%
IMB  | Imperial Brands        | Tobacco                                   | £17,269.21 |  7.68%
TW.  | Taylor Wimpey          | Household Goods and Home Construction     |  £4,128.50 |  7.36%
BDEV | Barratt Developments   | Household Goods and Home Construction     |  £4,682.45 |  7.23%

I've got a good handful of that lot and wouldn't necessarily rule them out for a top up to my income investments just because a trend of downward sp pressure and growing dividend but a deeper check for a 5 year history of increasing dividends knocks most out.

RIO, Phoenix and LGEN look unblemished and I take a view on Covid-19 halting some of the others like Barratt and MNG with forecast income nearly makes the cut.

I think there's two separate aspects to this question that are distinct enough that it perhaps makes them worth noting separately as part of this interesting discussion, and it's to do with the current position of income-investment capital...

If we consider two different potential lumps of income-seeking capital, and look at the above 'ultra-high yield' aspect when set against each of them individually, then I think the discussion that's gone on over on the RIO thread might be set in a slightly better context -

• Already invested capital, currently sat in one of these types of 'ultra-high yield' candidates

• Fresh investment capital, looking for an income-investment home from which to draw a FUTURE reliable and growing income stream

Personally, as an income-investor with a broad portfolio of individual income-delivering holdings, I am quite content that within those already-held positions, income and capital are always likely to contain quite a broad level of fluctuation, but I would still hope that taking a wider, portfolio-level view, those granular fluctuations might, with a fair wind, generally be dissipated by the overall income and capital performance of the broader income-portfolio itself, when taken as a whole.

Now the above is not to say that a much more active income-investor might not get some increased performance if they chose to sell underlying laggards more frequently, or carry out other such 'market trading' activities, but I think broadly speaking, long-term buy-and-hold income-investors simply need to accept that generally, there is likely to always be some level of underlying granular 'noise' within some area or other of a broader income-portfolio, and there comes a point where learning to live with those issues are beneficial to the long-term success of such income-strategies overall..

So that, to me, gives reason enough to perhaps justify maintaining current-positions in some income-investments that may make their way onto these types of ultra-high-yield tables, because the alternative of persistently trading around such occurrences may actually be, over the long term, more detrimental to the health of what's supposed to be a long-term buy-and-hold strategy than simply maintaining those current holdings and keeping a portfolio-level view of things where possible.

Taking the above into account then, this then brings the question to how things might be worth considering slightly different for the second category of capital, which is where funds aren't currently invested yet, and are looking to be put into the market with the task of seeking out steady, reliable dividends that are hopefully likely to go on to rise over the longer term from 'today', and that, for me personally, is where I think it is worth considering things differently to the above position, because I tend to think that 'already noisy' capital is different to 'potentially noisy' capital, and I tend to prefer taking less 'yield risk' with currently-uninvested capital than I'm happy to take with already-invested capital, and in terms of the potential for 'nudge-opportunities' being available at new-purchase times, I would much prefer to nudge my overall income-portfolio into a slightly more reliable area of the income-market than nudge it, even if it's only ever so slightly, into an area of the income-market which your 'but a deeper check for a 5 year history of increasing dividends knocks most out' statement seems to indicate exists in this type of ultra-high-yielding list...

So personally, I think it's worth considering these types of ultra-high-yielders in two separate cases, where much more caution might be warranted when considering fresh investment into them when compared to some level of acceptance of potential risk once we're already invested, but given that these two separate cases are not often considered in much individual detail in relation to these types of ultra-high-yielders, I thought this might be a good opportunity to do so...

Cheers,

Itsallaguess

[Dod101]

Over on the Rio topic there was the perennial question about yields too high to be sustainable and for a HYPer uninvestable or for the never sell builders not applicable for more money.
From the top 100 here https://www.dividenddata.co.uk/dividend ... ld&order=1
I pinched this list of those offering more than 7% because I prematurely thought the yield on the 100 was around 3.5% rather than the documented 3.98%

RIO  | Rio Tinto              | Industrial Metals and Mining              | £61,360.05 | 13.20%
PSN  | Persimmon              | Household Goods and Home Construction     |  £5,832.23 | 12.87%
ANTO | Antofagasta            | Industrial Metals and Mining              | £11,549.07 |  9.94%
MNG  | M&G                    | Investment Banking and Brokerage Services |  £4,955.35 |  9.46%
ABDN | Abrdn                  | Investment Banking and Brokerage Services |  £3,538.37 |  9.00%
PHNX | Phoenix Group Holdings | Life Insurance                            |  £6,119.37 |  7.99%
LGEN | Legal & General Group  | Life Insurance                            | £14,089.87 |  7.82%
AAL  | Anglo American         | Industrial Metals and Mining              | £40,944.35 |  7.72%
IMB  | Imperial Brands        | Tobacco                                   | £17,269.21 |  7.68%
TW.  | Taylor Wimpey          | Household Goods and Home Construction     |  £4,128.50 |  7.36%
BDEV | Barratt Developments   | Household Goods and Home Construction     |  £4,682.45 |  7.23%

I've got a good handful of that lot and wouldn't necessarily rule them out for a top up to my income investments just because a trend of downward sp pressure and growing dividend but a deeper check for a 5 year history of increasing dividends knocks most out. RIO, Phoenix and LGEN look unblemished and I take a view on Covid-19 halting some of the others like Barratt and MNG with forcast income nearly makes the cut.

For any new money I would certainly not be investing in any of the top five. They are well into anybody's 'danger' zone. I think that Phoenix and to a greater extent Legal & General are very good value at these yields and I would be happy to buy both of them. Not so keen on the other four although I hold Imperial.

Dod

[moorfield]

RIO  | Rio Tinto              | Industrial Metals and Mining              | £61,360.05 | 13.20%
PSN  | Persimmon              | Household Goods and Home Construction     |  £5,832.23 | 12.87%
ANTO | Antofagasta            | Industrial Metals and Mining              | £11,549.07 |  9.94%
MNG  | M&G                    | Investment Banking and Brokerage Services |  £4,955.35 |  9.46%
ABDN | Abrdn                  | Investment Banking and Brokerage Services |  £3,538.37 |  9.00%
PHNX | Phoenix Group Holdings | Life Insurance                            |  £6,119.37 |  7.99%
LGEN | Legal & General Group  | Life Insurance                            | £14,089.87 |  7.82%
AAL  | Anglo American         | Industrial Metals and Mining              | £40,944.35 |  7.72%
IMB  | Imperial Brands        | Tobacco                                   | £17,269.21 |  7.68%
TW.  | Taylor Wimpey          | Household Goods and Home Construction     |  £4,128.50 |  7.36%
BDEV | Barratt Developments   | Household Goods and Home Construction     |  £4,682.45 |  7.23%

I would judge above twice the CTY yield to be "too high" and requiring an answer to the question, why so high?

[kempiejon]

If we consider two different potential lumps of income-seeking capital, and look at the above 'ultra-high yield' aspect when set against each of them individually, then I think the discussion that's gone on over on the RIO thread might be set in a slightly better context -

• Already invested capital, currently sat in one of these types of 'ultra-high yield' candidates

• Fresh investment capital, looking for an income-investment home from which to draw a FUTURE reliable and growing income stream

...

So personally, I think it's worth considering these types of ultra-high-yielders in two separate cases, where much more caution might be warranted when considering fresh investment into them when compared to some level of acceptance of potential risk once we're already invested, but given that these two separate cases are not often considered in much individual detail in relation to these types of ultra-high-yielders, I thought this might be a good opportunity to do so...

Cheers,

Itsallaguess

Excuse the editing IIAG recon I agree, for LTBH HYPers already holding a share the current yield on any investment is largely irrelevant. Because they don't intend to sell.
When selecting a new investment or topping up surely the highest sustainable yield is what we're after and from my table above some of those highest yielders may well not be sustainable. My personal wrinkle is to try and add at above m HYP current yield, I don't have a maximum cut off. I previously used the FTSE100 average as a lowest boundary but I would occasionally drop below that for a good pick. By that I mean a large cap FTSE100 share with a long history of above inflation increases to dividend with an unusually high yield for that share. A company not too incumbered by large debt with at least 1.5 times dividend cover.

I would judge above twice the CTY yield to be "too high" and requiring an answer to the question, why so high?

I suppose the glib answer is it's that high because yield is a function of price and dividend. HYP has always fished in the down-trodden. ex-growth or value pond where income paying depressed shares are the fish.
You want to have a ready reckoner so use 2 x City of London Investment Trust yield. If 2 x is too high is 1.7 times OK?
It's dividend sustainability that I try and evaluate and use a few metrics. An arbitrary yield boundary doesn't look at anything else.
I imagine that at the boundary of 2 times CTY, different companies will cross that line as CTY share price and that of any prospect company wanders with market pressures.

[moorfield]

You want to have a ready reckoner so use 2 x City of London Investment Trust yield. If 2 x is too high is 1.7 times OK?
It's dividend sustainability that I try and evaluate and use a few metrics. An arbitrary yield boundary doesn't look at anything else.
I imagine that at the boundary of 2 times CTY, different companies will cross that line as CTY share price and that of any prospect company wanders with market pressures.

I have always been clear this is a coarse tool that I use. It's principal purpose really is as a time and effort saving device (ie. I'm just not going to bother with anything above that for now, will look elsewhere, may come back to it at a later time). There is some correlation between yield and likelihood of dividend cut in the near/medium term future, and it seems (to me) there is a ceiling somewhere above which that likelihood dramatically increases. The late Gengulphus agreed with me that that ceiling is empirically testable, but that the time and effort required to do it would be disproportionate and would unlikely shift the initial dial significantly. 1.7x may be just as OK, I am trying to be roughly right rather than precisely wrong here.

I can offer that IMB, VOD and RDSB all breached this level in the months preceding their last big dividend cuts and as I result I had ruled them out from further top ups. I'm glad that I did.

[Itsallaguess]

There is some correlation between yield and likelihood of dividend cut in the near/medium term future, and it seems (to me) there is a ceiling somewhere above which that likelihood dramatically increases.

The late Gengulphus agreed with me that that ceiling is empirically testable, but that the time and effort required to do it would be disproportionate and would unlikely shift the initial dial significantly. 1.7x may be just as OK, I am trying to be roughly right rather than precisely wrong here.

I can offer that IMB, VOD and RDSB all breached this level in the months preceding their last big dividend cuts and as a result I had ruled them out from further top ups. I'm glad that I did.

Anyone who's operated a HYP for a number of years, and who have allowed themselves to be tempted by the types of ultra-high yields that are being discussed here, and certainly such nose-bleed yields as currently appear at the top of the table in your opening post, will know it in their bones that such ventures often end in tears.

I now regard such ultra-high yields as perhaps being akin to the gamma-ray burst of a dying star - a bright physical manifestation that initially looks very appealing, but one which actually represents a much more calamitous imminent future...

To help prove this point without having to generate lots of empirical data, I'd just perhaps highlight two things -

• We've had lots of income-investors in recent days who are happy to comment on the scars they still carry from previous 'ultra-high yield' ventures, and who are now much more wary of such enticements

• We've had almost *no* income-investors who have raised firm examples where ultra-high yield purchases have gone on to actually *provide* those ultra-high yields for many years after their initial purchases...

So with my 'Occams Razor' hat on, and perhaps offering up a HYP-related version of the Fermi-Paradox, I'd always simply ask - if these ultra-high yields aren't broadly unsafe, just *where are* all those income-investors from that second group?

Cheers,

Itsallaguess

[moorfield]

• We've had almost *no* income-investors who have raised firm examples where ultra-high yield purchases have gone on to actually *provide* those ultra-high yields for many years after their initial purchases...

So with my 'Occams Razor' hat on, and perhaps offering up a HYP-related version of the Fermi-Paradox, I'd always simply ask - if these ultra-high yields aren't broadly unsafe, just *where are* all those income-investors from that second group?

Not on this board.

There are a handful of firm examples - preference shares. I bought SAN at >11% in 2011 and it has been pumping out a steady dividend for me ever since. Just as well to have a dividend that does not get cut as well as strive for those that race ahead and, inevitably, at some point fall, in a whole portfolio.

But we are unable to discuss those here, which is a shame and (imo) shortsighted. Although we can hold and report them under the Breelander Convention. Figure that out!

[pyad]

...We've had almost *no* income-investors who have raised firm examples where ultra-high yield purchases have gone on to
actually *provide* those ultra-high yields for many years after their initial purchases...

Cheers,

Itsallaguess

Why expect that UHYs "have gone on to actually *provide* those ultra-high yields for many years after their initial purchases"? Instead make a much lower assumption and then you are less likely to be disappointed. So if a share appeals on other grounds and the only thing putting you off is the UHY, assume it will deliver a much more modest return with which you would be happy for those many years after initial purchase. I wouldn't automatically reject UHY shares but I'd certainly give them an unusually good scroot because some of them may be in deep shite and to be avoided.

The much recently discussed RIO is a good example. I doubt despite its 13% UHY that it's about to go bust so if I wanted in now, I'd be willing to assume that it may deliver a decent yield of say 5% at a guess, long term. As we all know this can still go wrong as there are never any guarantees with divs.

[Padders72]

...We've had almost *no* income-investors who have raised firm examples where ultra-high yield purchases have gone on to
actually *provide* those ultra-high yields for many years after their initial purchases...

Cheers,

Itsallaguess

Why expect that UHYs "have gone on to actually *provide* those ultra-high yields for many years after their initial purchases"? Instead make a much lower assumption and then you are less likely to be disappointed. So if a share appeals on other grounds and the only thing putting you off is the UHY, assume it will deliver a much more modest return with which you would be happy for those many years after initial purchase. I wouldn't automatically reject UHY shares but I'd certainly give them an unusually good scroot because some of them may be in deep shite and to be avoided.

The much recently discussed RIO is a good example. I doubt despite its 13% UHY that it's about to go bust so if I wanted in now, I'd be willing to assume that it may deliver a decent yield of say 5% at a guess, long term. As we all know this can still go wrong as there are never any guarantees with divs.

This. Never dismiss an investment on purely dogmatic grounds. Apply some sense. I went into RIO assuming a 5-7% medium term yield and anything extra will be a bonus.

[Itsallaguess]

Why expect that UHYs "have gone on to actually *provide* those ultra-high yields for many years after their initial purchases"? Instead make a much lower assumption and then you are less likely to be disappointed.

So if a share appeals on other grounds and the only thing putting you off is the UHY, assume it will deliver a much more modest return with which you would be happy for those many years after initial purchase.

I wouldn't automatically reject UHY shares but I'd certainly give them an unusually good scroot because some of them may be in deep shite and to be avoided.

The much recently discussed RIO is a good example. I doubt despite its 13% UHY that it's about to go bust so if I wanted in now, I'd be willing to assume that it may deliver a decent yield of say 5% at a guess, long term. As we all know this can still go wrong as there are never any guarantees with divs.

Which would be a fair approach pyad, if reductions in dividends might be the only price to pay for potentially taking it, but in terms of my earlier 'HYP owners know it in their bones' comment, what they also know if they've been running a HYP for a good number of years, is that such ultra-high-yield rides are never that smooth and potentially acceptable on their own, and whilst I'm quite happy to accept that an income-strategy approach should primarily concentrate on the income delivery, I think it would be fair to say that we've all got the scars to also show that capital reductions of some shock and magnitude are also a common 'post-dividend-drop' symptom that are often linked with fishing in the ultra-high-yield area of the pool...

You're absolutely right when you suggest that such an 'ultra-high-yield' metric shouldn't ever be automatically dismissed, and that by doing so an income-investor might miss out on a potential opportunity, but I'd then have to question if the additional due-diligence required to separate the wheat from the chaff is actually worth it, or even possible, when more often than not, they're likely to be fishing for trout in a pool mostly made up of sharks...

Maybe I've just been unlucky in the past in this area, but it feels like when these types of regular discussions come around over the years, there's enough income-investors that pop up for Jaws-like scar-comparing sessions that allow me to think that getting badly bitten is the much more common outcome, and I always wonder where all the Brody's have gone to, who have always managed to dodge all the great whites...

So I think it's a little more nuanced that suggesting that avoiding this area of the income market is borne out of some sort of 'dogmatism', but one where, like many sports, playing the income-strategy percentage shot is likely to lead to less overall grief in the long term, rather than always trying to hit the really thin lines right on the edges of the court...

Cheers,

Itsallaguess

[IanTHughes]

I have been building my HYP for over 10 years now and, during that time, I have blundered into many “losses”. For most I believe that I can honestly claim that the “failure” was not easily knowable in advance, at least not with the information that a shareholder had available, although if being honest there were some where I was tempted by a high dividend without clearly confirming its sustainability. However, despite all these “individual” failings, including all those unforced errors on my part, the Portfolio Income has gone from strength to strength. The measure of the portfolio’s Income per Income Unit, went up year-on-year until the pandemic occurred.

The High Yield Portfolio (HYP) strategy is a "Portfolio" strategy. An HYPer must accept that occasionally individual shares will serve up dividend cuts, even total failures as happened to Carillion PLC (CLLN). As long as the "Portfolio as a whole" moves forward, there is no overall problem, unless of course one is expecting every individual share to shine.

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!


Ian

[dealtn]

This. Never dismiss an investment on purely dogmatic grounds. Apply some sense.

Off topic, no doubt, but really? On a board that promotes one of the most dogmatic sets of rules and dismisses an extremely large percentage of the investable universe.

I am very much in favour of pragmatism, but consistency of argument still appeals.

[Itsallaguess]

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

[Padders72]

This. Never dismiss an investment on purely dogmatic grounds. Apply some sense.

Off topic, no doubt, but really? On a board that promotes one of the most dogmatic sets of rules and dismisses an extremely large percentage of the investable universe.

I am very much in favour of pragmatism, but consistency of argument still appeals.

You have a point, and ironically I didn't realise to whom I was replying when posted that. I wasn't being deliberately arch or controversial, just inattentive.

[daveh]

There was a comment earlier in the thread that no one ever posts how their purchases of ultra high yielders have actually performed. Well its a little difficult as its not always clear if the UHY shares mentioned in the initial post were actually UHY shares when purchased (LGEN and MNG were, not sure about the others). However, of those on the list in the OP, I own PSN, BHP*, LGEN and MNG. This is how they have performed.

Ticker  Capital Value    Dividend Rcd    Years held
PSN      2.9X                  2.4X                 14    
BHP      1.3X                  0.8X                 14     
LGEN    1.1X                  0.5X                  6
MNG     1.2X                  0.2X                  3

X is the cost of the shares purchased (not necessarily all in one go) All are showing at least some capital appreciation and PSN has paid back well over 2x the original purchase cost in dividends. BHP dividends includes the value of WDS shares recently received but not S32. So for me they've performed decently. Would I buy them now? Maybe if they popped up to the top of my HYPTUSS. I was buying MNG when it was a UHY share and would buy now as I would with LGEN. Not sure about the house builders at the moment, but I'm not selling and would buy the miners if they appear at the top of HYPTUSS. I'm likely to be buying WDS next.
* not on the original list as its not a FTSE company but has also had mention as a UHY share.

[Dod101]

On the Rio thread there is a comment that no one ever talks about due diligence in relation to high (or UH) yields and yet it seems to me to be fundamental. I seldom look at the numbers in the accounts but I am tremendously interested in ‘knowing’ the share, the company behind it, what it does and how it is run (the culture).

For instance, I would be totally relaxed about buying Legal and General at its current yield, given its record and the fact that it is non cyclical. Phoenix Holdings is not bad but not in the same class as L & G. I am less keen on the miners because of the cyclical nature of their business and currently, the geopolitical situation in general. Clearly the market thinks the current (or at least historical) dividends are unsustainable. If they are halved they would probably still be acceptable to many and that would still leave them on a decent yield even if the share price was unmoved by a cut. In the short term it might drop but who knows?

The house builders are entering a period of more expensive mortgages and so a likely reduction in demand for their product at least until buyers get used to the idea of more ‘normalised’ interest rates and some clarity on the cost of living so matters may be too murky for most to have any real idea of where their business is going in the near future anyway.

These are the sort of thoughts I usually have about the sustainability of the dividend for any given share.

Were I a HYPer (which I am not) these thoughts would be even more important.

Dod

[scrumpyjack]

On the Rio thread there is a comment that no one ever talks about due diligence in relation to high (or UH) yields and yet it seems to me to be fundamental. I seldom look at the numbers in the accounts but I am tremendously interested in ‘knowing’ the share, the company behind it, what it does and how it is run (the culture).

For instance, I would be totally relaxed about buying Legal and General at its current yield, given its record and the fact that it is non cyclical. Phoenix Holdings is not bad but not in the same class as L & G. I am less keen on the miners because of the cyclical nature of their business and currently, the geopolitical situation in general. Clearly the market thinks the current (or at least historical) dividends are unsustainable. If they are halved they would probably still be acceptable to many and that would still leave them on a decent yield even if the share price was unmoved by a cut. In the short term it might drop but who knows?

The house builders are entering a period of more expensive mortgages and so a likely reduction in demand for their product at least until buyers get used to the idea of more ‘normalised’ interest rates and some clarity on the cost of living so matters may be too murky for most to have any real idea of where their business is going in the near future anyway.

These are the sort of thoughts I usually have about the sustainability of the dividend for any given share.

Were I a HYPer (which I am not) these thoughts would be even more important.

Dod

Generally I agree, but diversification in important. So I really don't like to hold too much in financials. They seem fine until the proverbial hits the fan and then one finds out just how much risk there is in their balance sheets. I have large holdings in PSN and BDEV, partly because they have made such massive gains and I'm too mean to pay CGT if I can avoid it but also because I think they are a lot more resilient than they used to be. Their balance sheets are much stronger and whilst house prices might fall and cut their margins temporarily, I think much of this will be dealt with over a few years by the consequent lower cost of building land that follows falls in house prices. Strong miners also in my view a good diversification and I don't mind cyclicality. The stock market, and analyst / commentators tend to take far too short term a view.

[IanTHughes]

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...

All I was thinking about was how to treat so-called untra-high yield possibilities when having money available for investment into one's HYP. And I believe that such buying opportunities should be treated the same as any other: i.e. buy only what one can reasonably believe to provide a high and sustainable dividend, while keeping the whole portfoloio appropriately diversified.

Your "nudge" strategy, I know nothing about.


Ian

[Itsallaguess]

All I was thinking about was how to treat so-called untra-high yield possibilities when having money available for investment into one's HYP. And I believe that such buying opportunities should be treated the same as any other: i.e. buy only what one can reasonably believe to provide a high and sustainable dividend, while keeping the whole portfolio appropriately diversified.

Your "nudge" strategy, I know nothing about.

As I said in an earlier post, I think it's sometimes quite acceptable to consider, for the sake of ultimately keeping trading down as low as reasonably practicable during what is supposed to be a long-term buy-and-hold income-strategy, that already-owned investments might well still be 'held', even if we might not consider it appropriate to invest further cash into that particular holding. This feels like an acceptable and pragmatic compromise to help benefit a long-term holding strategy.

Where things start to differ though, for me at least, is then where fresh investment opportunities arise with new capital. These are the 'nudges' that we often regularly get to give our income portfolios, and for me it's quite right to be able to consider that fresh capital completely separately from already invested capital in terms of how it might be used to influence the portfolio.

So then it comes down to a question.

Are we happy to nudge the portfolio into riskier territory, or would we prefer to ensure that each nudge adds a lower level of addition risk into it...

If you simply don't subscribe to the idea that ultra-high-yields offer any indication of higher investment risk, then that's absolutely fine, but for those that might be less sure, or have hard-earned experience that they often *do* indicate a higher risk, then these nudge opportunities offer up chances to either increase that risk, or moderate it...

For me, I think that eventually, a series of riskier nudges or top-ups chasing ultra-high-yields will tend to deliver poorer overall outcomes more regularly than a series of safer nudges, fishing in more moderate yields.

That's been my clear and unequivocal experience over the years with my HYP single-share holdings.

If others have been luckier than me, then more power to their elbow, but I think there's enough collective opinion on the subject of ultra-high-yields with regards to income-investing that certainly justifies the raising of some warning flags at the very least, even if people ultimately choose to ignore them...

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, and so I'll make no apologies for trying to make sure that such discussions at the very least get a better airing than they did then, and people can perhaps make a much more informed decision than might have been available if threads like this didn't get an airing...

Cheers,

Itsallaguess