too high?

[funduffer]

That doesn't give the full position of GFRDs dividend since it was a UHY share. When GFRD ran into trouble and had to cancel the dividend it also sold off its housebuilding division to Bovis, which became Vistry. GFRD shareholders received a significant holding in Vistry as payment and are therefore receiving significant dividends from their Vistry holding received due to holding GFRD.

Therefore to get a true view on the outcome of buying GFRD you need to also account for the Vistry shares received.

Thanks - that's a good point raised that's hopefully best answered by funduffer then, given that he's seen the complete round-trip of that large drop in GFRD yield and dividend, alongside the subsequent addition of his Vistry holding from that corporate action.

Hopefully funduffer is able to expand a little on how he felt the overall impact of that period affected that particular section of his income-portfolio then, taking the above into account?

I think with these things the simplest question to ask about these ultra-high-yield ventures is 'given what you know now regarding what's happened post-purchase, do you feel as though it was worth it?'....

Cheers,

Itsallaguess

When GFRD decided to sell off it’s house building division (Linden homes), I received a small holding in Vistry. I was looking for a house builder in my HYP and so decided to build Vistry up to a full holding. I was also disillusioned with the support sector after the Carillion debacle, so I dumped GFRD and used the proceeds to build up my Vistry holding. In other words I followed GFRD’s house building division and dumped the support services part.

I had to wait a long time for my first Vistry dividend, but it seems healthy so far.

Carillion, Capita and Galliford Try were all mistakes. I have not been near the support services sector since!

FD

[csearle]

What the thought police - good phrase - could never get their heads around was that the Zones had fixed boundaries and sometimes shares zigzagged over those boundaries.

They would more accurately be called the thoughtful rather than thought police because having arbitrary fixed percentages as boundaries was, frankly, absurd. If a way could have been found to have these boundaries linked to some metric that reflected the average yield then the whole idea would in my opinion have been more palatable for the thoughtful. C.

[Itsallaguess]

Here is the raw data for Purchase Yields and subsequent dividend cuts/increases, within the ‘virtual‘ Drawdown Portfolio that I am currently managing.

EPIC      | Yield | Cut Y/N? | Cut %    | Next Yr % | Next Yr %
VOD       | 9.00% | Y        |  -40.35% |    -0.92% |    -0.79%
GSK       | 8.91% | N        |    0.00% |     0.00% |     0.00%
IGG       | 8.61% | N        |    0.00% |     0.00% |     0.00%
ABDN      | 7.97% | Y        |  -32.41% |     0.00% |     0.00%
HSBA      | 7.53% | Y        |  -39.13% |   -54.41% |    75.49%
AV        | 7.32% | Y        |  -48.33% |    35.48% |     5.00%
IMB       | 7.16% | Y        |  -33.33% |     0.99% |     0.30%
WPP       | 7.13% | Y        |  -62.17% |     5.73% |   252.88%
Portfolio | 6.32% |          |          |           |          
ITV       | 6.25% | Y        |  -67.50% |  -100.00% |   126.92%
SHEL      | 6.00% | Y        |  -66.55% |    34.08% |    22.92%
BP        | 5.63% | N        |  -38.04% |   -20.64% |    11.11%
LAND      | 5.33% | Y        |  -49.07% |    16.38% |    37.04%
BLND      | 5.26% | Y        |  -48.50% |    -5.79% |    45.74%
BHP       | 5.11% | Y        |  -12.86% |    65.33% |    32.63%
BA        | 4.53% | N        |    2.16% |     5.91% |     0.00%
SMDS      | 4.34% | Y        | -100.00% |    74.69% |    23.97%
CCL       | 3.96% | Y        | -100.00% |     0.00% |     0.00%
IBST      | 3.73% | Y        |  -66.32% |   -50.00% |   368.75%

As far as I can see, in this portfolio at least, there is no correlation that can be drawn with regard to the level of Purchase Yield and subsequent changes in dividend through the pandemic.

Indeed the only 100% cuts have been at the lower purchase yields.

Surely the only sensible conclusion that an observer of that table might make is that the period covered by it so anomalously affected huge swathes of the HYP-facing universe, that trying to make any further conclusions from it regarding any more granular areas of investigation is likely to be almost impossible and unrepresentative over this particular time-scale...

This feels like the worst bricky in Hiroshima doing a tour in late August 1945, and trying to point out that it's now obvious that his poorly-reviewed handy-work was clearly no worse than anyone else's, after-all...

Cheers,

Itsallaguess

[moorfield]

This feels like the worst bricky in Hiroshima doing a tour in late August 1945, and trying to point out that it's now obvious that his poorly-reviewed handy-work was clearly no worse than anyone else's, after-all...

I think to use Purchase Yields here is misleading, the yield immediately prior to any announced dividend cut may be more useful.

[MDW1954]

What the thought police - good phrase - could never get their heads around was that the Zones had fixed boundaries and sometimes shares zigzagged over those boundaries.

They would more accurately be called the thoughtful rather than thought police because having arbitrary fixed percentages as boundaries was, frankly, absurd. If a way could have been found to have these boundaries linked to some metric that reflected the average yield then the whole idea would in my opinion have been more palatable for the thoughtful. C.

I stand by "thought-police"! Sometimes, the objectors weren't thoughful at all!

More seriously, though, you raise an excellent point. The absolute yield is less informative than the relative yield.

MDW1954

[MDW1954]

Here is the raw data for Purchase Yields and subsequent dividend cuts/increases, within the ‘virtual‘ Drawdown Portfolio that I am currently managing.

EPIC      | Yield | Cut Y/N? | Cut %    | Next Yr % | Next Yr %
VOD       | 9.00% | Y        |  -40.35% |    -0.92% |    -0.79%
GSK       | 8.91% | N        |    0.00% |     0.00% |     0.00%
IGG       | 8.61% | N        |    0.00% |     0.00% |     0.00%
ABDN      | 7.97% | Y        |  -32.41% |     0.00% |     0.00%
HSBA      | 7.53% | Y        |  -39.13% |   -54.41% |    75.49%
AV        | 7.32% | Y        |  -48.33% |    35.48% |     5.00%
IMB       | 7.16% | Y        |  -33.33% |     0.99% |     0.30%
WPP       | 7.13% | Y        |  -62.17% |     5.73% |   252.88%
Portfolio | 6.32% |          |          |           |          
ITV       | 6.25% | Y        |  -67.50% |  -100.00% |   126.92%
SHEL      | 6.00% | Y        |  -66.55% |    34.08% |    22.92%
BP        | 5.63% | N        |  -38.04% |   -20.64% |    11.11%
LAND      | 5.33% | Y        |  -49.07% |    16.38% |    37.04%
BLND      | 5.26% | Y        |  -48.50% |    -5.79% |    45.74%
BHP       | 5.11% | Y        |  -12.86% |    65.33% |    32.63%
BA        | 4.53% | N        |    2.16% |     5.91% |     0.00%
SMDS      | 4.34% | Y        | -100.00% |    74.69% |    23.97%
CCL       | 3.96% | Y        | -100.00% |     0.00% |     0.00%
IBST      | 3.73% | Y        |  -66.32% |   -50.00% |   368.75%

As far as I can see, in this portfolio at least, there is no correlation that can be drawn with regard to the level of Purchase Yield and subsequent changes in dividend through the pandemic. Indeed the only 100% cuts have been at the lower purchase yields.

Enjoy!


Ian

OK: so I could, if I wished, get into Spearman Rank Correlation analyses etc etc. But I'm not sure that you're right when saying that no correlation can be discerned.

Basically, what I'm seeing is this: six out of eight of the above average yield stocks delivered a cut. Eight out of ten below average yield stocks delivered a cut. 75% versus 80%.

Furthermore, the average cut for the above average yield stocks was 42.62%. The average cut for the below average yield stocks was 72.73%.

So you're very generous in saying "no correlation", in my view. I'm seeing a somewhat different picture.

MDW1954

[Itsallaguess]

EPIC      | Yield | Cut Y/N? | Cut %    | Next Yr % | Next Yr %
VOD       | 9.00% | Y        |  -40.35% |    -0.92% |    -0.79%
GSK       | 8.91% | N        |    0.00% |     0.00% |     0.00%
IGG       | 8.61% | N        |    0.00% |     0.00% |     0.00%
ABDN      | 7.97% | Y        |  -32.41% |     0.00% |     0.00%
HSBA      | 7.53% | Y        |  -39.13% |   -54.41% |    75.49%
AV        | 7.32% | Y        |  -48.33% |    35.48% |     5.00%
IMB       | 7.16% | Y        |  -33.33% |     0.99% |     0.30%
WPP       | 7.13% | Y        |  -62.17% |     5.73% |   252.88%
Portfolio | 6.32% |          |          |           |          
ITV       | 6.25% | Y        |  -67.50% |  -100.00% |   126.92%
SHEL      | 6.00% | Y        |  -66.55% |    34.08% |    22.92%
BP        | 5.63% | N        |  -38.04% |   -20.64% |    11.11%
LAND      | 5.33% | Y        |  -49.07% |    16.38% |    37.04%
BLND      | 5.26% | Y        |  -48.50% |    -5.79% |    45.74%
BHP       | 5.11% | Y        |  -12.86% |    65.33% |    32.63%
BA        | 4.53% | N        |    2.16% |     5.91% |     0.00%
SMDS      | 4.34% | Y        | -100.00% |    74.69% |    23.97%
CCL       | 3.96% | Y        | -100.00% |     0.00% |     0.00%
IBST      | 3.73% | Y        |  -66.32% |   -50.00% |   368.75%

Basically, what I'm seeing is this: six out of eight of the above average yield stocks delivered a cut. Eight out of ten below average yield stocks delivered a cut. 75% versus 80%.

Furthermore, the average cut for the above average yield stocks was 42.62%. The average cut for the below average yield stocks was 72.73%.

Now hang on...

Is anyone *seriously* trying to suggest that the above COVID-induced, HYP-annihilating nightmare period can *really* be used to help us draw serious conclusions regarding the sort of general ultra-high-yield risk-potential that people are seriously looking to consider on this thread?

If someone came along and wanted to perhaps criticise the whole flippin' *strategy* off the back of that data, then that might be one thing, but if someone's seriously looking to use more granular data within that lot to try and then make the case for ultra-high-yields being *safe*, then I'm afraid I'd have to suggest that they look again at the title of this thread and perhaps reconsider what they're smoking...

Cheers,

Itsallaguess

[daveh]

That doesn't give the full position of GFRDs dividend since it was a UHY share. When GFRD ran into trouble and had to cancel the dividend it also sold off its housebuilding division to Bovis, which became Vistry. GFRD shareholders received a significant holding in Vistry as payment and are therefore receiving significant dividends from their Vistry holding received due to holding GFRD.

Therefore to get a true view on the outcome of buying GFRD you need to also account for the Vistry shares received.

Thanks - that's a good point raised that's hopefully best answered by funduffer then, given that he's seen the complete round-trip of that large drop in GFRD yield and dividend, alongside the subsequent addition of his Vistry holding from that corporate action.

Hopefully funduffer is able to expand a little on how he felt the overall impact of that period affected that particular section of his income-portfolio then, taking the above into account?

I think with these things the simplest question to ask about these ultra-high-yield ventures is 'given what you know now regarding what's happened post-purchase, do you feel as though it was worth it?'....

Cheers,

Itsallaguess

When GFRD decided to sell off it’s house building division (Linden homes), I received a small holding in Vistry. I was looking for a house builder in my HYP and so decided to build Vistry up to a full holding. I was also disillusioned with the support sector after the Carillion debacle, so I dumped GFRD and used the proceeds to build up my Vistry holding. In other words I followed GFRD’s house building division and dumped the support services part.

I had to wait a long time for my first Vistry dividend, but it seems healthy so far.

Carillion, Capita and Galliford Try were all mistakes. I have not been near the support services sector since!

FD

I've had a look at my data now.

GFRD paid 77p in 2018 (28 and 49p) and 58p in 2019 (23 and 35p) before cutting the dividend in 2020 and not just due to the Covid pandemic, the deal with Bovis for the housebuilding arm completed on 3rd January 2020 giving 0.57406 of a Bovis share for each GFRD share held. The covid pandemic meant the expected Vistry dividends were delayed, but GFRD wasn't expected to pay a dividend in 2020 even before covid hit.

So if we look at the latest two dividends for GFRD and Vistry they were; for GFRD 3.5 and 2.2p (a final and an Interim) and for Vistry 20 and 40p (an interim and final) So accounting for the shares received the dividend is 5.7+ 0.57406*60 = 40.1436p. Not brilliant, but climbing back towards the dividend paid in 2018 and 2019.

[88V8]

Now hang on...

Is anyone *seriously* trying to suggest that the above COVID-induced, HYP-annihilating nightmare period can *really* be used to help us draw serious conclusions regarding the sort of general ultra-high-yield risk-potential ....

Yes, I think in terms of divi record and cuts, one has to cut some slack for covid.
Just to complicate an assessment which you were keen to keep simple... given that some Cos will have used covid as an excuse for cuts they would have made anyway....

V8

[Itsallaguess]

Now hang on...

Is anyone *seriously* trying to suggest that the above COVID-induced, HYP-annihilating nightmare period can *really* be used to help us draw serious conclusions regarding the sort of general ultra-high-yield risk-potential ....

Yes, I think in terms of divi record and cuts, one has to cut some slack for covid.

Just to complicate an assessment which you were keen to keep simple...

Well yeah - that table feels like the HYP equivalent of Which carrying out an umbrella comparison test by driving their equipment van into the Daulatpur–Saturia tornado before opening up each one...

I'm genuinely surprised that Malcolm thinks the underlying data offers anything in the way of serious value to this particular discussion...

Cheers,

Itsallaguess

[Itsallaguess]

So if we look at the latest two dividends for GFRD and Vistry they were; for GFRD 3.5 and 2.2p (a final and an Interim) and for Vistry 20 and 40p (an interim and final) So accounting for the shares received the dividend is 5.7+ 0.57406*60 = 40.1436p. Not brilliant, but climbing back towards the dividend paid in 2018 and 2019.

Thanks - and clearly they're taking some steps into recovery-mode following those initial gaps and cuts that have been complicated by the parallel corporate action.

Appreciate you digging out the info daveh, as I know it's not easy sometimes to gather than sort of legacy information in these types of circumstances.

Cheers,

Itsallaguess

[IanTHughes]

Now hang on...

Is anyone *seriously* trying to suggest that the above COVID-induced, HYP-annihilating nightmare period can *really* be used to help us draw serious conclusions regarding the sort of general ultra-high-yield risk-potential ....

Yes, I think in terms of divi record and cuts, one has to cut some slack for covid.

Just to complicate an assessment which you were keen to keep simple...

Well yeah - that table feels like the HYP equivalent of Which carrying out an umbrella comparison test by driving their equipment van into the Daulatpur–Saturia tornado before opening up each one...

I'm genuinely surprised that Malcolm thinks the underlying data offers anything in the way of serious value to this particular discussion...

Becasue it illustrates the failures or otherwise of all holdings in a given portfolio, it offers considerably more to a discussion about whether the selection of ultra-high yields represents a danger to an HYPer, than any number of reports on individual holding failures.

This is the HYP Practical Board, which I take to mean it is concerned with the practicalities of running a High Yield Portfolio (HYP), not simply one single holding.


Ian

[MDW1954]

I'm genuinely surprised that Malcolm thinks the underlying data offers anything in the way of serious value to this particular discussion...

Cheers,

Itsallaguess

I'm obviously surprised by what the data says, too. And -- equally obviously -- it's a very small sample. But when ITH says that he can see no correlation, I felt obliged to point out that I could. And yes, while I haven't done a Spearman Rank test, it would probably confirm it.

Do I think it "offers anything of serious value to this discussion", though? No.

Do I wish the data said something different? Yes.

And do I personally think that high yields signify a greater risk of a cut? Yes. Because if the market thinks that a dividend is at risk of being cut, it reduces the share price.

MDW1954

[Itsallaguess]

[Regarding the earlier tabular data showing widespread COVID-period dividend cuts]

Do I think it 'offers anything of serious value to this [ultra-high-yield risk] discussion', though?

No.

And do I personally think that high yields signify a greater risk of a cut?

Yes.

Because if the market thinks that a dividend is at risk of being cut, it reduces the share price.

Thanks for the above clarifications Malcolm.

It seems we're in much closer agreement regarding the earlier COVID-period dividend-cut information than I'd initially thought, so thanks for clearing that up.

Thanks also for clarifying your view on the ultra-high-yields side of things too...

Cheers,

Itsallaguess

[BullDog]

I happen to think that, especially within this walled garden sub-forum, there's a tendency for some posters to see what they want to see in any data presented here. That's not going to change anytime soon.

Suffice to say that without any scientific analysis at all, I can see that over reaching for the very highest yields in the equity market is seldom the best idea overall in the medium to longer term.

[kempiejon]

I happen to think that, especially within this walled garden sub-forum, there's a tendency for some posters to see what they want to see in any data presented here. That's not going to change anytime soon.

Suffice to say that without any scientific analysis at all, I can see that over reaching for the very highest yields in the equity market is seldom the best idea overall in the medium to longer term.

But no one is suggesting that over reaching for the very highest yield in the equity market is the best idea. What has been questioned is that any company should be arbitrarily removed just because it has a higher yield. Cf. 2 x CTY or a multiple of the FTSE100 average or for that matter any other assigned figure. Just because a company has a higher than average yield doesn't mean it shouldn't be investigate for inclusion in portfolio. I remove shares for further investigation where they do not have a history of growing dividends or if the cover is low, they carry too much debt, profits or turnover have fallen in fact any number of metrics I think give me an indication as to where the dividend level might be over the next few years.

If a company meets my metrics and its addition wouldn't imbalance the relative balance of shares and sectors in my portfolio why should the level of its yield preclude me from buying it?

[Itsallaguess]

I happen to think that, especially within this walled garden sub-forum, there's a tendency for some posters to see what they want to see in any data presented here. That's not going to change anytime soon.

Suffice to say that without any scientific analysis at all, I can see that over reaching for the very highest yields in the equity market is seldom the best idea overall in the medium to longer term.

But no one is suggesting that over reaching for the very highest yield in the equity market is the best idea. What has been questioned is that any company should be arbitrarily removed just because it has a higher yield. Cf. 2 x CTY or a multiple of the FTSE100 average or for that matter any other assigned figure. Just because a company has a higher than average yield doesn't mean it shouldn't be investigate for inclusion in portfolio. I remove shares for further investigation where they do not have a history of growing dividends or if the cover is low, they carry too much debt, profits or turnover have fallen in fact any number of metrics I think give me an indication as to where the dividend level might be over the next few years.

If a company meets my metrics and its addition wouldn't imbalance the relative balance of shares and sectors in my portfolio why should the level of its yield preclude me from buying it?

Because there comes a point at extreme, market-anomalous yields, where the market thinks your metrics are not adequate if you're buying such yield-based income-investments for long-term, reliable dividends past a certain yield point...

The current RIO yield of 12.77% is probably a good case in point here...

So at the extreme-yield end of the income-investment market, people buying those ultra-high-yield investments are basically saying that they know more than the market does, and I'm sorry, but the chances of that happening on the sort of mega-cap, FTSE-based income-investments that HYP investors primarily invest in is likely to be very low indeed...

In my view, HYP investors scratching at the extreme heights of the yield spectrum are choosing to fight battles with an army of price-discovering market analysts where, over the long term, they are likely to come off much worse, more often, than those using their metrics against more moderately yielding income-investments...

Cheers,

Itsallaguess

[Charlottesquare]

I'm genuinely surprised that Malcolm thinks the underlying data offers anything in the way of serious value to this particular discussion...

Cheers,

Itsallaguess

I'm obviously surprised by what the data says, too. And -- equally obviously -- it's a very small sample. But when ITH says that he can see no correlation, I felt obliged to point out that I could. And yes, while I haven't done a Spearman Rank test, it would probably confirm it.

Do I think it "offers anything of serious value to this discussion", though? No.

Do I wish the data said something different? Yes.

And do I personally think that high yields signify a greater risk of a cut? Yes. Because if the market thinks that a dividend is at risk of being cut, it reduces the share price.

MDW1954

If they do not signify a greater risk of a cut you likely have an imperfect market- markets can make mistakes over quite long short terms, misprice etc, but generally they price all the known information and are not swinging as an outlier that long (especially say FTSE100 shares which have been crawled over by analysts)

[IanTHughes]

I happen to think that, especially within this walled garden sub-forum, there's a tendency for some posters to see what they want to see in any data presented here. That's not going to change anytime soon.

Suffice to say that without any scientific analysis at all, I can see that over reaching for the very highest yields in the equity market is seldom the best idea overall in the medium to longer term.

But no one is suggesting that over reaching for the very highest yield in the equity market is the best idea. What has been questioned is that any company should be arbitrarily removed just because it has a higher yield. Cf. 2 x CTY or a multiple of the FTSE100 average or for that matter any other assigned figure. Just because a company has a higher than average yield doesn't mean it shouldn't be investigate for inclusion in portfolio. I remove shares for further investigation where they do not have a history of growing dividends or if the cover is low, they carry too much debt, profits or turnover have fallen in fact any number of metrics I think give me an indication as to where the dividend level might be over the next few years.

If a company meets my metrics and its addition wouldn't imbalance the relative balance of shares and sectors in my portfolio why should the level of its yield preclude me from buying it?

Quite right!

When a share price drops, and the yield therefore increases, it does not mean that there is now a greater chance of a dividend cut. All other things being equal, the chance of a dividend cut is exactly the same at whatever yield the market chooses to put on a share. What has possibly changed is that more of the market now believe the dividend to be in danger than did before. And I say "possibly" because share prices are increased or decreased by the 'market' for any number of reasons, only one of which is the level of fear within the market of a dividend cut!

Only when one has looked into the financial details of a particular company can one begin to build an idea as to how safe or otherwise a dividend is. Even then it is only one's own opinion and of course it may be wrong!


Ian

[Charlottesquare]

I happen to think that, especially within this walled garden sub-forum, there's a tendency for some posters to see what they want to see in any data presented here. That's not going to change anytime soon.

Suffice to say that without any scientific analysis at all, I can see that over reaching for the very highest yields in the equity market is seldom the best idea overall in the medium to longer term.

But no one is suggesting that over reaching for the very highest yield in the equity market is the best idea. What has been questioned is that any company should be arbitrarily removed just because it has a higher yield. Cf. 2 x CTY or a multiple of the FTSE100 average or for that matter any other assigned figure. Just because a company has a higher than average yield doesn't mean it shouldn't be investigate for inclusion in portfolio. I remove shares for further investigation where they do not have a history of growing dividends or if the cover is low, they carry too much debt, profits or turnover have fallen in fact any number of metrics I think give me an indication as to where the dividend level might be over the next few years.

If a company meets my metrics and its addition wouldn't imbalance the relative balance of shares and sectors in my portfolio why should the level of its yield preclude me from buying it?

Quite right!

When a share price drops, and the yield therefore increases, it does not mean that there is now a greater chance of a dividend cut. All other things being equal, the chance of a dividend cut is exactly the same at whatever yield the market chooses to put on a share. What has possibly changed is that more of the market now believe the dividend to be in danger than did before. And I say "possibly" because share prices are increased or decreased by the 'market' for any number of reasons, only one of which is the level of fear within the market of a dividend cut!

Only when one has looked into the financial details of a particular company can one begin to build an idea as to how safe or otherwise a dividend is. Even then it is only one's own opinion and of course it may be wrong!


Ian

But "The Market" is surely not an irrational player, if "The Market" thinks there may be issues with a company its collective wisdom surely needs really carefully investigated, whilst mispricing in the short term does occur with FTSE 100 companies it tends to not prevail for too long.

Of course the collective is not always correct but it is quite often correct.