kempiejon wrote: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=1I 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