HYP Practical guidance: what is the FTSE 100 yield?

[Arborbridge]

Moreover, my nasty suspicious mind can't quite put to one side that the purpose of this fabled benchmark is to simply make trouble by reporting posts discussing sub-FTSE 100 yield shares, however inadvertently.

II thought it was just an arbitrary benchmark put in by stooz and clariman to get the site up and running. I don't think either are or have ever been "HYP" investors

As the cancelled dividends replace the paid dividends in the twelve month lookback, the benchmark value will drift lower.

I doubt it was arbitrary - it's more or less what the original HYP concept required so seems sensbile enough. When writing guideline for the site, somone had to come up with something.

[Arborbridge]

In a long investing career, I can't think of a less appropriate time to try and calculate the yield of the FTSE 100. Moreover, my nasty suspicious mind can't quite put to one side that the purpose of this fabled benchmark is to simply make trouble by reporting posts discussing sub-FTSE 100 yield shares, however inadvertently.

Well as the originator of the question, I should say I am certainly not setting out to make trouble, quite the opposite, and your answer (my italics) illustrates why I asked it. So what benchmark can be used for reliably determining what is high yield? As I wrote in the linked post (viewtopic.php?p=343354#p343354) I use CTY yield because it is simple to measure(*) and poses the question "Why am I buying a single name share yielding less income than this collective?". Perhaps that is best placed on HYSS, certainly I wouldn't expect HYPP folk to consider that the FTSE 100 yield (whatever that is, now) might not be fit for their purpose.


(*) 4 * 4.75p / 320p = 5.9%, until told otherwise

The 5.9% look unsustainable, and we've already seen one IT (TMPL) slash it's payout. It's worth noting that CTY's cover is less than half of what TMPL's was before it cut.
To choose what might well be an artificially high yield is not realistic, and personally, I'd go with the current dividend data yield for the FTSE or just call it 4% and hope. 5.9% is more no-hope, in my view, and I cannot see the point of using it except to discourage HYPers

[Arborbridge]

Here's an idea to decide what is an acceptable yield for HYP.

Ask Stephen Bland.
He's the originator and could not only adjudicate on the matter but no doubt argue it in his usual forthright manner. He could be, perhaps should be, the final arbitor, and we should agree to defer to what he comes up with.

My suspicion is that he will bounce it back my saying that trying to fix a FTSE yield at the moment is a silly thing to do, and you'd best forget about it for six months. But to forestall that point, I'd say what happens to "the time is now" sentiment?

A challenge for you Stephen


Arb.

[moorfield]

The 5.9% look unsustainable, and we've already seen one IT (TMPL) slash it's payout. It's worth noting that CTY's cover is less than half of what TMPL's was before it cut.
To choose what might well be an artificially high yield is not realistic, and personally, I'd go with the current dividend data yield for the FTSE or just call it 4% and hope. 5.9% is more no-hope, in my view, and I cannot see the point of using it except to discourage HYPers

That's irrelevant and why I wrote until told otherwise above. I'm not interested in how CTY might or might not cover its dividend in future, only what it yields now relative to individual shares. Strategic ignorance, if you will. If CTY's dividend is rebased then so be it. Yes it's yield may well fall, and that may then bring more individual shares into scope for buying/topping up.

But the question will always be the same: "Why am I buying a single name share yielding less income than this collective?"

[tjh290633]

But the question will always be the same: "Why am I buying a single name share yielding less income than this collective?"

Simply because neither you, nor anyone else, has an inkling of what CTY's forward yield will be. You are falling into the same trap of relying on historic information that has already been overtaken by events.

Your single share may well have a sustainable dividend, whereas CTY is at the mercy of what its individual holdings do, as are we all.

TJH

[Alaric]

whereas CTY is at the mercy of what its individual holdings do, as are we all.

By virtue of being an Investment Trust, they are allowed to "cheat". In other words they can maintain dividends, should they wish, by selling assets or borrowing.

[tjh290633]

whereas CTY is at the mercy of what its individual holdings do, as are we all.

By virtue of being an Investment Trust, they are allowed to "cheat". In other words they can maintain dividends, should they wish, by selling assets or borrowing.

Up to a point, Lord Copper. However that equates to selling the family silver. It cannot go on indefinitely, and it becomes self defeating.

TJH

[MrFoolish]

What a lot of fuss about nothing. If someone is happy that the yield is high enough to meet their needs then this should be the end of it.

[MDW1954]

In a long investing career, I can't think of a less appropriate time to try and calculate the yield of the FTSE 100. Moreover, my nasty suspicious mind can't quite put to one side that the purpose of this fabled benchmark is to simply make trouble by reporting posts discussing sub-FTSE 100 yield shares, however inadvertently.

Well as the originator of the question, I should say I am certainly not setting out to make trouble, quite the opposite, and your answer (my italics) illustrates why I asked it. So what benchmark can be used for reliably determining what is high yield? As I wrote in the linked post (viewtopic.php?p=343354#p343354) I use CTY yield because it is simple to measure(*) and poses the question "Why am I buying a single name share yielding less income than this collective?". Perhaps that is best placed on HYSS, certainly I wouldn't expect HYPP folk to consider that the FTSE 100 yield (whatever that is, now) might not be fit for their purpose.


(*) 4 * 4.75p / 320p = 5.9%, until told otherwise

You asked me a question: I'll answer it. I would be extremely surprised if CTY's dividend record continued its unbroken 50+-years history unchanged. Gratified, to be sure (it's a major holding), but surprised. So, I don't know. What I am personally doing is to look at the shares in my personal (fairly extensive) portfolio, and calculate a rough average of the yields of those shares that seem fairly resilient/ haven't cut their dividends/ have cut but re-instated them.

It isn't a particularly pretty picture, but at least it's a viewpoint.

To stress, I wouldn't use CTY's yield as a data point in isolation.

MDW1954

[vrdiver]

I don't remember this question coming up during the Global Financial Crisis, when there were also a large number of dividend cutters.

Why is it suddenly an issue this time around?

Last time, I was still in the accumulation phase and just carried on buying whatever was yielding the best (that met all my various filters).

If I worked my way down the list to a share that sounded a bit low for HYP, I made a judgement as to whether to make the purchase or hold off until a more suitable candidate surfaced. If I posted my dilemma, nobody banned me from talking about it, because it was a HYP practical issue and posters cut each other a bit of slack rather than bludgeon each other with rules and regulations.

If, for example, I think Diageo is now the preferred purchase for my HYP, because all higher yielding candidates have been ruled out, then I'd like to be able to post that here and discuss it. By all means I'd expect some questions, and I'd expect, having posted, to have to justify why I'd made my decision, based on HYP logic (as opposed to TR or any other investing strategy).

Is it really so hard?

VRD

[Arborbridge]

That's irrelevant and why I wrote until told otherwise above.
But the question will always be the same: "Why am I buying a single name share yielding less income than this collective?"

You may think it irrelevant, but others may not

As to your question, that has always been the case so people make their choice according to taste. If experience shows that a particular investor progresses satisfactorily towards his aims using HYP then he/she will do so.
It could be that an investor requiring high income and income increases, might be more successful with a HYP over a long period of time, despite the current apparent turn around in the relative forecast yield prospects between ITs and HYP. That person would naturally be reluctant to change tactics for what may be a temporary change, and may well be correct in doing so.
Success or otherwise, can only really be decided if people keep separate portfolios and unitise them, but unfortunately most depend on gut feelings.
As in most aspects of investing, one can only ever know after the event: by the time you've found the answer, the game may well have moved on.

Arb.

[Arborbridge]

whereas CTY is at the mercy of what its individual holdings do, as are we all.

By virtue of being an Investment Trust, they are allowed to "cheat". In other words they can maintain dividends, should they wish, by selling assets or borrowing.

But there's a warning straw in the wind with TMPL which has cut its payout, despite having longer cover than CTY. With this precedent breaking away, it's possible others will follow.

Arb.

[Arborbridge]

What a lot of fuss about nothing. If someone is happy that the yield is high enough to meet their needs then this should be the end of it.

I think you may have missed the point. This isn't about one's needs - it's a discussion about what the FTSE100 yield is for the purposes of HYP considerations.

Arb.

[Arborbridge]

I don't remember this question coming up during the Global Financial Crisis, when there were also a large number of dividend cutters.

Why is it suddenly an issue this time around?


Is it really so hard?

VRD

My feeling about the first part is that the posters at that time weren't so disruptive. It just never became a series of nitpicking retorts in the same way, as people on HYPP of the time were all more or less of one accord. If Pyad gave advice on the matter of FTSE yield, or Gengulphus came up with a sensible analysis, my guess is that the majority would have fallen into line.
There were actually some great debates and slogging matches which could run to 100 posts or more, but they were confined to HYSS. During the past two years on TLF we've seen this discipline breakdown and the beginning of much sniping bringing discord to HYPP which did not happen previously, or was dealt with immediately by the mods - with feedback so people would learn from the deletion.

Is it really so hard? No it isn't.

Arb.

[Arborbridge]

If I worked my way down the list to a share that sounded a bit low for HYP, I made a judgement as to whether to make the purchase or hold off until a more suitable candidate surfaced. If I posted my dilemma, nobody banned me from talking about it, because it was a HYP practical issue and posters cut each other a bit of slack rather than bludgeon each other with rules and regulations.

If, for example, I think Diageo is now the preferred purchase for my HYP, because all higher yielding candidates have been ruled out, then I'd like to be able to post that here and discuss it. By all means I'd expect some questions, and I'd expect, having posted, to have to justify why I'd made my decision, based on HYP logic (as opposed to TR or any other investing strategy).

Is it really so hard?

VRD

I so absolutely agree with your memories and sentiments here. Spot on. When guidelines try to be too specific, the nitpicking go looking for nits to pick.

Arb.

[Dod101]

The whole thread was supposed to be a debate (for right or wrong) about the FTSE100 yield and how to identify it currently. It was not about how to pick HYP shares nor to consider whether the yield on an IT is a good substitute for it.

Dod

[Arborbridge]

The whole thread was supposed to be a debate (for right or wrong) about the FTSE100 yield and how to identify it currently. It was not about how to pick HYP shares nor to consider whether the yield on an IT is a good substitute for it.

Dod

When you say it was "supposed to be", I'm not so sure.
Look at the thread from which this was transferred, and the earlier posts within this continuation thread. Tell me if you now believe it was only meant as a question of the FTSE yield with no context - the context was clearly with reference to HYP.

Arb.

[vrdiver]

The whole thread was supposed to be a debate (for right or wrong) about the FTSE100 yield and how to identify it currently. It was not about how to pick HYP shares nor to consider whether the yield on an IT is a good substitute for it.

Dod

But the context was for the purpose of ruling a share valid or invalid for HYP. (Otherwise the question would have been on DAK, with a simpler title, not over here on the Biscuit Bar). Hence the discussion around context...

VRD

[Dod101]

It does not really matter to me but I started by reading G's first paragraph in the first post in which he I thought summarised what the discussion was about.

Anyway, I conclude frankly that I cannot get a meaningful FTSE100 yield given the number of suspensions, cancellations and very occasional reinstatements.

Dod

[Gengulphus]

I don't remember this question coming up during the Global Financial Crisis, when there were also a large number of dividend cutters.

Why is it suddenly an issue this time around?

Because the HYP Practical guidance at the time did not say anything about the FTSE100 yield! All it required about the yields of HYP shares was "The type of strategy discussed on this board invests in shares: ... • With high dividend yields, and safety factors that suggest that their dividend income is sustainable and will hopefully grow. ..." - and that's how it stayed until the TMF boards were closed (and arguably until the TLF HYP Practical guidance came out was published about a year later, depending on whether one thinks that no guidance was in effect during that year or that the TMF guidance was still in effect by default).

I think you may have missed the point. This isn't about one's needs - it's a discussion about what the FTSE100 yield is for the purposes of HYP considerations.

Not quite - it's a discussion about what the FTSE100 yield is for the purposes of the HYP Practical guidance. People can take whatever considerations they like into account when investing - the guidance only limits what they may discuss on HYP Practical.

I don't remember this question coming up during the Global Financial Crisis, ...

My feeling about the first part is that the posters at that time weren't so disruptive. ...

I think that's 'good old days' syndrome - posters were very disruptive from the autumn of 2007 to the spring of 2008, to the extent that the TMF moderators eventually decided to split the original HYP board to allow those who just wanted to run their HYPs in practice to get away from the disruption. It worked fairly well for a few months, but the disruption started up again - I suspect (but don't know) because those who would post their arguments against HYP found their lives rather empty when serious HYPers weren't around to argue back...

The whole thread was supposed to be a debate (for right or wrong) about the FTSE100 yield and how to identify it currently. It was not about how to pick HYP shares nor to consider whether the yield on an IT is a good substitute for it.

Correct. I thought I was very specific about that in my OP, but almost everybody has decided that it's a good excuse to discuss what they think the HYP Practical guidance should be, not how to deal with this aspect of what it is. Yes, I could report vast numbers of posts for being off-topic for the thread - and I've been tempted to do so... But it's not worth either my time or the moderators' - I'll just leave with the strong impression that people (including a moderator) aren't interested in making this aspect of the current guidance work.

When you say it was "supposed to be", I'm not so sure.
Look at the thread from which this was transferred, and the earlier posts within this continuation thread. ...

I'd suggest you make a start by looking at the earliest post in this thread!

Gengulphus