1nvest wrote:hiriskpaul wrote:Lootman wrote:BullDog wrote:Overall, with gold not paying any income, that means the remaining portfolio assets have to sweat harder to produce the income.
Not necessarily. You can hold gold miners, which typically do pay dividends. You can use gold options and futures to generate income. And of course you can sell some gold each year, given that the SWR is not just about income but about having enough capital to draw down.
In fact I could be 100% in Berkshire Hathaway, which pays no income at all, and just sell 4% a year. Who needs income?
The thing about doing that is you get to decide how much income to take. The natural yielders get what they are given. It wouldn't suit me, but some people prefer the latter.
For the former with investments in funds inside ISAs/SIPPs, I think there is much to be said for holding accumulation versions of funds/ETFs. That way your money stays fully invested until you chose to take it out. With funds that pay dividends you end up having more cash hanging around than is optimal.
Some stocks are pretty slow at paying out dividends, might take a couple of months between when the stock went ex-div and the share price was marked down to when you actually receive the dividend (and maybe a further delay before that money is reinvested again and after brokers, stamp duty, market maker, FX agent, taxman ..etc. may also have taken a slice). For higher yielding portfolios that might be 4% of the portfolio value being idle and/or bearing costs for several months each year. Maybe not that dissimilar to investing only 99% and leaving 1% in hard cash. Such generosity of 'free money' gifted to others enables them to operate out of expensive buildings/locations and pay high wages. Personally I don't feel like being generous to such cases and would rather keep it for myself or gift it to where I opined there was a greater need.
In theory during the time between a share going ex-div and being paid the unpaid dividend should be earning the risk free rate, so on ex-div date the share price should fall by slightly less that the dividend (which contradicts what I have said on another thread!). In addition though, a cum-div shareholder is carrying credit risk after ex-div date, which should also reduce the drop. After ex-div date of a final dividend, those entitled to the dividend become senior creditors to the company and can force payment, but when it comes to interim dividends the payment can be cancelled at any time with no recourse for shareholders who are entitled to the dividend but who sold on or after ex-div date. The motto is if you are intending to sell out of a dodgy looking company, don't wait until ex-div date!
Going off topic here...