Going back some way, to viewtopic.php?p=336881#p336881
88V8 wrote:What I'm buying is their reserves to see me past the divi drought.
If that is not assuming that their reserves are cash, I don't know what is.
Some interesting sidetracking and argument.
As I seem to have caused some of the sidetracking, yes it does sound as if I an referring to cash. A throwaway phrase open to misinterpretation.
As regards IT reserves , Here, however https://lemonfool.co.uk/viewtopic.php?f=54&t=24420
there was an extensive dissection which made it clear that they are not cash, but an accounting artifice.
Nevertheless, they represent a smoothing apparatus whereby ITs may if they choose maintain their dividends even though their inflow has diminished.
As has been said, some will choose not to do so.
I have been confining my IT buying to those I believe will continue come hell or high water, in order to defend their moat.
Why, because their moat is their track record of decades I repeat decades of unbroken dividend rises. This is not something that can be recreated if broken, not within an investing lifetime.
There are twelve ITs normally cited, City of London CTY 54 years, Bankers BNKR 53 years, Alliance ATST 53 years, Caledonia CLDN 53 years, BMO Global BGSC 50 years, F&C FCIT 49 years, Brunner BUT 48 years, Claverhouse JCH 47 years, Murray MUT 47 years, Witan WTAN 45 years, Scottish American SAIN 40 years, and Merchants MRCH with a mere 39 years although its reserves are not looking so healthy.
Of these, only four are worth considering for the high yield investor, imho:
CTY yielding 5.95%
MUT at 4.5%
MRCH 7.7% albeit its reserves are low and the share price has been a falling knife.
These four are the ITs that I have been buying. Those investors who are happy that so long as the overall portfolio yield is high, some underpayers may be tolerated, could consider the other candidates. Their sub--3% yield does not float my boat, I must say.
I also hold BERI Blackrock Energy and HFEL for a bit of diversification, but do not intend to increase them atm.
Amongst the Heroes, I fully accept that divi increases in the medium term are likely to be modest, but even one missed divi would amount to significantly more than a few years of low rises.
And yes, they all fish in the same UK pond. In for a penny……….
And yes, they may end up paying me divis out of my own capital. But if I stick the capital in a cash account it will be eroded by inflation, and the merit of divis is that you can spend them, while the capital is just blips on a screen, and TR was a variety of sports car made by Triumph..