dealtn wrote:So maybe explain, clearly what it is that I am not "getting".
I have tried, but one last time...
dealtn wrote:Here was someone saying they care to a degree. They stick to income investments. None of which I have a problem with, and my posts have been in synch with.
My sole intervention here was regarding solely measuring dividend income, when my view, backed up by others in this thread and many others on the board is the reality that that isn't the sole concern - hence talking about XIRR and the ability for capital to grow to allow for that steady rising income desired.
Well, measuring the dividend income is clearly a necessary part of satisfying the aim of the OP, which was to target "approx 4-5% (presumably, starting) yield". However, the objective was also to look for "a steadily growing income stream, without consuming its own capital. A basket to last you 30 years." So, I don't think anyone was under the illusion that that is the "sole concern" or has stated as such.
dealtn wrote:Is anyone here really saying they are unconcerned by a scenario where a portfolio of 4% dividend yield growing at 5% might have turned £100k into £200k, against a 6% growing by 1% that remains at £100k over 12 years? The former has a 6.7% yield in year 12 (an improvement?) with the latter a 3.4% yield (a deterioration?)
No, I don't believe anyone here is saying that. The key word in your example is "might". In an earlier post, I illustrated that those outcomes "might" well be reversed and that lower yield and higher dividend growth twelve years ago doesn't necessarily guarantee a superior total return up to today. The point is that if we concentrate on assessing the prospects for a sustainable and growing dividend of potential investments (and no reason not to consider historic IRR/total return figures as part of that assessment) then we shouldn't have to worry unduly about the prospects for capital growth. The aim is to build a portfolio that produces reliable (growing) income so that the short to medium term volatility (or noise) in capital value can largely be ignored. That isn't the same as being unconcerned about long-term capital performance which, if the portfolio has been researched well, hopefully shouldn't cause concern.
dealtn wrote:More importantly, would it be of no concern were the 6% original portfolio to have dropped to £50k in value, with the same income pay out, as one that remained at £100k (or indeed against one that had risen to £150k)? The exact same £76k of dividends received (looking backwards) and a now 13.4% yield versus the 6.7% one (or 4.5%).
I am unconvinced holders of the portfolio in the £50k scenario wouldn't be having thoughts about the stability of the dividend stream going forward, and perhaps pondering whether previous dividends had unnecessarily been paid out of unearned income maybe, or from capital on the balance sheet?
I am sure it would be of concern, and I agree that holders of the portfolio in the £50k scenario would be extremely likely to be having thoughts about the stability of the income going forward! However, I would suggest that most (if not all) investors here are savvy enough to recognise the alarm bells and reassess their strategy long before such a scenario developed.
dealtn wrote:I will have to concede if there are people that can't see the difference, or who can see it but would literally be unconcerned in such scenarios there is little I can do to convince them. I contend that most can see the difference, or would have at least thoughts about what that would mean to them should that scenario pan out.
I really don't think you need to worry about convincing anyone. I don't remember seeing anyone suggest that they wouldn't be concerned in such scenarios, and it difficult to understand why you keep bringing them up
dealtn wrote:As such I can't see the dogma that dividend income is all that matters to income investors
Perhaps it would be more accurate (and less provocative) to say that a sustainable/growing dividend income is what matters most to income investors. Clearly, consideration of capital is an integral part of ensuring that sustainability/growth is maintained. However, maximising TR is less important than feeling comfortable being able to draw solely on dividend income rather than having to sell to generate that income. To that end, a long-term TR of 7% (comprising 4% dividend and 3% capital growth) may actually be more acceptable in some circumstances than a long-term TR of 8% (comprising 2% dividend and 6% capital growth) if it avoids the potential of having to sell into short term depression of the share price to acquire the desired income. It may be this slight trade off that is anathema to you, but I don't believe anyone is ignoring the greater picture and simply being guided by dividend yield alone. The main driver (for me, at least) is that I seem to find it easier to spot reliable dividend growth than capital growth. Anyway, if I haven't managed to explain this clearly enough, please start another thread as this one has been corrupted enough by this diversion.