Before the thread was closed I had started to draft a reply to this post in that thread...
tjh290633 wrote:As far as I can see, all you have demonstrated is that shares which have continued to pay dividends have by and large maintained their share price, while those that cancelled or reduced their dividends suffered a fall in share price. Since then they have recovered to some extent, while in the case of BT.A a new shareholder has built a substantial stake of 12%.
I don't think that your conclusions are a valid interpretation of the situation. I have shown several times that one year's losers are often the next year's winners in terms of share price movement. Fluctuations in share price are usually of little consequence in an HYP. Fluctuations in dividend rates are more important. You show an increase in dividends, I think, but this is merely a partial restoration of previous reductions. You will, of course, have noted that BT.A is still not paying dividends and is intimating an intention to recommence with an interim next February.
Distorting facts to suit your personal agenda is not helpful.
TJH
My bold.
Having just reread this post the two sentences I have highlighted raise a question in my mind. Is the statement made universally true, for both those drawing down and those not yet doing so but building their pension pot? In the case of the former it may be true in some cases, but I wonder if that is always the case. In the latter case I think it is even less universally true. TJH seem to give scope for it to not always be true, as he refers to "little consequence" rather than no consequence, and says dividend fluctuations are "more important" which implies a matter of degree not an absolute. But he does not expand on this and it is left very much as subtext.
One central principle of the initial HYP approach was that capital is very much subordinate to income. But of course, it is pretty much agreed by all that HYP has moved on since those initial articles in many respects. I wonder if the high level of subordination of capital is something that is also not as clear now as it once was.
For somebody drawing income from their HYP it may well be the case that capital is very much subordinate to income. But I also think there may be instances where that is not the case. One of the benefits of HYP over buying an annuity is the ability to pass assets on to ones heirs. In such a situation being able to pass on as much capital as possible may be important to an investor and if they have a significant safety margin they may trade income against capital preservation. Even for somebody in drawdown who takes all the income produced, if they envisage many years of future income requirement I would have thought capital would be relevant. If the capital in there portfolio were flat for many years it would mean either a similarly flat income groth, or, an ever spiralling yield which may not be sustainable. So capital, while not an objective in its own right may well be important as it is often correlated to income growth.
For the pot builder yet to start drawing down an income that latter point is all the more important. Returning to the initial point regarding the switch out of BT.A into other shares, for a pot builder seling a share low and then seeing the shares bought to replace it lag the performance of that sold share is far from ideal. In simple terms, surely a pot builder wants the biggest pot possible at the point they look to draw their income? If an income of £10,000pa is needed, somebody with a pot of £200,000 has many more options than somebody with a pot of £100,000. They can secure there income while likely being able to be more conservative, or alternatively, if they buy the hold the same basket of shares they will have a substantially bigger safety margin.
Holding forever has given way to various approaches to trimming, rebalancing and trading; no ITs has changed and now REITs and quasi-REITs are generally accepted; and, a method initially put forward for those seeking an immediate income is being used by some who are many years away from drawing that income with dividends reinvested. Is it not also now reasonable to consider a more balanced view on capital versus income alone, as they are in many instances linked and correlated?
Any thoughts from others?
