Very High Yield Shares

[monabri]

And VOD (9.7%) has been steadily heading towards its second cut in recent years for some time now. Again, with a newish CEO installed, that will come with November's half year results.

Bookmark this post, because you read it here first, and then you can tell me I was right.

I think I'll claim that one though!

viewtopic.php?p=589736#p589736

Based on

viewtopic.php?p=589588#p589588

[Itsallaguess]

As you know my benchmark of very high yield or too high yield is twice that of CTY (City of London), so 9.8% currently, and with regards to dividend cuts that has not let me down yet in recent years.

As a sweet-spot for finger-in-the-air simplicity, I've always liked your idea of using the CTY yield as a single-metric test-point, and I suspect that it's likely to continue being useful as one of the easiest methods of slicing away what are likely to be the most volatile (income and capital) ultra-high yield options offered up by the UK-facing income-investment market at any given time.

Cheers,

Itsallaguess

[Dod101]

According to yesterday's FT, The FTSE100 yield is currently 3.71% and the FTSE250 is 3.36%.

The yield from own income portfolio was 4.92% last year which sounds almost the same as the CTY overall yield.

Dod

[IanTHughes]

As you know my benchmark of very high yield or too high yield is twice that of CTY (City of London), so 9.8% currently, and with regards to dividend cuts that has not let me down yet in recent years.

As a sweet-spot for finger-in-the-air simplicity, I've always liked your idea of using the CTY yield as a single-metric test-point, and I suspect that it's likely to continue being useful as one of the easiest methods of slicing away what are likely to be the most volatile (income and capital) ultra-high yield options offered up by the UK-facing income-investment market at any given time.

I would also like to offer my thanks for such a benchmark. I have used it extensively to indicate a share that I should add to my list of possible candidates for inclusion in my High Yield Portfolio (HYP). It has been enormously successful in helping me in my search for the high dividend income that I am seeking for my portfolio.

moorfield and/or itsallaguess, claiming that a share’s yield is too high, is a very clear indication of a share worth investigating!

So, thank you both very much.

Enjoy!


Ian

[Itsallaguess]

moorfield and/or itsallaguess, claiming that a share’s yield is too high, is a very clear indication of a share worth investigating!

I think I've been fairly consistent in my views on this subject over the years, and won't ever say that shares displaying ultra-high yields cannot ever go on to produce worthwhile outcomes.

What I've been consistent in saying is that in general, and where income-investors don't possess enough suitable knowledge through which they can filter the wheat from the chaff in such an ultra-high-yield arena, they are likely to be better off over the long-term, and see much less income and capital volatility with their UK-facing income-investments, if they do try to avoid the ultra-high-yield end of what might enticingly look to be an 'available' income spectrum...

I think it's clear from the multi-page portfolio-threads that you produce Ian, that you are a much more experienced income-investor than many who might follow something akin to the HYP strategy, so I've certainly never seen you personally looking to casually dismiss such volatility-risk as negating the above view.

The general volatility risks to income and capital that I think moorfield and I are discussing here are more towards 'the man in the street', who might otherwise get wooed by more experienced investors looking to actively undersell those ultra-high-yield risks, which I think is irresponsible in the extreme on such a public investment site.

Cheers,

Itsallaguess

[IanTHughes]

moorfield and/or itsallaguess, claiming that a share’s yield is too high, is a very clear indication of a share worth investigating!

I think I've been fairly consistent in my views on this subject over the years, and won't ever say that shares displaying ultra-high yields cannot ever go on to produce worthwhile outcomes.

What I've been consistent in saying is that in general, and where income-investors don't possess enough suitable knowledge through which they can filter the wheat from the chaff in such an ultra-high-yield arena, they are likely to be better off over the long-term, and see much less income and capital volatility with their UK-facing income-investments, if they do try to avoid the ultra-high-yield end of what might enticingly look to be an 'available' income spectrum...

I think it's clear from the multi-page portfolio-threads that you produce Ian, that you are a much more experienced income-investor than many who might follow something akin to the HYP strategy, so I've certainly never seen you personally looking to casually dismiss such volatility-risk as negating the above view.

The general volatility risks to income and capital that I think moorfield and I are discussing here are more towards 'the man in the street', who might otherwise get wooed by more experienced investors looking to actively undersell those ultra-high-yield risks, which I think is irresponsible in the extreme on such a public investment site.

You are quite correct in that your views with regards to investing in Equities have been consistent for many years. In my view, you are consistently incorrect but, I am the first to allow that, you are allowed your view, however nonsensical it may appear to an investor like myself.

Just to be clear, what I am saying is that anyone, whether on these boards or elsewhere, that makes the following claim:

Investing in shares with a dividend yield higher than an arbitrarily chosen limit, is dangerous and should be avoided, while shares that offer a yield below the same arbitrarily chosen limit, are not dangerous.

Is a person who is not only talking “complete nonsense” but also does not appear to understand even the fundamentals of Equity investing.

What such a person is claiming is that a share yielding just below their arbitrarily chosen limit, is acceptable, but the very next day, assuming the share’s price has declined, even just slightly maybe simply because it has now become ex-dividend, such that the yield is now higher than their arbitrarily chosen limit, the share should be avoided.

I hereby call out such “advice” as complete and utter nonsense, displaying as it does an ignorance with regard to Equity investing.

Obviously, any investor can simply ignore such advice as the complete nonsense it is, along with all the other complete nonsense that is posted on these boards. The problem is that those readers less experienced in buying equities, especially novices or even the “man in the street”, maybe coming to these boards for “advice”, might be seduced by such “complete nonsense”. They may even be led to believe that persons spouting such nonsense, are experienced in Equity investing!

My advice to anyone reading these boards, especially the less experienced “man in the street”, is simple.

Avoid any advice posted by anyone who appears to believe that bad investments can be avoided, simply by avoiding shares whose yields are above an arbitrarily chosen limit. You may well lose income return, but you will not decrease risk! Such a person’s knowledge, with regard to Equity Investment, is dubious at best. Any and all “advice” from such persons is best avoided.

But please, your posting of such “complete nonsense” can be useful, even to the “man in the street”. As I said before:

moorfield and/or itsallaguess, claiming that a share’s yield is too high, is a very clear indication of a share worth investigating!

So, thank you both very much.

Enjoy!


Ian

[Itsallaguess]

Just to be clear, what I am saying is that anyone, whether on these boards or elsewhere, that makes the following claim:

Investing in shares with a dividend yield higher than an arbitrarily chosen limit, is dangerous and should be avoided, while shares that offer a yield below the same arbitrarily chosen limit, are not dangerous.

Is a person who is not only talking “complete nonsense” but also does not appear to understand even the fundamentals of Equity investing.

What such a person is claiming is that a share yielding just below their arbitrarily chosen limit, is acceptable, but the very next day, assuming the share’s price has declined, even just slightly maybe simply because it has now become ex-dividend, such that the yield is now higher than their arbitrarily chosen limit, the share should be avoided.

I hereby call out such “advice” as complete and utter nonsense, displaying as it does an ignorance with regard to Equity investing.

<Sigh...>

You'd think Brewin Dolphin would know a thing or two about Equity Investing though, and yet that's exactly the conclusion they came to with regards to 'Dividend Risk' in the earlier linked document where they looked at 35 years of UK-market data -

Dividend Risk -

Earlier this year our Research Team carried out a study into the risk of dividend cuts and compiled an analysis of the safety, or otherwise, of UK dividends paid by a wide variety of companies.

We studied 35 years of monthly historic data to examine how many instances of dividend cuts had actually occurred during that time and how the probability of a cut changed depending on the level of the dividend yield.

Our analysts then estimated the probability of a dividend cut for each of the companies for which they provide recommendations.

The results are instructive.

....

For dividend yields above 6% the chances of a dividend cut rises rapidly, highlighting how a high yield can often reflect the market expectation that the dividend is not sustainable.

We are already using this research to influence how we invest for our clients, helping to reduce the risk of cuts to income which will also support total returns, given that a cut to the dividend is often accompanied by a fall in a company’s share price.

https://www.brewin.co.uk/insights/dividend-risk

Could you please tell me where the errors are in the above Brewin Dolphin study, which enables them to come to the exact conclusion that you want to dismiss as being 'complete nonsense'?

Cheers,

Itsallaguess

[Dod101]

There is no black or white in investing but I think it is generally true that a particularly high yield is an indication that caution may be sensible in deciding whether to invest or even continue investing in any particular share.

I do not think that anyone is suggesting that immediately a share reaches a certain yield it should be sold. What I do think though is that the market collectively does not seem to have great faith in that particular share, otherwise it would be bringing the yield down to something nearer the average. At the very least we should be striving to discover why these very high yields persist, and hardly surprisingly it is somethimes/often because the market thinks that a cut is on the cards.

Dod

[IanTHughes]

You'd think Brewin Dolphin would know a thing or two about Equity Investing though, and yet that's exactly the conclusion they came to with regards to 'Dividend Risk' in the earlier linked document where they looked at 35 years of UK-market data -

Dividend Risk -

Earlier this year our Research Team carried out a study into the risk of dividend cuts and compiled an analysis of the safety, or otherwise, of UK dividends paid by a wide variety of companies.

We studied 35 years of monthly historic data to examine how many instances of dividend cuts had actually occurred during that time and how the probability of a cut changed depending on the level of the dividend yield.

Our analysts then estimated the probability of a dividend cut for each of the companies for which they provide recommendations.

The results are instructive.
....
For dividend yields above 6% the chances of a dividend cut rises rapidly, highlighting how a high yield can often reflect the market expectation that the dividend is not sustainable.

We are already using this research to influence how we invest for our clients, helping to reduce the risk of cuts to income which will also support total returns, given that a cut to the dividend is often accompanied by a fall in a company’s share price.

https://www.brewin.co.uk/insights/dividend-risk

Could you please tell me where the errors are in the above Brewin Dolphin study, which enables them to come to the exact conclusion that you want to dismiss as being 'complete nonsense'?[

Oh dear, another straw man argument! Of course, coming from you that is hardly surprising, but it is rather wearying!

Let me make it clear:

Of course I have read the study that you highlighted. I read it just about when it first came out, about eight years ago, soon after I started investing my own funds, rather than trusting others.

Furthermore, in general, I agree with what they say, and especially that:

For dividend yields above 6% the chances of a dividend cut rises rapidly, highlighting how a high yield can often reflect the market expectation that the dividend is not sustainable.

Although it must be stated that interest rates have rather changed - risen - since this study was written, so the insistance on 6.00% as a limit could be seen to be rather "of the time".

Mind you, they certainly know a lot more than you do!

That of course does not alter by assertion that:

Just to be clear, what I am saying is that anyone, whether on these boards or elsewhere, that makes the following claim:

Investing in shares with a dividend yield higher than an arbitrarily chosen limit, is dangerous and should be avoided, while shares that offer a yield below the same arbitrarily chosen limit, are not dangerous.

Is a person who is not only talking “complete nonsense” but also does not appear to understand even the fundamentals of Equity investing.

What such a person is claiming is that a share yielding just below their arbitrarily chosen limit, is acceptable, but the very next day, assuming the share’s price has declined, even just slightly maybe simply because it has now become ex-dividend, such that the yield is now higher than their arbitrarily chosen limit, the share should be avoided.

I hereby call out such “advice” as complete and utter nonsense, displaying as it does an ignorance with regard to Equity investing.

Try, oh pleae try, to understand the difference!

But I am forever magnanimous:

moorfield and/or itsallaguess, claiming that a share’s yield is too high, is a very clear indication of a share worth investigating!

So, thank you both very much.

Enjoy!


Ian

[Itsallaguess]

Mind you, they certainly know a lot more than you do!

<Sigh...>

Ian,

This is precisely what I said earlier -

What I've been consistent in saying is that in general, and where income-investors don't possess enough suitable knowledge through which they can filter the wheat from the chaff in such an ultra-high-yield arena, they are likely to be better off over the long-term, and see much less income and capital volatility with their UK-facing income-investments, if they do try to avoid the ultra-high-yield end of what might enticingly look to be an 'available' income spectrum...

https://www.lemonfool.co.uk/viewtopic.php?f=31&t=39304&start=20#p591775

And this is what Brewin Dolphin conclude in their 35-year study -

For dividend yields above 6% the chances of a dividend cut rises rapidly, highlighting how a high yield can often reflect the market expectation that the dividend is not sustainable.

We are already using this research to influence how we invest for our clients, helping to reduce the risk of cuts to income which will also support total returns, given that a cut to the dividend is often accompanied by a fall in a company’s share price.

https://www.brewin.co.uk/insights/dividend-risk

Do you think it would be possible of you, whilst please avoiding personal attacks and the over-use of exclamation marks in your reply, to clearly explain what you see as the major differences in the above two sets of views?

Cheers,

Itsallaguess

[MDW1954]

Moderator Message:
IanTHughes: your posts in this thread have become increasingly sarcastic and aggressive. Dial it down. What I was reading as sarcasm this morning is now coming across as personally abusive. People who don't agree with you are not necessarily wrong, or idiots to be pitied. --MDW1954

Moderator Message:
For the avoidance of doubt, moderators have received no reports from IAAG. Or anyone else, in respect of posts on this thread since much earlier this morning. --MDW1954

[IanTHughes]

I can only repeat what I have already posted – slightly amended so as not to offend - as I cannot think of a different form of words that would make it simpler to understand.

Just to be clear, what I am saying is that anyone, whether on these boards or elsewhere, that makes the following claim:

Investing in shares with a dividend yield higher than an arbitrarily chosen limit, is dangerous and should be avoided, while shares that offer a yield below the same arbitrarily chosen limit, are not dangerous.

Is a person who, in my view, does not appear to understand even the fundamentals of Equity investing.

What such a person is claiming is that a share yielding just below their arbitrarily chosen limit, is not dangerous and is perfectly acceptable. But the very next day, assuming the share’s price has declined, even just slightly maybe simply because it has now become ex-dividend, such that the yield is now higher than their arbitrarily chosen limit, investing in said share is now considered dangerous and should be avoided.

Obviously, any investor can simply ignore such advice. The problem is that those readers less experienced in buying equities, especially novices or even itsallaguess’s “man in the street”, maybe coming to these boards for “advice”, might be seduced by such an incorrect statement.

My advice to anyone reading these boards, especially the less experienced “man in the street”, is simple.

"Avoid any advice posted by anyone who appears to believe that bad investments can be avoided, simply by avoiding shares whose yields are above an arbitrarily chosen limit. Following such advice may well lose you some income return, but it will not decrease risk! Any such advice is best avoided."

Investing in any share with the aim of obtaining an income, should only be undertaken after careful research into the expected sustainability of that income. Whether the share is offering a low or high yield is irrelevant, such research must always be undertaken.

I have my own ideas about investing but it is always nice to know that folks like Brewin and Dolphin agree with me.

https://www.brewin.co.uk/insights/dividend-risk

So what can we, as a charity investment manager, do to [p]rotect our clients? In the first instance the answer is to diversify.
…..
This has the effect of limiting the impact of any dividend cut at any one individual company and, with the benefit of some astute research, increases the chances of achieving income growth in other areas to compensate.

Diversification and research, and not a single mention of avoiding high yields simply because they are high yield!

Enjoy!


Ian

[Itsallaguess]

I can only repeat what I have already posted

Given what you've previously posted hasn't been at all clear in terms of articulating the difference between the two quoted sections in my previous post, then there's really no need for you to repeat any of it.

As you've chosen not to explain how you see any difference in the the two sets of views in my last post, I'll now cease my engagement with you on this particular topic.

Cheers,

Itsallaguess

[IanTHughes]

I can only repeat what I have already posted

Given what you've previously posted hasn't been at all clear in terms of articulating the difference between the two quoted sections in my previous post, then there's really no need for you to repeat any of it.

As you've chosen not to explain how you see any difference in the the two sets of views in my last post, I'll now cease my engagement with you on this particular topic.

Oh that's alright. If you have no relevant argument ..... so be it.

In any case, my posts are meant for others on this board, rather than you.

Enjoy!


Ian

[Crazbe7]

You'd think Brewin Dolphin would know a thing or two about Equity Investing though, and yet that's exactly the conclusion they came to with regards to 'Dividend Risk' in the earlier linked document where they looked at 35 years of UK-market data -

Dividend Risk -

Earlier this year our Research Team carried out a study into the risk of dividend cuts and compiled an analysis of the safety, or otherwise, of UK dividends paid by a wide variety of companies.

We studied 35 years of monthly historic data to examine how many instances of dividend cuts had actually occurred during that time and how the probability of a cut changed depending on the level of the dividend yield.

Our analysts then estimated the probability of a dividend cut for each of the companies for which they provide recommendations.

The results are instructive.
....
For dividend yields above 6% the chances of a dividend cut rises rapidly, highlighting how a high yield can often reflect the market expectation that the dividend is not sustainable.

We are already using this research to influence how we invest for our clients, helping to reduce the risk of cuts to income which will also support total returns, given that a cut to the dividend is often accompanied by a fall in a company’s share price.

https://www.brewin.co.uk/insights/dividend-risk

Could you please tell me where the errors are in the above Brewin Dolphin study, which enables them to come to the exact conclusion that you want to dismiss as being 'complete nonsense'?[

Oh dear, another straw man argument! Of course, coming from you that is hardly surprising, but it is rather wearying!

Let me make it clear:

Of course I have read the study that you highlighted. I read it just about when it first came out, about eight years ago, soon after I started investing my own funds, rather than trusting others.

Furthermore, in general, I agree with what they say, and especially that:

For dividend yields above 6% the chances of a dividend cut rises rapidly, highlighting how a high yield can often reflect the market expectation that the dividend is not sustainable.

Although it must be stated that interest rates have rather changed - risen - since this study was written, so the insistance on 6.00% as a limit could be seen to be rather "of the time".

Mind you, they certainly know a lot more than you do!

That of course does not alter by assertion that:

Just to be clear, what I am saying is that anyone, whether on these boards or elsewhere, that makes the following claim:


Is a person who is not only talking “complete nonsense” but also does not appear to understand even the fundamentals of Equity investing.

What such a person is claiming is that a share yielding just below their arbitrarily chosen limit, is acceptable, but the very next day, assuming the share’s price has declined, even just slightly maybe simply because it has now become ex-dividend, such that the yield is now higher than their arbitrarily chosen limit, the share should be avoided.

I hereby call out such “advice” as complete and utter nonsense, displaying as it does an ignorance with regard to Equity investing.

Try, oh pleae try, to understand the difference!

But I am forever magnanimous:

moorfield and/or itsallaguess, claiming that a share’s yield is too high, is a very clear indication of a share worth investigating!

So, thank you both very much.

Enjoy!


Ian

So much noise from someone with just over 8 years investing experience.

Enjoy!

Crazbe7

[IanTHughes]

So much noise from someone with just over 8 years investing experience.

I personally have no knowledge as to how many years of investment experience itsallaguess has under his/her belt, unlike you obviously. I will say that it had always appeared to me that itsallaguess’s investment experience was longer than eight years but, I bow to your greater knowledge.

Mind you, as someone with over 40 years of experience in investment, both for myself and professionally for others, I have to say that, whatever the number of years experience anyone may have, one can make mistakes. The real issue is whether one truly learns from such mistakes.

Enjoy!


Ian

[Tara]

As you know my benchmark of very high yield or too high yield is twice that of CTY (City of London), so 9.8% currently, and with regards to dividend cuts that has not let me down yet in recent years.

MNG (10.1%) has been running comfortably above that multiple for the last 6 months. It's next interim results in September will bring the portended dividend cut / kitchen sink from the newish CEO now that he's got the last final results out of the way.

And VOD (9.7%) has been steadily heading towards its second cut in recent years for some time now. Again, with a newish CEO installed, that will come with November's half year results.

Bookmark this post, because you read it here first, and then you can tell me I was right.


The baccys IMB and BATS yields are high, but not too high. They will continue to payout steadily for the forseeable, fill yer boots.

There is no evidence that M&G will cut the dividend in September, and there is in fact every likelihood that the dividend will continue to increase. The 2022 dividend for M&G was 7% higher than the 2021 dividend, and I would not be surprised if there was a similar increase for 2023.

M&G is not just a fund manager, and it generates huge amounts of capital every year from its Heritage insurance business. There was a good reason why Macquarie was eyeing it up for a bid earlier this year, and why Schroders was also having a look at it before.

I think a takeover bid for M&G will come before any dividend cut.

[Itsallaguess]

Mind you, as someone with over 40 years of experience in investment, both for myself and professionally for others, I have to say that, whatever the number of years experience anyone may have, one can make mistakes.

The real issue is whether one truly learns from such mistakes.

Well one of the mistakes that you've made is to attempt a rebuttal of the following view of mine -

What I've been consistent in saying is that in general, and where income-investors don't possess enough suitable knowledge through which they can filter the wheat from the chaff in such an ultra-high-yield arena, they are likely to be better off over the long-term, and see much less income and capital volatility with their UK-facing income-investments, if they do try to avoid the ultra-high-yield end of what might enticingly look to be an 'available' income spectrum...

https://www.lemonfool.co.uk/viewtopic.php?f=31&t=39304&start=20#p591844

with a quote from the previously linked Brewin Dolphin study that says -

[Diversification] has the effect of limiting the impact of any dividend cut at any one individual company and, with the benefit of some astute research, increases the chances of achieving income growth in other areas to compensate.

https://www.lemonfool.co.uk/viewtopic.php?f=31&t=39304&start=20#p591868

As your whole argument on this thread, against a view of mine that's clearly and specifically focussed on inexperienced investors, seems to be that 'astute research' can reduce the risk of poor investment outcomes in the ultra-high-yield arena, and my view from the start is specifically talking about income-investors who don't possess the skills or the knowledge to carry out that 'astute research', then it seems to me that you've wilfully misrepresented me from the outset so as to enable a repeated and really quite tiresome personalised attack, and nothing more...

In any case, my posts are meant for others on this board, rather than you.

Really?

I wonder what they make of them...

Cheers,

Itsallaguess

[Dod101]

As you know my benchmark of very high yield or too high yield is twice that of CTY (City of London), so 9.8% currently, and with regards to dividend cuts that has not let me down yet in recent years.

MNG (10.1%) has been running comfortably above that multiple for the last 6 months. It's next interim results in September will bring the portended dividend cut / kitchen sink from the newish CEO now that he's got the last final results out of the way.

And VOD (9.7%) has been steadily heading towards its second cut in recent years for some time now. Again, with a newish CEO installed, that will come with November's half year results.

Bookmark this post, because you read it here first, and then you can tell me I was right.


The baccys IMB and BATS yields are high, but not too high. They will continue to payout steadily for the forseeable, fill yer boots.

There is no evidence that M&G will cut the dividend in September, and there is in fact every likelihood that the dividend will continue to increase. The 2022 dividend for M&G was 7% higher than the 2021 dividend, and I would not be surprised if there was a similar increase for 2023.

M&G is not just a fund manager, and it generates huge amounts of capital every year from its Heritage insurance business. There was a good reason why Macquarie was eyeing it up for a bid earlier this year, and why Schroders was also having a look at it before.

I think a takeover bid for M&G will come before any dividend cut.

I do not know a lot about M & G but they have been trying to off load the Heritage business for some time. If it contains only closed funds then they are likely indeed to be throwing off large amounts of cash but if they succeed in off loading it they will become simply a fund manager as I understand it. That will put them alongside Schroders and abrdn and they have not had a brilliant time of it in recent years. Seems a strange ambition because it will then cut off a significant source of funds for their dividend. Maybe that is why the market is nervous.

Many will know a lot more about M & G than I do and i would be interested in their views.

Dod

[Alaric]

If it contains only closed funds then they are likely indeed to be throwing off large amounts of cash but if they succeed in off loading it they will become simply a fund manager as I understand it. That will put them alongside Schroders and abrdn and they have not had a brilliant time of it in recent years. Seems a strange ambition because it will then cut off a significant source of funds for their dividend. Maybe that is why the market is nervous.

Until they offload the closed funds, a comparison is with Phoenix. But's that has a high yield as well. Cash from these zombie insures is in part a release of capital as the business runs off and the solvency capital is no longer needed. So the dividend can be looked as as partly a return of capital. Didn't Aberdeen Standard as they then were, make a special dividend distribution when they sold their Standard Life business to Phoenix?