So what is "high yield" now?

[moorfield]

FTSE 100 yield (dividenddata): 3.89%

10 year gilt yields: 4.70%


And more importantly, what is "too high yield" ?

[BullDog]

Good question.

[Dod101]

I will check the FT tomorrow but I am sure it is much more than 3.89% especially after the falls we have seen this week. What is too high a yield? I do not know but as always it depends on the company involved and whether I would trust them.

Dod

[BullDog]

What's high yield? Assuming HL's page is correct, City of London IT presently yields 5.08%. Anything over that is high yield?

[Dod101]

What's high yield? Assuming HL's page is correct, City of London IT presently yields 5.08%. Anything over that is high yield?

Ah but the question was 'What is too high a yield?' IT is clear that in a number of cases, too high a yield is probably something in to double figures these days.

Dod

[88V8]

...And more importantly, what is "too high yield" ?

Luni used to reckon 160% of the FTSE.

So LGEN verboten...

V8

[Alaric]

FTSE 100 yield (dividenddata): 3.89%

10 year gilt yields: 4.70%

The old concept of a reverse yield gap comes back. Equities are lower yielding than Gilts because of the possibility of dividend and share price growth.

[Dod101]

...And more importantly, what is "too high yield" ?

Luni used to reckon 160% of the FTSE.

So LGEN verboten...

V8

I would be surprised if the FTSE100 is not much higher than 3.89%. I am sure it must now be well over 4%, probably more like 4.5%.

Dod

[Breelander]

I would be surprised if the FTSE100 is not much higher than 3.89%. I am sure it must now be well over 4%, probably more like 4.5%.

Dod

No, just 3.9%. See for yourself, the data is here:
https://markets.ft.com/data/indices/tea ... =UKX.D:FSI

[Dod101]

I would be surprised if the FTSE100 is not much higher than 3.89%. I am sure it must now be well over 4%, probably more like 4.5%.

Dod

No, just 3.9%. See for yourself, the data is here:
https://markets.ft.com/data/indices/tea ... =UKX.D:FSI

That does surprise me given the way that share prices have fallen but then two biggies Shell and HSBC have had substantial cuts in recent years but at least they are both I think promising increases in dividends.

Dod

[Gerry557]

FTSE 100 yield (dividenddata): 3.89%

10 year gilt yields: 4.70%


And more importantly, what is "too high yield" ?

Usually I find the high yield things that I invest in are found to be too high in hindsight but the ones I don't invest in are usually fine.

[tjh290633]

Looking at "World markets at a glance" from the FT, the yield on the FTSE100 is indeed 3.90%. another marker is the FTSE350HY index, which gives us 5.60%.

I always reckon that higher yield is anything above the market level. Too high is rather more subjective, as special dividends can come into play. The miners recently got into double digits territory recently for this reason. Woodside Energy has a very high yield, over 11%, but so does Vodafone. Are they both too high? One third of my holdings yield more than 7%. Another third have yields below 3.9%. I have two holdings which yield below 2%, which normally is my indication for a total sell. They are IMI and Haleon, neither of which I am inclined to sell. In fact, IMI is my best performing share and ranks second by weight.

I see no reason at the moment for disposing of any of my high yielders. It might be a reason not to top up, although Imperial Brands is the highest yielding share among those eligible. The very high yielders are all ruled out because of the share of dividend income which they contribute.

I do not see a prescriptive formula to make a yield too high. There are other factors to consider.

TJH

[Dod101]

Looking at "World markets at a glance" from the FT, the yield on the FTSE100 is indeed 3.90%. another marker is the FTSE350HY index, which gives us 5.60%.

I always reckon that higher yield is anything above the market level. Too high is rather more subjective, as special dividends can come into play. The miners recently got into double digits territory recently for this reason. Woodside Energy has a very high yield, over 11%, but so does Vodafone. Are they both too high? One third of my holdings yield more than 7%. Another third have yields below 3.9%. I have two holdings which yield below 2%, which normally is my indication for a total sell. They are IMI and Haleon, neither of which I am inclined to sell. In fact, IMI is my best performing share and ranks second by weight.

I see no reason at the moment for disposing of any of my high yielders. It might be a reason not to top up, although Imperial Brands is the highest yielding share among those eligible. The very high yielders are all ruled out because of the share of dividend income which they contribute.

I do not see a prescriptive formula to make a yield too high. There are other factors to consider.

TJH

Yes I was indeed surprised to find that the FTSE100 yields only 3.89%, partly as I said because the yield from the biggies in the index, HSBC, Shell and Astrazeneca are currently modest. I have a bias towards financials where the yields are much higher. Some will say that that increases my risk profile. I would not know and can live with the steady increases in the dividends from these companies.

Dod

[dealtn]

Good question.

Indeed an excellent question. Sadly most look at this with reference to "dividend" yield, and not more usefully as "earnings" yield.

[Dod101]

Good question.

Indeed an excellent question. Sadly most look at this with reference to "dividend" yield, and not more usefully as "earnings" yield.

But if you are living off your dividends it is these that count. We cannot live off the earnings, and that was not the question. Sorry but you have introduced a red herring, however worthy a one.

Dod

[dealtn]

Indeed an excellent question. Sadly most look at this with reference to "dividend" yield, and not more usefully as "earnings" yield.

But if you are living off your dividends it is these that count. We cannot live off the earnings, and that was not the question. Sorry but you have introduced a red herring, however worthy a one.

Dod

If you live off dividends, and expect to do so for anything longer than the short term, then I'm afraid it IS the earnings you need to be looking at. It is that which counts and which you live off.

[Dod101]

But if you are living off your dividends it is these that count. We cannot live off the earnings, and that was not the question. Sorry but you have introduced a red herring, however worthy a one.

Dod

If you live off dividends, and expect to do so for anything longer than the short term, then I'm afraid it IS the earnings you need to be looking at. It is that which counts and which you live off.

No ned to be afraid of anything. I am well aware of that, thank you.

Dod

[BT63]

I don't believe in setting a specific yield. I believe in setting a relative level.
Anything in the highest-yielding quintile should be treated with suspicion, or viewed as high-risk/high-reward.
Also, anything in the lowest-yielding quintile could be overvalued and even if the company does well, the overvalued share price might not do well.

[Alaric]

I
Also, anything in the lowest-yielding quintile could be overvalued and even if the company does well, the overvalued share price might not do well.

Income seeking investors are not always bothered by share price considerations. A downside of chasing high dividend yield is that what you may gain on the dividend, you can lose on the share price, so the overall return is no better and may well be worse than a share with a yield close to the mean or median.

[BT63]

I
Also, anything in the lowest-yielding quintile could be overvalued and even if the company does well, the overvalued share price might not do well.

Income seeking investors are not always bothered by share price considerations. A downside of chasing high dividend yield is that what you may gain on the dividend, you can lose on the share price, so the overall return is no better and may well be worse than a share with a yield close to the mean or median.

Very high yield shares are the most likely to be companies in trouble, even if their problems haven't hit the news yet. That can often result in further falls in their share price and risks to the dividend, hurting both capital and income.
So an income investor should be bothered about the higher than average risk to the too-good-to-be-true dividend.