moorfield wrote:It's a fallacy I think to believe that its possible to build a 15 share HYP consisting entirely of high yield holdings with an increasing dividend at any one time. Covid pandemic aside, I'm not sure that that has ever been done, or at best is a rare occurence.
First of all you have to clarify what you mean by
”high yield” and
”increasing dividend”.
Once that has been done, surely your premiss would depend on the other criteria that may be taken into account during the selection process. Before making an assertion of fallacy, one should first be made aware that selection for a High Yield Portfolio (HYP) is not solely dependant on being
”High Yield” or
”Increasing Dividend”, however one ends up defining either term.
For example, if the only other requirement was that Market Capitalisation must simply put the selection within the FTSE350, I suspect finding 15
”High Yield” holdings, with
”Increasing Dividend” might even be fairly straightforward.
For HYP selection, there are various criteria used which might include:
Market Capitalisation – minimum allowed.
Debt Level (or Interest Paid) – maximum allowed.
and others
And of course one must not forget “Diversification”.
For each criteria, there will be some sort of limit, maybe even a red-line “must not cross” limit. With more investing experience one will find that such limits must be set at levels that are testable. A limit that is never reached is hardly a limit, and not of much use
It therefore follows that many One-Shot, 15 Holding HYP portfolios being set up at any one time may well require compromising one or more of those criteria limits, including
”High Yield” and/or
”Increasing Dividend”.
As an experienced investor, I see no surprise there at all.
moorfield wrote:The fortunes of various companies ebb and flow, as we all know. I thought I had teed up my point about overall portfolio income/yield well enough for someone to grasp that, GSKs history aside (and moaning about), what matters ultimately is a high and rising overall portfolio income. Perhaps not well enough.
What you suggested was:
moorfield wrote:If you subscribe to the idea that a share held today is the same as a share bought today (or put differently what GSK has paid in the past has been spent, it's what it pays next year that matters) - then it is seemingly absurd that TJH both holds GSK and agrees that it wouldn't "cut it" in a new portfolio. That problem resolves itself easily by considering overall yield.
What you appear to be suggesting is that any yield is acceptable, just as long as it was at some time in the past, high yield! Rather absurd in my view. HYP is for “High Yield” now, not once upon a time.
You also appear to have ignored, or maybe not noticed, that selecting lower yields than might otherwise be available, will adversely affect the overall “Portfolio” yield. This is of course why, for HYP purposes, and right now, GlaxoSmithkline (GSK) should not be selected, if there are higher yields available and thought achievable. After all, it is a high overall Portfolio Yield that is the primary aim of an HYP.
Enjoy!
Ian