Year end yields

[Dod101]

I have not done a lot yet in analysing the results for the year but they will not be very inspiring. I note some of the trailing yields though. Phoenix Holdings, Chesnara and Legal & General are yielding 8.2%, 8.06% and 7.50% respectively. For decent sound companies they seem very high.

Imperial Brands and BAT are yielding 6.78% and 6.62% respectively and that is after increases in the share prices of more than 20% for both so this year the tobaccos have come good at last.

Clearly there is still nervousness about the financial companies.

My capital value across the portfolio is down by 9.8% from the all time high a year ago and my yield is a mere 4.43% . The portfolio includes quite a few (non) Growth shares where the yield is very small. However, the cash income from the dividends is up by 9% and as that is my primary concern I am not too unhappy.

Dod

[NotSure]

Would you not expect yields to drift up with the 'risk-free rate'? Yield of 5% is OK in return for risk to capital when bank accounts pay 0%, but now you can get 4.5% on a 1-year bond with no risk to capital, shouldn't investors demand higher yields?

[BullDog]

2023 will be the first year I have drawn down dividends acrued in 2022. In previous years they were reinvested. Dividends accrued are around 4% portfolio yield, very soon to be withdrawn.

2023 should hopefully yield more as some growth investments have been sold and reinvested for income. And some portfolio income shares have been traded for a higher yield. Will have to see in one year's time, but portfolio yield should hopefully increase over the next year.

[Dod101]

Would you not expect yields to drift up with the 'risk-free rate'? Yield of 5% is OK in return for risk to capital when bank accounts pay 0%, but now you can get 4.5% on a 1-year bond with no risk to capital, shouldn't investors demand higher yields?

I imgine that you are correct but my mind is currently dissecting my numbers. This whole issue needs some thought and hopefully discussion.

Dod

[Dod101]

2023 will be the first year I have drawn down dividends acrued in 2022. In previous years they were reinvested. Dividends accrued are around 4% portfolio yield, very soon to be withdrawn.

2023 should hopefully yield more as some growth investments have been sold and reinvested for income. And some portfolio income shares have been traded for a higher yield. Will have to see in one year's time, but portfolio yield should hopefully increase over the next year.

Yes my cash dividends are up and I will take a look at the entire portfolio over the next day or two to see if I should be weeding out some laggards but as TJH said yesterday, often the laggards of one year tend to be the stars of the next. I am not suggesting that you are chasing income but I know that to be a futile exercise so am content with my overall 4.43% which does not contain any housebuilders (except unfortunately M J Gleeson) or miners.

Dod

[BullDog]

2023 will be the first year I have drawn down dividends acrued in 2022. In previous years they were reinvested. Dividends accrued are around 4% portfolio yield, very soon to be withdrawn.

2023 should hopefully yield more as some growth investments have been sold and reinvested for income. And some portfolio income shares have been traded for a higher yield. Will have to see in one year's time, but portfolio yield should hopefully increase over the next year.

Yes my cash dividends are up and I will take a look at the entire portfolio over the next day or two to see if I should be weeding out some laggards but as TJH said yesterday, often the laggards of one year tend to be the stars of the next. I am not suggesting that you are chasing income but I know that to be a futile exercise so am content with my overall 4.43% which does not contain any housebuilders (except unfortunately M J Gleeson) or miners.

Dod

Yes you are correct. Chasing income is a fool's errand. I like TJH's rebalancing philosophy. If I were half as successful long term, I would be very happy.

[Dod101]

Would you not expect yields to drift up with the 'risk-free rate'? Yield of 5% is OK in return for risk to capital when bank accounts pay 0%, but now you can get 4.5% on a 1-year bond with no risk to capital, shouldn't investors demand higher yields?

NotSure, as you might say. The difference is of course that a share gives some opportunity for a capital gain as well as the possibility of loss, so that to me is some compensation for a not too high dividend. It is total return that matters, not just income. Fundamentally, why are we investing at all and not just placing money on deposit otherwise?

Dod

[Alaric]

It is total return that matters, not just income.

Not a view universally shared by contributors to this site and one where posts expressing that might get deleted on one or more boards.

[Dod101]

It is total return that matters, not just income.

Not a view universally shared by contributors to this site and one where posts expressing that might get deleted on one or more boards.

If the OP reads his comments in the cold light of day, I am sure he will agree that his comments are a self evident truth, assuming that is, that by 'site' he is referring to TLF as a whole.

Anyway to me it is total return that matters although with an emphasis on income for most of my shares.

Dod

[NotSure]

Would you not expect yields to drift up with the 'risk-free rate'? Yield of 5% is OK in return for risk to capital when bank accounts pay 0%, but now you can get 4.5% on a 1-year bond with no risk to capital, shouldn't investors demand higher yields?

NotSure, as you might say. The difference is of course that a share gives some opportunity for a capital gain as well as the possibility of loss, so that to me is some compensation for a not too high dividend. It is total return that matters, not just income. Fundamentally, why are we investing at all and not just placing money on deposit otherwise?

Dod

My bold. I think we are investing as we believe that by taking some risk to capital, we can beat the risk free returns available. The risk free returns have been zero so long, it is easy to forget there are alternatives (i.e. the era of TINA is maybe over - "There Is No Alternative" [to risky assets]). I believe this affects dividend yields, rational PERs and the value of future growth, so all aspects of TR, whatever your tilt. Although most here will not be tempted by cash deposits, even at better nominal rates, a portion of the market that supports the current valuations will be.

[vand]

Would you not expect yields to drift up with the 'risk-free rate'? Yield of 5% is OK in return for risk to capital when bank accounts pay 0%, but now you can get 4.5% on a 1-year bond with no risk to capital, shouldn't investors demand higher yields?

Yeah, exactly. This is why understanding the bond market will make you a better stock market investor, as it all links back to discount rates and the equity risk premium.

[dealtn]

Anyway to me it is total return that matters although with an emphasis on income for most of my shares.

Dod

In which case perhaps a more appropriate metric to consider is earnings yield not dividend yield.