Itsallaguess wrote:As we can see from the above charts, an income-investor purchasing DEC one year ago at a yield at that time of around 13.5% has seen the value of their invested capital eroded over the subsequent 12-month period by 34%.
Time will of course tell as to whether the current dividend 'yield' of 17.67% can be maintained to help make up for that loss of investment capital, and it will be interesting to see where DEC goes from here in that regard, but with a 12-month capital loss of 34%, then even at a yield of 17.67%, that's two full years worth of dividends that need to be recouped just to stand still from an overall investment perspective, which feels like quite a high bar in itself looking at the above performance...
Followers of this thread can ask themselves if that 13.5% yield indicator from one year ago from DEC was potentially a 'Too High' yield or not, but certainly from the above evidence it would seem to be the case and I thought capturing the above here on this thread might be warranted given the subsequent 1-year history of the share...
Whilst not disputing the potential danger of very high yields, I would just like to point out the limitations of using such limited selective data to illustrate a point. For instance, if you were to take Diageo (so many people's prime example of a safe lower yielding but growthy company) and perform the same exercise, the results would surely set off the same (or louder) alarm bells:
An investor purchasing DGE a year ago at a yield of around 2% has seen their invested capital eroded over the subsequent 12-month period by 20%.
Time will of course tell as to whether the current dividend 'yield' of 2.58% can be maintained to make up for that loss of capital. With a 12-month capital loss of 20%, then at a yield of 2.58%, that's well over
seven full years worth of dividends that need to be recouped just to stand still from an overall investment perspective.
Of course, I am obviously not trying to say DEC is a superior investment to DGE, and I appreciate that IAAG is not presenting his data as conclusively damning evidence. I am just pointing out, slightly tongue in cheek, that we should always be wary of reading too much into such data alone, valid though it is. By the logic employed, DGE would be in even greater bargepole territory than DEC. I believe further investigation would lead most people to a different conclusion.
You can argue anything with statistics...