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Dividend income
Micawber
Posted: 17 August 2017 07:22:47(UTC)
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As this subject features in many investors' lives, and has revealed diverse views in unrelated threads, I thought it worth starting a specific thread for it.

To start off, here's an interesting piece from Trustnet: https://www.trustnet.com...idend/#gpt-trustnet-top

...to which I would add buybacks (an alternative to special dividends) which too have changed the path of 'progressive dividends' in recent years and seem likely to stay.

I'd also note that the forecast FTSE dividend growth for 2018 is heavily dependent on banks, and the announcement of the USG's £400bn lawsuit against British lenders for fixing LIBOR is going to be yet another drag on that sector...
8 users thanked Micawber for this post.
Tim D on 17/08/2017(UTC), Jeff Liddiard on 17/08/2017(UTC), Mike L on 17/08/2017(UTC), Mr Helpful on 17/08/2017(UTC), dlp6666 on 17/08/2017(UTC), Abstract Artist on 17/08/2017(UTC), antigricer on 18/08/2017(UTC), Vince. on 21/09/2017(UTC)
Mr Helpful
Posted: 17 August 2017 10:29:56(UTC)
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Micawber;49881 wrote:
As this subject features in many investors' lives, and has revealed diverse views in unrelated threads, I thought it worth starting a specific thread for it.

...to which I would add buybacks (an alternative to special dividends) which too have changed the path of 'progressive dividends' in recent years and seem likely to stay.

I'd also note that the forecast FTSE dividend growth for 2018 is heavily dependent on banks, and the announcement of the USG's £400bn lawsuit against British lenders for fixing LIBOR is going to be yet another drag on that sector...


OK some thoughts :-

1. According to some, only an investment that provides an income can be considered an investment.
To those investors : nil income = speculation

2. Earnings, book values, etc are what the acountants say they are, and can be driven by a variety of motives.
Dividends are not immune from shady motives manipulation; but less so, being real money delivered into the investor's pockets.
Think Enron !

3. Buybacks are contentious as the record supposedly indicates purchases seldom made at propitious prices, and again the motives can be questioned.

4. Fortunately we are not restricted to UK for income.
Many ITs and ETFs offer a route into Global or International Income.

5. Income ETFs however offer a generally unchanging and perhaps simplistic model for the selection of their holdings, so caution is warranted. Still useful though bearing that in mind.

Look forward to thoughts from others.
For us income is the life-blood that pays the bills.
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Micawber on 18/08/2017(UTC)
PaulSh
Posted: 18 August 2017 09:30:12(UTC)
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Mr Helpful;49889 wrote:
For us income is the life-blood that pays the bills.

And this is the big problem. Someone investing for value can move in and out of the market, selling when things are looking fragile (like right now, for instance) and then "buying the dips" afterwards. But when it's income you're after, if you're not invested then you're not earning.

Specifically looking at dividends, I really don't trust them. They are the "top slice" of a company's income, and if that income unexpectedly drops, dividends are one of the few expenditures that are discretionary so it's only natural that they will suffer. Furthermore, UK dividend income is concentrated in far too few companies for my liking, which is not the case in other markets - see here for some interesting comparisons:

http://www.morningstar.c...h-risk-investments.aspx

Edit: Although it doesn't say specifically in that article that they have done so, it's customary to exclude investment companies from such comparisons otherwise you're not comparing apples with apples.
6 users thanked PaulSh for this post.
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Mr Helpful
Posted: 18 August 2017 09:57:22(UTC)
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PaulSh;49920 wrote:
Mr Helpful;49889 wrote:
For us income is the life-blood that pays the bills.

And this is the big problem. Someone investing for value can move in and out of the market, selling when things are looking fragile (like right now, for instance) and then "buying the dips" afterwards. But when it's income you're after, if you're not invested then you're not earning.

Specifically looking at dividends, I really don't trust them. They are the "top slice" of a company's income, and if that income unexpectedly drops, dividends are one of the few expenditures that are discretionary so it's only natural that they will suffer. Furthermore, UK dividend income is concentrated in far too few companies for my liking, which is not the case in other markets - see here for some interesting comparisons:

http://www.morningstar.c...gh-risk-investments.aspx


Stocks are only one source of income, and UK Stocks income, as per the article and above comment, is yes a worrying sub-sector.
I don't trust their sustainability either.

The Income (aware) Investor, will very much as suggested, be moving in and out of Asset Classes and sectors, as yields fluctuate.
The by-product is likely to be capital gains !!!
But that is probably not the immediate goal.

The Discounted Dividend Model suggests the value of an asset is the present value of its future income stream, which can be reduced down to the Gordon Equation :--
Market Return = Dividend Yield + Dividend Growth
which offers a way of gauging likely outcomes
take the dividends away and how then do we calculate values or expected returns ?

It is not for one moment, being suggested an investor retreats to hide in excessive cash.
Money, in aggregate, must indeed be made to work (ahead of inflation) at all times.

What may not be acceptable to income investors is a nil yield asset such as gold, or lottery tickets,
(edit: or tulips) or Enron !
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PaulSh
Posted: 18 August 2017 11:36:55(UTC)
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Mr Helpful;49922 wrote:
The Income (aware) Investor, will very much as suggested, be moving in and out of Asset Classes and sectors, as yields fluctuate.

Yes, that's pretty much what I've been doing. Feels like I'm overweight in fixed income at the moment, but I'm holding on for a little longer in case yields improve in property and infrastructure.

Mr Helpful;49922 wrote:
What may not be acceptable to income investors is a nil yield asset such as gold, or lottery tickets, or Enron!

Nevertheless, I am holding almost 5% gold at the moment as my income needs are a little less than my potential natural yield and I trust Trump and Kim even less than I trust the markets!
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Mr Helpful on 18/08/2017(UTC)
srg751
Posted: 21 September 2017 07:21:52(UTC)
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Geraldine Weiss. The queen of Blue chip dividend investing. ( Tony's wife ?)

http://www.telegraph.co....p;utm_campaign=DM554607

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Vince. on 21/09/2017(UTC)
Micawber
Posted: 21 September 2017 08:39:44(UTC)
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srg751;51276 wrote:

Geraldine Weiss. The queen of Blue chip dividend investing. ( Tony's wife ?)

http://www.telegraph.co....p;utm_campaign=DM554607



Reasonable - but how many UK stocks currently pass these screening criteria:
"1. Stock must be undervalued as measured by its dividend yield on a historical basis
2. It must be a growth stock that has raised dividends at a compound annual rate of at least 10pc over the past 12 years

3. It must be a stock that sells for two times its book value, or less
4. It must have a price-to-earnings ratio of 20 or less
5. It must have a dividend payout ratio of around 50pc to ensure dividend safety plus room for growth
6. The company’s debt must be 50pc or less of its market value
7. It must meet a total of six “blue chip” criteria: the dividend must have been raised five times in the past 12 years; have an “A” credit rating from S&P; at least five million shares must be outstanding: it must have at least 80 institutional investors and a total of 25 uninterrupted years of dividend payouts and earnings improvements must have been recorded in at least seven of the past 12 years"
Ludditeme
Posted: 21 September 2017 12:31:24(UTC)
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Micawber;51277 wrote:
srg751;51276 wrote:

Geraldine Weiss. The queen of Blue chip dividend investing. ( Tony's wife ?)

http://www.telegraph.co....p;utm_campaign=DM554607



Reasonable - but how many UK stocks currently pass these screening criteria:



I really like the simplicity of this, but haven't found anything that fits the bill yet. I suppose if it was that easy, we would all be sat watching a spreadsheet all day!
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