Money and Finance
In a October 2008 article, Todd Wenning described the High Yield Portfolio approach this way - "Buy 10 to 15 high-yielding large-cap stocks today and hold them -- forever."
Todd Wenning used a ruleset from Stephen Bland writing at the Motley Fool UK back in 2000 to select a basket of high yielding companies. The ruleset is as follows:
In the research article, Todd Wenning highlighted seven stocks:
- Dividend Growth Checkup
As part of my annual review process for my portfolio, I read through the latest quarterly or annual reports for the companies I own, as well as checked up on the organic dividend growth for each position and for the portfolio as a whole. The dividend...
- The Danger Of Having An Absolute Dividend Yield Target
I think it is possible to deliver a 4 per cent yield and to deliver dividend growth, going forward, but as I say, you must never allow an income target to dictate what you own. - Neil Woodford (UK fund manager) In this low interest rate era, the demand...
- The Ten Points Of Income Investing
1. Income investing is a separate and distinct strategy It's not growth, it's not value -- income comes first. (See: The Income Investor's Manifesto) 2. Discipline and patience are behavioral prerequisites Great dividend-producing...
- Ultra High Yield = Ultra High Risk
The first rule of dividend investing (or at least it should be the first rule) is: If the yield is too good to be true, it probably is. In an article I wrote last May, I looked into the highest-yielding stocks on the UK FTSE All-Share and found that...
- Todd Wenning On Finding Differentiated Dividend Ideas
One of the good things about dividend investing is also a challenge. Dividend investing forces you to screen out many stocks, because they do not pay a dividend at all. And really, for most dividend investors, you are going to want at least a 2 or 3%...
Money and Finance
Buy a High Yield Portfolio and Hold Forever
In a October 2008 article, Todd Wenning described the High Yield Portfolio approach this way - "Buy 10 to 15 high-yielding large-cap stocks today and hold them -- forever."
Todd Wenning used a ruleset from Stephen Bland writing at the Motley Fool UK back in 2000 to select a basket of high yielding companies. The ruleset is as follows:
- Large-cap stocks,
- With a history of increasing dividends,
- Relatively low debt levels, and
- Sufficient dividend coverage,
- That hail from diverse industries.
In the research article, Todd Wenning highlighted seven stocks:
| Original dividend yield | |
| Nucor | 3.5% |
| Sysco | 3.4% |
| Eli Lilly | 5.5% |
| Caterpillar | 4.1% |
| UPS | 3.5% |
| Northrop Grumman | 3.4% |
| Reynolds American | 7.3% |
The blended portfolio came in around 4.5% yield at time of purchase, so an investor who put in $1,500 in each company could realize over $450 in annual income.
Fast forward to today, we are in a global yield famine. Its actually somewhat painful to look at the yields available circa 2008, but moving along how would an investor have done buying this HYP? I ran some numbers over on Longrundata.com.
| Value of $1,500 is now worth | Annualized Total Return | |
| Nucor | $2,662.28 | 10.5% |
| Sysco | 2,917.15 | 12.2 |
| Eli Lilly | 3,958.58 | 18.3 |
| Caterpillar | 5,466.24 | 25.2 |
| UPS | 3,939.37 | 18.2 |
| Northrop Grumman | 5,885.32 | 26.8 |
| Reynolds American | 5,202.26 | 24.1 |
The net result here is that from the time that Todd Wenning wrote this article on HYP to now, the value of those seven stocks with $1,500 in original (For a total of 10,500) plus dividends reinvested is worth $30,031.20 today. The average annualized return is 17.8%.
Those are stellar results, but that's not the best part. The High Yield Portfolio concept is about Yield. Otherwise why hold forever? Turning to the current yield in those companies
| Value of $1,500 is now worth | Current Yield | Current Income | |
| Nucor | $2,662.28 | 2.9% | $77.21 |
| Sysco | 2,917.15 | 3.1 | 90.43 |
| Eli Lilly | 3,958.58 | 3.2 | 126.67 |
| Caterpillar | 5,466.24 | 2.6 | 142.12 |
| UPS | 3,939.37 | 2.6 | 102.42 |
| Northrop Grumman | 5,885.32 | 2.3 | 135.36 |
| Reynolds American | 5,202.26 | 4.3 | 223.70 |
So with an initial investment in the fictional HYP in October 2008 of $10,500, this group of companies not only delivered capital gains; it now yields $897.92. This equates to a 8.6% yield on original cost, closing in on a holy grail of income investors - a double digit yield on cost. This where a very good return goes to great.
Notice that there was no massive risk taking here, no ground breaking discoveries, no impossible to predict outcomes. Its as dowdy a group of companies as you are likely to find.. The idea of a HYP is sound in principle, and examples like Todd Wenning's show how well it can work in practice.
- Dividend Growth Checkup
As part of my annual review process for my portfolio, I read through the latest quarterly or annual reports for the companies I own, as well as checked up on the organic dividend growth for each position and for the portfolio as a whole. The dividend...
- The Danger Of Having An Absolute Dividend Yield Target
I think it is possible to deliver a 4 per cent yield and to deliver dividend growth, going forward, but as I say, you must never allow an income target to dictate what you own. - Neil Woodford (UK fund manager) In this low interest rate era, the demand...
- The Ten Points Of Income Investing
1. Income investing is a separate and distinct strategy It's not growth, it's not value -- income comes first. (See: The Income Investor's Manifesto) 2. Discipline and patience are behavioral prerequisites Great dividend-producing...
- Ultra High Yield = Ultra High Risk
The first rule of dividend investing (or at least it should be the first rule) is: If the yield is too good to be true, it probably is. In an article I wrote last May, I looked into the highest-yielding stocks on the UK FTSE All-Share and found that...
- Todd Wenning On Finding Differentiated Dividend Ideas
One of the good things about dividend investing is also a challenge. Dividend investing forces you to screen out many stocks, because they do not pay a dividend at all. And really, for most dividend investors, you are going to want at least a 2 or 3%...