Member Info for zac0_4

Tichtich - not sure of the relevance of your first point. Where does Motley Fool fit into my post?

I'm the polar opposite to you. I actually want my investments to go up not down! I do agree with your statement regarding not taking too much notice of short term performance though. I invest for the long term so it's that performance that interests me. Out of my dividend paying holdings this is one of my better ones. So let's take a look at UKW annualised returns (with dividends reinvested) over 10, 5 and 3 years.

Here they are (10) +8.27%pa, (5) +7.32%pa & (3) +3.77%pa

Here's the same annualised returns from a global equity tracker fund - L&G International Index

(10) +10.59%pa, (5) +8.97%pa & (3) +10.32%

The differences mount up compounded over the long term. The above is the main reason why I'm slowly moving away from dividend paying investments.

. . . dividend paying share that continues to erode capital! What are Warren Buffet's first 2 rules of investing?. . . no.1 Don't lose money, and no.2 refer to rule 1

Thankfully 70% of my portfolio is invested in global equity funds

Brib - It does. It's not looking particularly promising for my dividend paying holdings this year to date though. If their share prices remain 'as-is' until year end here's my projected total return (capital & dividends) for 2023.

LGEN -3.1%, New City High Yield -5.0%, MRCH -3.3%, HHI +3.8%, HFEL -5.4%, EAT +0.9% & UKW -4.1%

I often ask myself why I bother with dividend paying holdings! Thankfully 70% of my portfolio is in global equity funds. I'd have been far better simply putting all of the above in a global tracker fund - my holding in L&G International Index is up almost 7.0% year to date.

At what cost to your capital, though?

"Look at a companysuch as Aon (NYSE:AON) due to buybacks . . . "

That's an assumption. Perhaps the rise in share price could be down to the increase in profits from $700m to $2,600m during the same time period.

As I've said, I'm not convinced by buy backs . . . but that's only my opinion.

Neversellshell22 - Thanks. Although the harsh reality is that the total return I've enjoyed (!) over the last 5 years, with dividends reinvested, has been . . . a loss of 8%

If I'd have had my money in a simple global tracker fund, ie L&G International Index fund, over the same period I'd have enjoyed a return of +59%.

That's one of the reasons I'm moving away from (i) individual shares, and (ii) dividend paying holdings

Bald_eagle

"Zac, don't panic, I'm not saying personally that I think the divi is unsustainable . . . " Good. And I'm not panicking!

I think your final point "People who like dividend growth but tolerate capital erosion then please explain your theory on why that is good? . . . is too often ignored or when recognised is not acted upon. I wouldn't say I've consciously tolerated capital erosion but I've certainly been caught out believing a share price will recover. My investment in NRR cost me a 5 figure loss! Bought in around £3.00. Sold at 80p. An expensive lesson.

I'm not too bad here. 1st purchase made in October 2015 and have added along the way, including last Friday. Highest price paid £2.76, lowest £1.77 with an average of £2.39. So, to date around 8% down on capital but dividends received to date to the value 43% of my overall cost.

Despite the above looking ok I'm fully aware that over the last 5 years (to date) LGEN has delivered an annualised return, including dividends reinvested, of 3.75% pa. My investment in L&G International Index fund has delivered an annualised return of 9.60%

I'm slowly weaning myself off some of my dividend paying investments. Shell was sold last week. LGEN is safe for now but on the watch list!

Gulharbour - apologies. I mustn't have explained myself clearly. I'm not in favour of company buy backs. Buy backs indicate to me that a company doesn't have anything better to spend their profits on . . . ie profitable reinvestment in their business!

Bald_eagle - the dividend is clearly sustainable. Earnings per share for 2022 were 38.33p with a dividend per share of 19.37p. There is currently no evidence the current level of dividend is under any duress.

Unless of course you know otherwise . . .

LOTM-13

I only used the companies as examples as they were the ones you referenced in your post.

You maybe right. I'm not convinced regarding the shareholder value of buy backs. Look at BP. Over the last 10 years they've bought back over 5bn shares costing close to $31bn. Their share price today is 1.3% higher than it was 10 years ago!

As I think I've said previously all that counts for me is total return. How a company delivers that is up to them.

Meoryou - I'm sure I'll pop in from time to time. It's generally speaking a nice board with plenty of opposing views and a diverse group of (generally!) well mannered people. I hope that continues.

I've no real complaints with my overall returns from either BP or Shell.

BP provided me a total return of 46% (16% capital / 30% dividends), and

Shell provided me a total return of 80% (45% capital / 35% dividends)

Now just seems to be the right time to move on. Time will tell. Good Luck!!

. . . to my directly held oil shares. Sold BP in Feb and have sold my total holding in Shell this morning. I've had a target sell price in mind of around £25 for some time now. I could have sold for that price earlier but for various reasons chose not to.

However, although the price I sold for today is below my target price a number of other holdings after yesterday's sell off are now at levels where (i) their dividend yield is more attractive, and (ii) they look as likely to deliver a 10% growth in share price as Shell does.

The result is I'll now enjoy a 12% increase in annual dividend payments, hopefully the growth prospects in share price are no worse and I have 25% of my capital from the sale to invest elsewhere.

I've held for years and have enjoyed a 45% return on my capital, a return of 35% from dividends so around 80% total return. No complaints and a sad goodbye!

. . . to my directly held oil shares. Sold BP in Feb and have sold my total holding in Shell this morning. I've had a target sell price in mind of around £25 for some time now. I could have sold for that price earlier but for various reasons chose not to.

However, although the price I sold for today is below my target price a number of other holdings after yesterday's sell off are now at levels where (i) their dividend yield is more attractive, and (ii) they look as likely to deliver a 10% growth in share price as Shell does.

The result is I'll now enjoy a 12% increase in annual dividend payments, hopefully the growth prospects in share price are no worse and I have 25% of my capital from the sale to invest elsewhere.

I realise it's Shell and not BP I'm talking about but it maybe of interest.

LOTM-13 - firstly, thanks for taking the time to respond in so much detail. However, the acid test for me is annualised total return over the longterm. That is dividends and share price appreciation / depreciation. That's all I'm really interseted in.

Looking at the example stocks you've used here's their annualised return over the last 10 years: BBY +6.27%, BARC -3.02% and VMUK -13.05% (this is a 5 year figure)

So, despite buy backs and dividends I'd have to say mediocre at best, appalling at worst.

An investment in a simple global equity tracker, ie Legal & General International Index, over the same 10 year timescale would have produced an annualised return of 10.91%.

Compounded the difference in return is substantial.

"Is that not obvious though? . . . "

No. Not really. If they're paying out 50% of the profits in dividends I'd expect the balance to be deployed in such a way to at least maintain the value of the business. At this share price we'll enjoy a dividend this year of c8.0% . . . the cost . . . a 10% reduction of capital!

. . . the more I think I'd be better off simply holding a global index tracker fund and selling capital as and when I need it.

Psycologically there's certainly comfort in receiving dividend payments but you certainly seem to pay a price in poor capital value.

I've yet to see any benefit to shareholders from buy backs. Maybe I'm looking at it all wrong.

Looking at the example given on a previous post the £450m cash to be used for a buy back currently sits on the balance sheet so is priced into the share price. The cash used for the buy back is removed from the balance sheet therefore reducing the value of the business. However, the shares are cancelled so the reduced value of the business is spread over a smaller number of shares maintaining the share price status quo!

As I say, I maybe looking at it all wrong!!!!

Hedging reduces risk. Are you talking about a leveraged position? That magnifies both gains and losses!

I'm now 70% by value in (non-dividend paying) funds and 30% in dividend paying holdings (2 shares & 8 investment trusts).

My dividend holdings are held in either an ISA or a SIPP. At the moment any dividends received in my SIPP are re-invested in funds and in my ISA are re-invested into the existing dividend paying holdings. I'll review at the end of the year. I'm retired so take income by simply selling down some fund units either quarterly or half yearly. I only drawdown outside of my ISA/SIPP in order to make use of the CGT allowance.

I've been investing for years. My top 5 performers over the last 5 year period are all funds: L&G Global Tech +143%, AXA Framlington Global Tech +90%; Fundsmith Equity +63%, L&G International Index +61% and Rathbone Global Opportunities +58%.

I probably know that I should sell my 2 remaining individual shares and either move into funds or top up my dividend paying investment trusts . . . but I've held both LGEN and Shell for years and find it difficuly saying goodbye to old friends. However, the 5 year performance doesn't stack up at +25% return from LGEN and -4% from Shell (with dividends reinvested)

Good luck.

Tambo210 - thanks. For global income (dividends) I'm invetsed in TB Evenlode Global Income, accumulation version. I don't think it will ever set the world on fire but it's been a steady performer for me.