Stock with the highest and safest yield?

[Julia]

SKC, yes. Agree. What I'm interested in, though, is the possibility that someone will sell a positively trending stock for one which they might consider is, um, yet to fulfil its potential, but has a higher yield.

 

[cheeyeen]

In your above description you're selling a share which has doubled in price (you don't say whether it's still uptrending?) in order to invest in something which will provide higher yield not on your original investment but on its current price.

I understand your theory if you're purely chasing dividend yield, but how much importance do you place on capital growth?

Let's say your original stock is still trending strongly upwards but is only offering a current yield of 5%. Would you sell this (incurring the CGT) to put those funds into, say, a stock yielding 8% but which is trading sideways?

Just curious.

Funny, I thought I was only providing one of the reason why someone want to calculate a position's yield base on market price rather than entry price, so that you can compare it to other oppurtunities that comes up in the market. I didn't say yield is the only factor in evaluating an investment (the question is about yield, may be the first try wasn't very clear and hence I was tryign to qualify the second answer with "assuming we are only talking yield"). All of a sudden this become my investment philosophy... My original post is as followed.

I guess the main reason is to take up the oppurtunity that you see in the market (or better use of capital), especially for people with limited capital. If an investment is yielding 10% on my entry price, but the price has double and yield is now 5% at market. And there is another investment that yield 8-9%. I might want to switch to there. Of course there are many other factors that need to be considered in an investment. Like whether the div/dist growth, capital growth, tax on realisation of the investment etc.

 

[nathanblack]

Just to add another perspective to this thread. The idea of using d/e's to build a long term income stream.

As an example (all figures are rough).

If you brought $10,000 worth of CBA 15 years ago @ $9 you would have got about 1,111 shares.
You would have received about $24,300 in d/e's and would now be currently getting nearly $3,000 per year in d/e's. And as CBA's d/e's grow so does your return.

But how important was the entry price? Looking back if you'd paid $9.50 or even $10, would you still be happy?

ofcourse everyone wants to buy as low as possible, but nobody will time it perfectly. i think entry price can be overated for long term holds.

 

[Julia]

OK, cheeyeen, thanks. You'd be surprised at how many do buy for yield and ignore falling SP.

 

[Bullock]

As I said, the reason I asked the question was to generate some interesting talk and it has.I thought after a year of moving in and out of many stocks it might be time to start settling in for the long run.

For the record I hold all the banks ANZ, NAB, CBA, WBC, MQG.I also hold WOW WDC CSL AMP QAN VBA QBE WPL HVN as well as some small UCG companies.

In the past month I have added for some dividends ASX CAB CCL FGL MTS SHL TLS and topped up on the banks.

I am not the type to stick money in the bank so I don't mind some risk.Some of my worst decisions this year have ended up not to bad after taking up rights issues eg. BSL GPT WES SUN and still to play out on RIO AIO GMG?

When I asked for "safe" stocks I realise there is no such thing but I am a believer that the worst has been seen.I don't see any of our top companies disappearing in the near future so if I jump in now,sure my capital may move around but unless this market does something its never done in the past and drop for the next twenty years I should see it increase in my time horizon.

As some of you have stated as the years go by hopefully dividends will increase and the return on my initial outlay will continue to improve.Picking up a bank yeilding 8% or more with the ability to grow in the coming years seems like a good time to start building for the future.

 

[nomore4s]

Capital loss is worth more in the current year than future years, unless they are adjusted by inflation and/or interest rate. So bring them forward can have some benefits.

Fair enough, but in the example given imo it would be a poor financial decision.

But how important was the entry price? Looking back if you'd paid $9.50 or even $10, would you still be happy?

ofcourse everyone wants to buy as low as possible, but nobody will time it perfectly. i think entry price can be overated for long term holds.

If I paid $15 I'd still be happy.

I just picked $9 for that example because that's around the price CBA was trading at during June '94.

For my long term buys I tend to pick a price level and try to accumulate around those prices.

 

[nathanblack]

As I said, the reason I asked the question was to generate some interesting talk and it has.I thought after a year of moving in and out of many stocks it might be time to start settling in for the long run.

For the record I hold all the banks ANZ, NAB, CBA, WBC, MQG.I also hold WOW WDC CSL AMP QAN VBA QBE WPL HVN as well as some small UCG companies.

In the past month I have added for some dividends ASX CAB CCL FGL MTS SHL TLS and topped up on the banks.

I am not the type to stick money in the bank so I don't mind some risk.Some of my worst decisions this year have ended up not to bad after taking up rights issues eg. BSL GPT WES SUN and still to play out on RIO AIO GMG?

When I asked for "safe" stocks I realise there is no such thing but I am a believer that the worst has been seen.I don't see any of our top companies disappearing in the near future so if I jump in now,sure my capital may move around but unless this market does something its never done in the past and drop for the next twenty years I should see it increase in my time horizon.

As some of you have stated as the years go by hopefully dividends will increase and the return on my initial outlay will continue to improve.Picking up a bank yeilding 8% or more with the ability to grow in the coming years seems like a good time to start building for the future.

goodluck with your long term strategy, i wish you well, and thanks for stimulating some discussion.

side note : have you consider the buying costs of such a large portfolio? i counted 25odd stocks there, i know diversity is great but you think the costs involved erode some profit? perhaps an index fund would be more appropriate.

 

[Bullock]

Thanks Nathanblack

Yes, the costs do take up some profits.I try to buy parcels of shares at a minimum of $2000.I have looked at STW and the likes but I like to have the control to add or sell individual stocks at different times if I feel the need.I have been looking at the property SLF since it was just under $6 but haven't made a move yet.I think it might look discounted when looking back in a few years.

 

[brty]

What are we talking about when using "the long term". For different people this can vary.

In the very long term say 50 years most stocks disappear, history clearly shows this. Companies like Woolies that have existed for many years, have had their shareholders robbed of equity in the past while the company continues, just ask General Motors shareholders about it. There are very few good dividend paying companies that were in the top 50 stocks from even 30 years ago, still existing today.

So the term, "long term" really needs to be defined when discussing a dividend strategy and the according stocks to hold.

brty

 

[mkarpoff]

I have a simple question.

What stock is providing the highest and safest yield.

What I mean by safest is unlikely to fall or be cut and your capital outlay not disappear.

I guess Telstra would rate highly.The banks?

Any thoughts?

Telstra has already had quite a run.

 

[RT14]

Telstra has already had quite a run.

Why would it suddenly stop though?

Momentum is a fantastic tool here and it continues to trade higher. Plus the dividend, TLS possesses (currently) two great return-drivers.