Back in late 2011 I started building what is known as a UK High Yield Portfolio (HYP). It was a much talked about strategy back in the Motley Fool forum days and is still being discussed on the more recent Lemon Fool forums. One of the aims of a HYP was as a substitute for an annuity in retirement. This meant that the dividends spun off by the HYP needed to increase at a rate which is equal to or greater than inflation if it was to be called a successful investment strategy. I unitised my HYP a long time ago so I know in 2017 that goal was easily achieved with dividends increasing by 20.1% which is well above the current inflation rate (RPI) of 3.9%.
The dividend increase was largely helped by the only ad-hoc event to occur in 2017 which was National Grid’s (NG.) special dividend and share consolidation. If I net that special dividend off as many would argue that was really a return of capital it’s still done its job with a 6.7% dividend increase.
There were no buys (or sells) in 2017 as my overall investment strategy has now moved on to be a mechanically diversified collection of low expense, physical (as opposed to synthetic), income based (as opposed to accumulation) ETFs tracking enough indices to give me diversification across asset classes and countries held within low expense SIPP/ISA/Trading Account wrappers. This means that the HYP now only forms 5.2% of my wealth but interestingly it still delivers 14.3% of my total dividends. This is very useful for 2 reasons:
The dividend increase was largely helped by the only ad-hoc event to occur in 2017 which was National Grid’s (NG.) special dividend and share consolidation. If I net that special dividend off as many would argue that was really a return of capital it’s still done its job with a 6.7% dividend increase.
There were no buys (or sells) in 2017 as my overall investment strategy has now moved on to be a mechanically diversified collection of low expense, physical (as opposed to synthetic), income based (as opposed to accumulation) ETFs tracking enough indices to give me diversification across asset classes and countries held within low expense SIPP/ISA/Trading Account wrappers. This means that the HYP now only forms 5.2% of my wealth but interestingly it still delivers 14.3% of my total dividends. This is very useful for 2 reasons:
- Along the lines of replacing an annuity its original aim was to help me live off dividends only in FIRE and in that regard it’s still punching above its weight. In 2017 it spun off £3,929 in dividends.
- When we come to register in our new Med country as self sufficient, unlike the UK and one of the reasons we ended up with the disaster that is Brexit IMHO, we’re going to need to demonstrate sufficient income and/or capital to prove we’re not a potential burden on the state. Those dividends are a good chunk of income to help with that.