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SDS (Seductive Dividend Stocks)
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Sorry I hide my true identity but I'm a physicist/engineer, native contrarian and idea generator. I am an eclectic dividend investor with motto "In God We Trust, All Others Pay Cash" applied to companies I invest in. I like to read /and read a lot - did you look on my SA photo 8-)? / including... More
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  • Illustrative Comment To Jeff Paul Article "Finding High Yield, Low-Payout Outperformers" (12 Feb. 2012) 2 comments
    Feb 12, 2012 9:04 AM

    Jeff Paul published good "Finding High Yield, Low-Payout Outperformers" article ( analysis of 2009 report by Credit Suisse (NYSE:CS) - see link in his article. At page 25 of this excellent report esp. for dividend zealots ( I found interesting table I reproduce here for convinience:

    Jeff Paul used the most right column and corretly concluded that over an 18-year period, from 1990-2008 the "High-Yield, Low-Payout" (HY-LP) split shown in pink in the table above offered the best return.
    I ploted HY-LP position for each year from the table (+5 than it is the best performer and -5 than it is the worst performer, +1 than it is just a level above and -1 han it is just a level below average) and got the following graph:

    In my mind this is quite a rollercoaster because of often (quarterly) rebalance and I'd stay away from this. I think a dividend investor should not chase most promissing approach and should keep long-term perspective. I prefer to have a broad portfolio of different dividend stocks and ignore noise.

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  • Jeff Paul
    , contributor
    Comments (1271) | Send Message
    Hi SDS,


    It does look like a rollercoaster, but consider that it ranked below +2 in only 4 of the 18 years. So, if you "avoid the noise", this group generally had a pretty high average rank. In contrast, the Low-Yield/High-Payout (blue) group has less variation, but is consistently negative in its rankings. I do agree about the frequency of rebalancing that the study did. It would be nice to know the impact if only annual or semi-annual rebalancing occurred. Somehow, I have to think performance would still be above the middle rank (0). Also, just because a group ranked low in this chart, doesn't mean it was negative returns. 1999 was near the peak of the Internet bubble, so everything was up, but no-div stocks (tech) were way above the rest. I do believe it makes sense to have a broad selection of holdings, but I am leaning more toward high yield and/or low payout stocks based on the different studies I have found. Nothing wrong with medium-medium stocks, but I think the other high/low groups offer more value in general, and I would avoid high payout-low yield.
    17 Feb 2012, 08:34 PM Reply Like
  • SDS (Seductive Dividend Sto...
    , contributor
    Comments (4457) | Send Message
    Author’s reply » Jeff,
    That is why I asked you to see effect of rebalance frequency on different portfolios. Because let say 1 rebalance each 5 years is quite slow experiment, backtest should be done.


    "... if you "avoid the noise"" as a long-term investor I do ignore noise, as a stock market researcher I try to squeeze as much info as possible from the noise or fluctuations - see


    Yes rank is just in a.u. CS quants used total return. You can see from graph on page 3 of their report that HY-LP had negative years.


    I'd not surprise if "medium-medium stocks" outperform others in long-run. Imagine well-balanced sport team without stars vs. teams with starts only in offense and weak defense or starts only in defense and weak offense.....


    " I would avoid high payout-low yield." The same in real life. Note that CS combined this group with negative payout.


    18 Feb 2012, 01:14 AM Reply Like
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