The High Yield Portfolio

Published on:

March 3, 2010

Stephen Bland (TMFPyad on our discussion boards) introduced the concept of the High Yield Portfolio -- often abbreviated to HYP -- on the Fool website in November 2000.

It's an income investing strategy designed as an alternative to purchasing an annuity. The total dividends received should ideally rise above the rate of inflation, therefore protecting the purchasing power of your income stream. A secondary aim is for the capital performance of the shares picked to outperform the UK market, as measured by the FTSE 100 index.

The strategy involves picking a portfolio of 15-20 high-yield shares from a wide variety of different industries. The intention is hold each share forever. In practice though, as the years go by, a number of shares are taken over and a new share has to be selected in their place.

How the strategy works

The following articles describe various aspects of operating a high yield portfolio:

Discussion boards

Two discussion boards exist on the Fool concerning this strategy. 

High Yield - Share Strategies was the first board set in December 2000. Over time this board has evolved into discussing other high yield investing strategies as well. 

In June 2008, a second board called High Yield - HYP Practical was set up purely for discussion of running the original High Yield Portfolio strategy and similar strategies in practice. Here people post details of their own HYPs and discuss how to carry out the strategies. The pros and cons of the strategies are off-topic for this board, and it is not suitable if you're undecided about whether such strategies are for you.

Demonstration portfolios

Four demonstration portfolios (HYP1, HYP2, HYP3 and HYP4) have been published on The Motley Fool site.

HYP1 was picked in November 2000 and is the only one of these demonstration portfolios that is still being tracked by Stephen Bland. Alternative versions of this portfolio are also followed on the High Yield - HYP Practical board.

HYP2 was picked in April 2003 but its performance was only tracked until February 2008.

HYP3 and HYP4 were constructed differently in that one share per month was picked, rather than all the selections being made at the same time. And, unlike HYP1 and HYP2, some limited trading of shares (known in HYP parlance as tinkering) was permitted. 

HYP3 was constructed from May 2005 to August 2006 and HYP4 from September 2006 to December 2007. HYP3 and 4 were only tracked until February 2008.

HYP1 -- created 13 November 2000

Year Income % change Capital % change FTSE 100 % change
2000 N/a N/a 75,000 N/a 6,275 N/a
2001 3,451 N/a 75,414 +0.6 5,238 -16.5
2002 3,474 +0.7 66,180 -12.2 4,029 -23.1
2003 3,197 -8.0 72,177 +9.1 4,371 +8.5
2004 3,205 +0.3 80,450 +11.5 4,794 +9.7
2005 3,546 +10.6 98,367 +22.3 5,465 +14.0
2006 4,131 +16.5 127,330 +29.4 6,194 +13.3
2007 4,452 +7.8 138,966 +9.1 6,564 +6.0
2008 5,040 +13.2 No data N/a 4,169 -36.5
2009 3,187 -36.8 97,485 N/a 5,277 +26.6
2010 3,297 +3.5 113,893 +16.8 5,797 +9.9

Click on the year for the full annual review.

HYP2 -- created 2 April 2003

Year Income % change Capital % change FTSE 100 % change
2003 N/a N/a 75,000 N/a 3,753 N/a
2004 4,564 N/a 95,332 +27.1 4,485 +19.5
2005 4,347 -4.8 106,104 +11.3 4,914 +9.6
2006 5,008 +15.2 144,893 +36.6 5,965 +21.4
2007 5,600 +11.8 159,473 +10.1 6,352 +6.5

Click on the year for the full annual review.

In February 2008, HYP2 was valued at £140,924 and the FTSE stood at 5,755.

HYP3 -- created May 2005 to August 2006

In February 2008, the capital value of HYP3 was down 4.5% vs 0% for the FTSE. Income for the first year was £3,508.

HYP4 - created September 2006 to December 2007

In February 2008, the capital value of HYP4 was down 22.3% vs down 7.3% for the FTSE.

Moving Around This Guide

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