High Yield Dividend Investing Beats The Market?

A very unfashionable style of investing is to buy high dividend stocks which so they pay you a high income. These have underperformed for over a decade but now it seems that since the beginning of the year they have stormed to the front of the pack in terms of performance.
During a crisis period when capital growth in the equity market stalls, people tend to turn to income funds because they provide a steady stream of cash payments. In this video, I consider whether this outperformance will continue, whether high income yield funds should form part of your core portfolio and take a look at some of the best income ETFs for both US & UK investors.
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Timestamps
00:00 Introduction
00:30 Factors
02:24 Income
04:38 Why is high income outperforming?
08:56 Caution!
11:47 The problem with income
13:55 Global Income Indices
16:50 Income ETFs for UK Investors
18:18 Income ETFs for US Investors
19:18 Conclusion
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DISCLAIMER
All information is given for educational purposes and is not financial advice. Ramin does not provide recommendations and is not responsible for investment actions taken by viewers. Figures that are quoted refer to the past and past performance is not a reliable indicator of future results.
#DividendInvesting #HighYield #PensionCraft

[@Pensioncraft]

If you like my videos then you’ll love our FREE weekly Market Roundup. I send it out each Friday and it’s packed full of interesting insights and a roundup of the news that’s most relevant for investors pensioncraft.com/market-roundup/

[@JohninRosc]

Do you have a view on the raft of doom and gloom statements telling us that the mother of all crashes is coming imminently? So many of them have appeared in recent days and most are citing QT (and its unknowns) as the harbinger.

[@antonmursid2714]

Antonmursid✌🙏🙏🙏🙏🙏💞🙏

[@stevo728822]

Two points. 1. Global high div cover Asian stocks which incur a higher trading cost, hence that's why the management fee is higher. The ETF's with cheaper fees tend to be just US, UK & Eurozone focused. 2. High dividend stocks and ETF's move in price more around the pre and post dividend date. So they always tend to fall after the dividend date.

[@johnristheanswer]

Good vid Ramin as always. Ben Felix , who I'm sure you are aware of , has just done a video debunking the dividend story of stock returns V growth stocks.

[@Pensioncraft]

Thanks for the info

[@normanprice5351]

Just to say many thanks for your Video on dividend income shares which has useful advice which has just come at the perfect time for me ...This is because I have recently transferred my personal pension pot in to a Pension SIPPS ...I still have around two thirds of the money in cash which I want to use as dividend income but the stocks I have invested in so far seem to have avoided the stock market fall which goes to show ...It does not always pay to pay the professionals to look after ones own pension pot !!!!..🤔..

[@drumsmith215]

Thank you for your insight and research! 🙏

[@Pensioncraft]

Glad it was helpful!

[@oferzeira8125]

Helpful and enriching presentation. Thank you.

[@BitcoinStoic]

Hi Ramin! Great video. Would it be worth also comparing the amount of dividends you would be receiving in retirement? Presumably, when holding high dividend etfs, you wouldn't have to sell any shares to receive the income compared to holding growth etfs. If you did hold growth etfs would the outperformance be able to buy you the same amount of dividends? It would be great to see this analysis

[@dunk8157]

This is nice to see as I left a comment about Dividend stocks doing well during the 1930s crisis on one of your recent videos, and now there is a wole video about it :)

[@audriusurbonavicius5428]

A nice thing about dividend stocks which nobody talks about is every time you receive dividends your personal dividend yield for a particular company is rising as the book cost for that position gets discounted. And dividends is real cash from your investment when price growth is only virtual profit unless you sell the stock. If you buy to sell later is not really an investment but a bit of speculation and market timing. I have a chunk of Segro (LSE: SGRO) which I had +50% in profit in one year a few months ago. I saw RSI was peaking and inflation was on the way but decided to keep shares as I consider this company as my long term investment. Now, it's only +5% left at least it paid approx. 2.5% dividends. I think you either speculate and take profits or invest in stocks that creates a cash flow. The most frustrating thing about most UK dividend stocks is that they pay dividends 1-2 times a year. I enjoy dividends every quarter from US stocks indeed.

[@planesaircraftandtrains9873]

That's why I like iukd pay quarterly. Each quarter is not equal though.

[@blainecannon4848]

The dividend CAGR should also be closely considered to effectively compare the snowball effect for both ETFs and individual stocks. An example is SCHD, which is a combination of growth and value supplemented by a 3% dividend totaling an average 14.5% Rate of Return since inception. Obviously each investor’s circle of expertise differs, but including companies that supplement an ETF strategy based on excellent fundamentals, such as Apple, Coke, Intel, Microsoft, Lowes, Abbie, J&J, etc. results in a well diversified and growing portfolio. While I agree that pure growth stocks are needed, we assume every investor can be aggressive and manage the risk tolerance. The data cannot account for the changing world order, which can drastically impact these companies as small and medium capped investments are still and remain speculative in today’s global markets.

[@riga9838]

Hey Ramin, when comparing IWF vs VYM charts have you included the dividend those etf pay out to investors(total return) or just the price at which the etf is traded(price return)? Today difference is around 2% in favour of the high dividend yield etf. I can't compare the two properly untill this important question is anwered. One more question, your comparision starts from 2009, just after the big crash of 2009 and the beginning of an unbelieveble hystorical record low interest rates and huge liquidity from the FED BCE BOE BOJ......which we know goes in favour of growth stocks. It would be interesting to see how the two strategies performed during a longer time horizon, during differnt market conditions, highyer inflation and interest rates.... Just found something online, the growth of 1 dollar invested in 1927 in dividend paying stocks vs in non dividend paying stocks(growth stocks usually don't pay dividends or just a little). The result is huge and is in favour of dividend stocks. $8000 vs $2500 I can't believe those numbers are real. You might get better information then me and come up with different results, would be interesting.

[@mmabagain]

than

[@trudithomae3227]

Can you tell us more about what goes into your core portfolio please?

[@Pensioncraft]

Hi @Trudi Thomae I do have a members video where I discuss my core portfolio here www.pensioncraft.com/patreon-post/how-i-invest-my-money/

[@jaysonschmitt888]

I like your graphics/slides. What programs do you use to create them?

[@0tispunkm3y3r]

He talks about R frequently so I guess it's done in R.

[@H1ddentransmission]

SCHD is my boy

[@marcwareham9351]

Where can I buy this in England please?

[@boombustinvest]

.... so then why not switch at least a percentage of your core portfolio into the dividend funds? (At least while there is no sell-off in these based on a recession?) No guarantees of course but we are dealing with balance of probabilities so you would probably be limiting downside in core global-equities/growth?

[@arigutman]

Enjoyed the video, this was my first time here - thank you for the content! I think dividend investing in and of itself is a sound strategy to deploy during any market, but particularly during mayhem like the period which we are living now... Investing should be done for the long-term and dividend growth investing is all about doing just that. Value, value, value given value prevails. However, investing in growth plays now depending on the company and its trajectory could be worthwhile now as well.. It is just important to have a strategy and stick to it, but do not wait.. at minimum investing into indexes or ETFs will do!

[@jmc8076]

Another good channel is Finaius. He does 20-30min in-depth bio videos on financial icons. Also uses deep fake images to help illustrate a life story. Cheers. ✌️

[@arigutman]

@@jmc8076 Familiar with it, watched a few of his videos, thanks!

[@rafaelf6994]

thanks again for such informative videos. have a nice weekend

[@Pensioncraft]

Thanks, you too!

[@btm1]

great analysis, thank you!

[@Pensioncraft]

My pleasure! @btm1

[@DaveBFC]

I'm all in the FTSE U.K. Equity Income Index Fund - 5.43%👍

[@womensfinancecoach4573]

Excellent - as always! Thank you Ramin.

[@Pensioncraft]

Thanks for listening

[@silentwilly2983]

Not sure why you think that dividend/value funds under perform. If (big if) the market is efficient they should in the long run perform equal to growth funds, at least risk adjusted. If you look at your graph comparing the 2 they pretty much performed comparable till growth started to outperform a few years back. By the time a full cycle is completed and the market is back at a major bottom there is a good chance that the out performance of growth will have disappeared, certainly if you look at it risk adjusted as growth is far more volatile (you may obviously debate whether volatility is a good measure for risk).

[@lamanerasiemprelahay9851]

$JEPI is already outperforming:) cheers.

[@daveschmarder-1950]

I started buying VYM about a dozen years ago. Its done well over the years, but as you said, it seriously lags in some years. The pandemic was an example of this. I'll likely won't ever sell as it has a mountain of unrealized capital gains. I've held VIG too, but for a shorter period of time.

[@Rickenaround]

Excellent

[@Pensioncraft]

Thank you so much 😀

[@tiffany.Elizabeth.]

I’m mainly invested in Canadian REITS and my An Div % is upwards of 7% on some companies. I was able to buy at the bottom in march - june 2020 at as high as 10-13%

[@nickdoyle-achievefinancial2464]

Dividends are undesirable for me currently due to 20% tax rate and 3.8% NIIT. I'd rather have shares grow and hopefully sell them later in the 0 or 15% gains bracket.

[@nickdoyle-achievefinancial2464]

​@@chessdad182 60% VTSAX & 40% VTIAX

[@diseasefreeforall]

Is there any reason to invest in a fund or stock just because it pays a dividend? Dividends aren't free money like interest on a savings account, the share price is adjusted down on the ex-dividend date and when you receive dividends you don't get the benefit of subtracting your cost basis like you would from selling shares.

[@jam99]

Depends on your tax situation. For random example, no gift iht on regular gifts coming from income but iht could be applied to equivalent capital in uk.

[@andrewmarsden1970]

Interesting option. Had my fingers burned using Invesco High Income which started well, but they messed it up.

[@2LegHumanist]

Depends on your tax regime. In Ireland we can't even avoid tax by reinvesting dividends. I avoid them like the plague.

[@DoctorAB282]

Thanks I remember you mentioned data analysis program am not sure is it Cmpsr as I tried hard to find and wish you nice weekend

[@Pensioncraft]

Thanks, you too!

[@nicholask5078]

Interesting video as always I think that investment has become more complicated with the war in Ukraine and the high inflation caused largely by the steep increase in the price of oil, which affects everything and the disastrous impact on food supplies. the key question becomes, which companies will continue to make profits and pay out dividends in the new environment, which seems almost certain now to turn into a recession the Fed's desire to control inflation by raising interest rates seems to me to be absurd; while cheap money has been a contributory factor, the main driver, as in previous inflationary periods, has been caused by the increase in the price of oil, which is a direct result of the invasion of Ukraine, not by consumer demand raising interest rates is more likely to create a recession than anything else however it seems that the Fed is intent on persisting with its plan, so we have to work with a relatively high interest rates environment and negative growth for at least the next year until the Fed reverses course in that environment, companies providing essentials, such as energy and food are likely to do better than consumer discretionary

[@ahmetdeniz3379]

Great video again! Have to stop myself buying MO since it's overweight in my portfolio. my high yielders baes currently are EPD and NRZ which balance out my more conservatively yielding guys.

[@ahmetdeniz3379]

5.77% and not quite! NEP is my largest at 6.1%......

[@BestDividendStocks]

Very cool video 👍💥🚀

[@Pensioncraft]

Thankyou

[@glebkatrats6857]

too much data, difficult at the end to understand main message

[@mrc8333]

Hi, enjoyed the Deficit Myth book recommendation, I’ve also enjoyed Psychology of Money, got anymore recommendations? Thanks for your content.

[@Sir_Blinkford]

The Adventures of Rupert the Bear

[@mrc8333]

@@Sir_Blinkford 🙄 very poor attempt at a joke.

[@masoncnc]

Hmmm. I'd consider covered call ETFs like JEPI and BST and QYLG to be income funds whereas VYM or SCHD to be high quality. SPHD, HDV and other heavy in oil have actually gone up in 2022.

[@fredatlas4396]

Why does Vanguard UK only offer the income, distribution classes of their etfs on their own platform. Why don't they offer the Acc versions like some other UK platforms do, like Fidelity UK etc. Also despite only offering distribution versions of their etfs, they also don't offer automatic reinvestment of dividends. This really doesn't make any sense

[@fredatlas4396]

Where has the reply gone

[@MagicNash89]

Surprised I dont see iShares STOXX Global Select Dividend 100 UCITS ETF on the list anywhere, its div yield is around 4-5%, one thing to note though its invested almost entirely into developed markets and a big % of financials in there

[@masoncnc]

2023 huge market run up 2024: hold my beer

[@jayhay1237]

Not many people consider accounting legitimacy? In the age of extreme fraud. Special purpose vehicles. Price manipulation. Algorithms.

[@muffemod]

The relevance of dividend irrelevance yo!

[@kvikende]

Ben Felix, is that you

[@muffemod]

My checking account has a positive YTD return. Thank god I didn't invest in globally diversified index funds. Imagine seeing an unrealized loss of 13%... the horror! 🤣🤣🤣

[@BombDrop]

@@muffemod what is your strategy instead?

[@muffemod]

@@BombDrop r/woosh

[@BombDrop]

@@muffemod not a native English speaker, I wasn't familiar with the term checking account.

[@MarkSmith-ho9ii]

Something not picked up is that value ETFs tend to be sector consolidated. You don't often find one company in a sector paying a dividend when the rest are not. value are dividend etfs are chasing the same five factors it's just their distribution is skewed differently. but hey something has to the take place of growth stocks...thisbisbjust the fashion trend

[@Robis9267]

Pretty weak analysis this time. Most of the companies pay the dividend not because, angry pensioners demand them and will burn the offices, but simply because of "law of diminishing returns", when a company saturates its market, there are very few profitable investment opportunities left, and it generates a huge amount of cash anyway. Much better way then is to pay out dividends to shareholders who risked their capital, rather than "overinvest" like in USA in shady opportunities, which will eventually come crashing down, as we see right now. Value > growth and it is a rule. All the growth companies would like to reach a stage when they are so rich, that are considered boring by cocaine driven wall str. They will go play with clients money elsewhere by pumping up valuations, while value/dividend investors will collect their royalties.