Super-high yield investing involves buying shares where the dividend yield is close to or above twice the market yield. Of course this means taking on more risk, but the returns can be much greater as well.
An even faster re-rating occurred after I bought N Brown in 2012 with a yield of 5.4%. Just eight months later the share price had increased by 47% and I sold N Brown for a total return of 52%.
Although I don’t invest in many of these situations they have, on average, worked out quite well over the years. The trick, of course, is to try to separate out those companies that can sustain the dividend from those that are about to cut or suspend it.
In November’s Master Investor magazine I reviewed three super-high yield companies (N Brown, Carillion and Connect Group) in order to highlight some of the factors I look at in order to separate out the wheat from the chaff.
There are no guarantees of course, but hopefully you’ll find something useful in there:
Super-high yield investing: Only for the brave