HYP #5 - Avoiding and dealing with losers in a High Yield Portfolio
This is part 5 in the Stockopedia High Yield Portfolio series by Stephen Bland (HYP). Last week I compared the various methods of holding the shares in an HYP from the taxation and other angles. Also I reviewed briefly the suitability of the strategy for more elderly investors likely to be requiring immediate income, dismissing common industry advice that equities for such people ought to be avoided or minimised. In fact immediate income investors, of any age, were the original inspiration for my public launch of the approach back in 2000.
This week I’ll have a look at whether shares that turn out to very poor investments from an HYP point of view can in some way be avoided by the initial selection checks. To make it clear, I will define first what constitutes a lousy share for HYP purposes. There are two main categories of lousiness but note that it is what has happened to the income with which I am principally concerned. Capital, remember, is very much secondary or irrelevant.
The worst is a share in the portfolio that has gone bust so that there is no possibility of any future income from it, the latter point being the very reason for holding it in this strategy. The capital will have been lost too.
The less worse is a share that has suspended dividend payments for a long period, a crime in the HYP world, but is still listed on the market thereby presenting the chance of income recovery at some stage. In such circumstances the share price will very likely have fallen dramatically from cost.
I am quite willing to admit that even with my very lengthy experience in the market spanning several decades, I have picked shares that have gone on to do very badly in HYPs that I have constructed. Which is not at all the same thing as saying those portfolios as a whole have done badly. Quite the contrary.
My worst examples were two banks that I selected at various stages years ago, before the financial crisis. These were Lloyds and Royal Bank of Scotland. Both have retained their listings and therefore still remain in the portfolios but have remained dividendless for many years now and their share prices are down 80-90% on cost. But it is the lack of any payout for such long periods which is their primary offence.
The big question is whether I could have foreseen this and avoided including these holdings. I believe not.
At the time, these banks looked like very attractive HYP shares. Both were very big caps, had lengthy increasing dividend histories and stood at attractive yields relative to the market. These are three leading selection criteria of mine. Also, I considered then and still do despite the failures, that banking is one of those fundamental economic sectors that I will very likely include in every HYP I build. So the only question is which one, not whether they should appear at all.
When a company suspends dividends, you probably won’t know at the time how long this might last. For example another past selection of mine, the oil company BP (LON:BP.) , ceased paying for a while after its Gulf of Mexico spill. Does this mean that it falls into my categories above? Clearly, dividend suspension is very bad news for an HYP share but one hopes it might be fairly temporary. As it turned out, BP resumed dividends within about a year or so, though at a much lower level. Since then it has been increasing the payouts. So it was an initial casualty of this disease but recovered.
BP satisfied my selection criteria at the time and like banks, I consider oils to be a highly desirable sector. There is no way I could have foreseen what happened and my view is something like this could just as easily have happened to the alternative sector choice, Royal Dutch Shell (LON:RDSA) .
Another of my old choices that suspended for a while is housebuilder Persimmon (LON:PSN) . In the financial crisis which affected property badly, they had to conserve cash so ceased dividend payments. Unlike banks and oils, housebuilders are not in my opinion a must-have HYP sector. But a couple of my old portfolios contain this share because it looked attractive at the time on my usual selection criteria. Persimmon eventually resumed payouts and now has in place a very attractive though unusually spaced eight year dividend commitment.
It is true that housebuilding is cyclical, tied very much to the financial state of the nation with factors like the availability of mortgages and interest rate levels being important to this business. But Persimmon, as far as I could see at selection, was a conservatively managed business that was easily able to ride all that out. Naturally I was very disappointed when they suspended dividends but it didn’t turn out bad in the end, justifying my original view.
Some HYPers influenced by the psychological flaw of Recent Events Syndrome, have said to me after examples like the above go wrong that they would never buy banks or oils or housebuilders etc. again because they are seen as too risky, judged by what had just happened. That is far too short term a view and breaches my doctrine of Strategic Ignorance which says that investors should ignore all opinions when considering the very distant future for which the strategy is intended.
I’d go as far as to say that you should expect over the very long term holding period of an HYP, with no voluntary trading remember, some of your shares to go through a rough patch with dividend cuts and quite possibly some suspensions for a period. There is also the chance you have to take, though it’s small I think given my selection criteria, that a share could go completely bust.
There are two concepts operating over the long term in the HYP strategy which fight dividend failures.
First, there is the idea of recovery. Most big caps which go through dividend suspensions will eventually recover payouts. Even Lloyds and RBS, by far the longest suspenders I’ve ever picked, will I believe resume dividends eventually. No guarantees of course, equity investment is risk investment, but one of the reasons I restrict selection to big caps is their capacity for recovery from tough times, something I believe much less likely for smaller companies.
Second, there is the mandatory HYP criterion of wide diversification and equal investment at cost. Here, the idea is that those shares delivering increasing income will compensate for the suspenders and cutters such that the portfolio total income, which is what really matters to the investor, will still grow long term. That I’m confident will be situation even where a share has gone bust and disappeared entirely from a portfolio.
My old portfolios holding Lloyds and RBS have done just this. Of course their total income would have been even better if these two had resumed payments before now, but as I’ve said, I see nothing in my selection methods that would have led me to exclude these shares at the time.
So in conclusion to this week’s piece, expect some dividend failures and weaknesses over the eternity holding period for HYPs, maybe even the total failure of a company. I can’t see any way this can be avoided by improving on selection tests. But expect too a very good chance of eventual dividend recovery in the afflicted shares and also, compensation from the unafflicted shares in your portfolio so as to ameliorate the effect on total income. It is the latter figure which is the test of long term HYP performance upon which investors should concentrate.
Next week I’ll consider whether a High Yield Portfolio is the single investment approach that most equity investors will ever need, or alternatively whether this is too narrow or risky and it should be used only as an element of a wider approach incorporating for example certain commercial funds like investment trusts or other strategies.
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29 comments
While you may think that I am wrong, I should point out that I never stated they were not published. I said that they were either not entirely mechanical OR not published. If they are not mechanical there is a degree of discretion in whether to include a stock or not, and knowledge of how stocks have performed until now may raise questions regarding whether such knowledge biased the selection during backtesting. Therefore it does not seem that backtesting could be done without inviting criticism of skewing the results.
So essentially what it boils down to is that backtesting is not possible. Bland claims that results during the time frame available are proof that the methods are appropriate, and others claim that the time frame is limited and not representative enough to assume methods are appropriate.
I do not see how it can progress from there.
I think that is part of it.
The other part is that the criteria being used are not clear. Essentially I have not seen from Stephen a clear set of criteria or methodology which could be objectively applied in a way that their results can be measured (not the same as saying it doesn't exist, I just haven't seen it).
I won't contribute to this any further.
Thanks
You are right it is not entirely mechanical. You are wrong to say my methods have not been published. Try reading the series of articles I wrote some time ago for Stockopedia, one of which is at top of this thread which follows from that article. And I wrote extensively on the subject for many years before that on the Motley Fool UK which is where I launched the HYP strategy back in 2000.
Anyway as someone else suggested, and probably the only point of agreement I have with that reader, is that this is all now rather repetitive and boring. I probably won't respond any more in this thread on the points raised simply because any reply would have to reiterate what I've already said more than once and I have nothing further to add.
Hot Socks, Bland, I don't want to get involved in the discussion as a whole.
I do not know what Bland's criteria are for inclusion, if entirely mechanical and the criteria are published, then it seems reasonable that it would be possible to see what shares qualified at some point in the past and see how they have performed until now. But I understand that Mr Bland sells a tip sheet, which makes me think that it is not entirely mechanical (or if it is, the methods are not published).
You may now resume, gentlefolks.
Stephen
I guess you are entitled to continue making unsubstantiated claims whilst choosing not to provide any supporting evidence.
Likewise I am entitled to continue pointing this out.
Makes for a boring discussion though.
I don't mind critics, been facing them since the year dot and as you suggest, writing publicly invites criticism and rightly so. Sometimes the criticism is reasonable, sometimes it proposes quite ludicrous conditions or objections, like the above demand for 60+ years of back testing which is one of the most outlandish and as I said, impossible, requirements ever proposed to me to justify what I do.
My approach to investing and many other facets of life, has been to go against the crowd. This contrarian stance will naturally create more critics than going with the stream because the latter is the way most people think. That's why it is the stream. I don't adopt contrarianism as an affectation, it's just the way I'm made.
Yes I sell an HYP tipsheet, The Dividend Letter. It's record speaks for itself having been published since 2008. I doubt very much it would have survived that long, let alone flourished as it has, if my record had been poor.
But I have no further independent evidence on HYPs specifically to add to my lengthy published record as mentioned, though there is a lot of anecdotal support from other successful long term HYPers on the Lemon Fool forum, previously the Motley Fool UK.
If all that's not good enough, there's really nothing further I can say to you and the similar minuscule few critics demanding more and more. It will have to rest there. If you don't like the HYP strategy, don't follow it and I wish you luck with whatever you do.
Stephen
You've said at several points that my "demand" for 60 years plus of data is "outrageous".
I didn't demand anything, I simply said that this is the evidence necessary to substantiate your claim that it makes sense to purchase a set of shares based on deliberate ignorance of their future prospects and then hold them forever regardless of what happens to them.
I can't get any of the links you have provided to work (which may be down to my computer or it may not, I don't know) but demonstrating 10 years or so evidence of performance for a dividend based strategy in a period of exceptionally low interest rates where proxy bond shares have been all the rage is just evidence that a strategy has worked okay for 10 years in an environment broadly favourable to that strategy.
It is not evidence for what you are recommending.
As for difficulties collecting data over long periods you are absolutely right that this is difficult to do, but a number of academics and commentators have collected and analysed such data over long periods and reach judicious and careful conclusions on it. Yes it is difficult to do and presents certain challenges which the analysis must account for, but that is not an excuse for not doing it.
I agree with you that small investors trading lots generally ends badly. If you were simply saying that trading little, investing long term and treating dividends and particularly reinvestment of dividends as an important part of investing would tend to improve investment performance then I would have no problem with that - there is heaps of assiduously collected evidence from a number of sources which suggests it is a sensible approach.
But your suggestions go way beyond that - recommending for example that a large savings pot should be invested in one go with no thought to prevailing market conditions is frankly reckless.
Thanks
Hot Socks
Hi Stephen
I'm sorry if you feel persecuted, that's absolutely not my intention. What's that old saying to the effect that your friends are the ones who challenge you when you go wrong - your enemies are the ones who say nothing…..
you say
"….Plea for facts? I have published regular annual reviews each November ….
and
"….I'm not going to justify any further what I do, having been writing publicly and extensively about it since around the year 2000…."
It's not for me or anyone else to pass any comment on your personal investment strategy or your approach to investing. But you do not limit your writing to sharing your personal experiences. You publish a tip sheet and you encourage people who are not sophisticated investors to follow your lead. And you make money out of those who subscribe to your services. All of that places your comments fairly and squarely in the public domain and not only invites comment but actually mandates fair and constructive criticism from those who believe your approach is based on incorrect analysis and thinking. Of whom I am one.
You seem to think that publishing your various portfolios provides evidence for the assertions on which your investment approach is based. But a moment's thought shows that it does nothing of the kind.
As I said on a previous post your approach is based on propositions which include:-
If you advocate those ideas then you should be able to provide some supporting evidence to show that they work. That does not mean making unsupported assertions, or simply publishing your own portfolio. It would for example require a comparison between the results obtained by drip feeding or pound cost averaging and those obtained by investing a single lump sum. Or comparing "strategic ignorance" based investing vs "strategic knowledge/insight" based investing.
Someone like Paul Scott bases his approach on the principles that you claim do not work. He eschews strategic ignorance in favour of strategic insights. He is assiduous in his timing. He does not hesitate to sell when the time is right. He protects his capital. His record shows that he is successful in his approach - which indicates that all of those practices work when done well. You claim they do not work. You have to do more than publish your own portfolio to make your claims stick.
Sorry to be blunt about this, but we need to look at evidence not simply rely on assertions.
I'm not going to justify any further what I do, having been writing publicly and extensively about it since around the year 2000 including here on Stockopedia. My records have been published repeatedly as mentioned above and I'm not going to regurgitate it all yet again.
On your demand for 60+ years of back testing I respond that back testing is a discredited way of demonstrating the efficacy of a strategy. People doing this tend to data mine, by which I mean searching for patterns that fit their preconceived notions, rather than the proper scientific method of seeking evidence to destroy them.
I have no faith in back testing at all, having seen it all too often misused either naively by foolish people or mischievously to market dubious schemes. My record consists entirely of real time forward testing, based on what I see as investment logic and very lengthy experience with the market and seeing the errors of a lot of small investors, most of whom, particularly those who trade, made no money over time.
A further reason that back testing is invalid particularly in the case of HYPs is that it is plain impossible due to the enormous number of corporate changes with shares over time and decisons that would need to have been made with original selection and then all the mandatory alterations to the portfolio along the way. Even say five years would be very tricky to do, 60+ years would be an impossible task.
And forward testing therefore trashes back testing, even were the latter possible for HYPs, which it is not.
I took the risk of spelling out my ideas in public and then constructing portfolios in public. Had it failed I would have taken the rap but it didn't and my position has been vindicated. Not for as along as your rather outrageous demand for 60+ years admittedly, but it has now been a considerable time since my public launch and before that I had long been observing, privately, the merits of HY investing.
If you don't like the HYP strategy I advocate, or think that I am concealing the records because I have something to hide, that's your prerogative. Anyway, whatever your chosen approach I hope you are not one of that great majority who lose money in shares. There are innumerable ways to invest in equities and even amongst the much narrower field of equity income investing, mine is just one of many possibilities. But it works.
Plea for facts? I have published regular annual reviews each November of my first public HYP launched on the The Motley Fool UK back in 2000. Now on the successor Lemon Fool site since TMF closed its boards.
In my HYP newsletter, The Dividend Letter which I launched in 2008, I publish regular annual reviews each January of all complete portfolios to date, showing performance of both income and capital (though capital is irrelevant or at best, depending on personal views, very much secondary) for each years since they were complete. I have completed six HYPs there and am currently constructing HYP7.
I think I am much more open than many other investment writers. My portfolios even include all costs and spreads, something that is often excluded from the performance claims of many tipsheets so as to enhance the results artficially over what an investor could in reality achieve.
I think if you are recommending that an investor should pick shares based on a particular set of criteria and then hold them forever regardless of events then it is incumbent on you to set out clearly what those criteria are and to demonstrate with rigorous backtesting for a sufficiently long term period (say 60 years +) that this methodology has outperformed and that there is a preponderance of statistical evidence plus enough logical explanation for the results to reasonably conclude that they are not simply coincidence or good fortune.
I can't see that you've provided links or other references to where that research and data is openly available, or set out a clear set of criteria for stock selection that could be tested in that way. If I'm wrong then obviously you can post them.
I agree with you that it is impossible to predict events over the very long term, that we all have a tendency to place too much weight on recent experience and not enough on longer term evidence or that when trading most of us are more likely to make bad decisions than good ones unless we are very careful. It is also plain that over the very long term dividends (and particularly reinvestment of dividends) are an important criteria in stock picking.
But those conclusions do not in themselves justify any particular investment strategy without rigorous analysis and evidence.
I started to get serious about investing only when I was faced by the novel prospect of inheritance lump sums needing to be intelligently placed. I could not, nor could I now, come to that, trade with borrowed money. i was invited by my bank to meet an "advisor" who attempted to sell me products, beginning with an assessment of my personal risk profile. Was I "high", "medium" or "low". Images of three bears sprang to my mind and there was a strong whiff of snake-oil so I left, to find my own way within what has now become a paying hobby.
Along the way, I have at least spared myself the indignity of paying others to lose my money but, most importantly, I have learned a great deal and much of it from these august pages. One of the things I have learned is to be sceptical of the siren voice of any guru. In medicine, where there is a reliable cure for something, the course of action is bleedingly obvious. Got appendicitis? Have yourself a quick appendicectomy. When you discover a vast multitude of remedies, by and large, they all stink. Of course, one might work for you ( or, more scarily, seem to work but actually something else really happened) but the problem is always being sure that if A is followed by B, B was caused by A.
I share tournesol's plea for hard facts while, at one and the same time, being emotionally, perhaps even spiritually, (and barely intellectually) attracted to a high dividend stock policy overall. I do think it is useful to have models of blind, fundamentalist faith to compare with so I am more tolerant of anecdotes in my anecdotage than he is. After all, would any one of us adopt, wholesale, any model devised by any other investor?
Hi
I lost money (Lots) in RBS and came the the conclusion that I could have avoided the loss.
I knew that Fred Goodwin was disliked by many of the people who worked for him and was not trusted by many in the city which is why RBS had a relatively low rating. I also picked up that when the ABN Amro deal was going through they decided to do Due Diligence Lite.
Several lessons I invested and stayed invested when I started to feel uneasy and could have got out because I got caught up in the Fools bulletin boards I dont read any boards now.
I don't invest in companies with overbearing unpopular C.E.O's and I think I would spot the warning signs in a potential investment.
Lloyds I dont know a lot about I do remember at one time you said it was by far your largest investment and you had a significant portion of your portfolio in it. For me I was put off by the massive dividend that was widely expected to be cut. It had a "if it looks to good to be true" feel to it.
Also learned a lesson about banks. When you look at a Banks balance sheet compared with most businesses their net worth is made up of one mountain of assets less another slightly smaller mountain of liabilities.
You know all the liabilities will have to be paid but who knows what the assets(Loans to Customers) are worth until they have all been repaid. Small differences in bad debt provisions can have a big impact on profits and net worth.
RBS was a big overweight and painful loss but I found lots of lessons.
Tournesol,
If you check out HYP 2, 3 and 4 see link below, I think you will quickly work out why they were not continued, which is what I hinted at in my first post.
http://www.fool.co.uk/investing/guides/the-high-yield-portfolio.aspx
SB's HYP is a good idea though.
Excel35
Tournesol,
Your such a charming fellow :)
You asked for "evidence", I provided just some evidence from a source where hundreds of people have discussed HYP's, albeit many doing it in there own little way (building, tinkering etc). Other HYP's were set up by the author himself, HYP 2, 3 and 4. Use the search function on the fool.co.uk. Or view past threads on the HYP boards.
I like the long term buy and hold high yield strategies. I'm not saying I follow Stephen Blands specific way. He has created his own specific way with its own unique selling point (its teh income which matters). Gets him writing work if nothing else!
There are plenty of studies on high yield strategies and which deciles or quintiles or not are the best performing over 25+ years.
DYOR though.
Have a good day. :)
Excel
1) you are conflating HYP (a la Steven Bland) with generic high yield strategies, which is incorrect. the point I am making is that the general merits of investing in high yielding stocks do not in any way provide evidence for Steven's very specific methodology. How does a general conclusion that dividend paying stocks outperform others lead to the idea that "the time to invest is now" for example?
2) anecdotes are not evidence. isolated examples obtained via arbitrary selection are not evidence. evidence is systematic assessment of a significant sample of cases covering a cross-section of the population. the rest is just hear say.
And yes, now you come to mention it, I am rather charming. One of my most charming attributes is the insistence on rigour and dispassionate objectivity in any concerted effort to influence other people and their (financial) well being. If Steven said "this approach has worked well for me " that would be one thing. But it is quite another when he says "here is the truth and the way, follow it and ye shall achieve salvation and paradise but do not ask questions of him to whom this truth has been revealed for that way lies heresy and eternal damnation." or that kind of thing.
I have no doubt that SB is utterly sincere. I have no doubt that he has been very successful in his investments. But it does not follow that the rules he advocates will help other people to achieve financial security at an acceptable level of risk.
Some facts on the merits of a high yield strategy here:
High Dividend Yield Stocks Generally Outperform Those with Lower Yields,
However, the Best Returns Have Not Come from those with the Highest Yields.
Higher Yields Coupled with Low Payout Ratios Have Produced the Best Returns
http://www.tweedy.com/resources/library_docs/papers/WhatHasWorkedFundVersionWeb.pdf
Asagi
Asagi
The links you provide might support the general argument that dividend paying stocks do better than none-divi paying stocks but they have nothing whatever to do with the manifold other aspects of Steven's HYP methodology - all those additional (randomly selected ?) elements that SB has welded together into a rigid conceptual framework.
T
Whilst I agree that preservation of capital is very important a HYP will beat any annuity hands down every time.
Stephen Bland's HYP 1 was set up before 9/11 and survived the worst slump for decades, despite two banks being in the portfolio of 15 it has performed very well; after 10 years an increasing income has been provided and despite the FTSE being several hundred points lower the capital has increased rather well.
"...a HYP will beat any annuity hands down every time...."
is that actually true? - is it factually correct? and if so to what extent do each of the rubrics advocated by Steven contribute to that outcome?
If we are talking about constructing an alternative to an annuity then we can kind of see where the "capital does not matter" fallacy slips in - because with an annuity the capital is "lost" immediately and only the income stream remains - but of course that does not make the loss of capital unimportant for normal rational people - it simply points up the disadvantages of annuities.
But SB proposes other rubrics - strategic ignorance - ignore timing - invest the entire lump sum available in one single go - never sell or trade - never switch into cash to ride out clearly visible incoming tidal waves and possibly others.
Now, whilst understanding the joy of simplicity and the attraction of simple ideas I would argue that those additional rubrics are highly questionable. I'm not going to bore Stephen's devoted disciples by going into detail, but I do think that packaging together a set of arbitrarily selected propositions without concern for evidence that they work or not and the risks that they give rise to is not an enlightened approach at all it is deeply non-rational.
That link is two years out of date. I published recently on the Fool the thirteenth anniversary of HYP1.
http://boards.fool.co.uk/hyp1-is-13-12922886.aspx?sort=postdate
Whatever greases your axle.
But the fact is that I designed HYPs as an equity income strategy. That's all it was ever meant to be. If a growing income can be achieved, then it is quite likely capital will follow too eventually. But that is a side effect, though a good one of course, of chasing income. In practice capital fluctuations are ignored.
Hello Pyad,
It is so nice to find you here! Thanks for coming. We will be the richer for it.
I look forwards to lots of lovely high divi ideas, but I do promise that I will take capital profits when I think it prudent!
MD
Stephen
"...I and my readers will stick to the ...HYP approach because it works..."
You appear to be misinterpreting what I said and misunderstanding what Stockopedia is for.
I am not taking issue with every aspect of your "HYP" approach - some of the rules you lay down are self evidently sensible, and others are unexceptional. But some of them are illogical and/or counter intuitive. If, the overall approach does work as well as you claim, then it ought to work even better if you refine it by removing the misguided bits. The point of discussion forums like this is not for you to proclaim some divine truth which has been revealed to you in a vision and which "your readers" absorb in respectful and uncritical silence. It is to share ideas, subject them to examination and improve them through debate and challenge. If you don't want to play that game, then you're on the wrong pitch with the wrong people.
The first thing required for any serious discussion of your hypothesis and your claims - which are let's face it pretty big ones - is to assemble the evidence and analyse it. By evidence I mean the actual investment history and performance which have been generated by your approach. Now either you can produce that or you can't. If you can then please do so and let's examine it. If you can't or you are unwilling to do so, then your claims are exposed as hot air.
"...let's not ruin your fine argument with anything as grubby as the facts..."
Nice line Stephen, it's the facts I'm asking you for.
You can get an idea of how the first HYP1 performed for the first 11 years at the link below, plus note there were also HYP2, 3 and 4, none of which were continued.
http://boards.fool.co.uk/hyp1-is-11-12406972.aspx?sort=whole
Excel
you cannot be serious.
are you really suggesting that a single example of a portfolio constructed at an arbitrary point in time and maintrainedc for a relatively short period can be taken as evidence of the reliability of the methods used to select and subsequently manage it?
and that one can extrapolate from a single data point some general rule?
Really that is absurd.
The thing is HYP strategies, while clearly founded in deep innumeracy, sort of work. If you backtest I'd expect slightly above index results. It is because, when combined with a bit of common sense to exclude the obvious basket cases, stable dividends are not a bad proxy for identifying established boring and stable cos, who do tend to moderately outperform. Basically the strategy is okay, even if the proponents have a confused understanding of why. It's a bit like the placebo effect, where false beliefs can lead to positive outcomes (for some conditions). There are worse traps the innumerate could fall into!
Don't restrain yourself, tell us what you really think.
I assume you are one of those rational and mathematically/financially literate investors. Congratulations.
I and my readers will stick to the irrational and mathematically/financially illiterate HYP approach because it works withough investors having to worry about capital values. It makes good returns from income and if you want me to consider the capital, from that too. But let's not ruin your fine argument with anything as grubby as the facts.
"...Capital, remember, is very much secondary or irrelevant..."
With the greatest respect, I have to say - Nonsense. Absolute and utter tosh. I could not disagree more.
That statement reflects a fundamental and complete misunderstanding of risk.
In my opinion what matters to any rational and mathematically/financially literate investor is the total return they obtain - ie capital growth plus dividend income.
TR = CG + DI
The idea that only one of these three variables is of any consequence is bizarre. In fact it is worse than bizarre it is a dangerous delusion. It can in extremis lead to a kind of self administered ponzi scheme where dividends are paid out but capital is eroded. For dividend paying companies, a fall in capital value indicates a loss of faith by the market in the forward dividend stream. That is a red danger signal which is not to be complacently over-ridden. No amount of Bland assertions to the contrary can rationalise it away.
T