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Retirees Stop Chasing Yields - The Ultimate Straw Man

Summary

  • Retirees don't need to be biased by bad experiences of others.

  • A straw man is a form of argument fallacy based on giving the impression of refuting an opponent's argument, while actually refuting an argument that was not presented.

  • "It’s high yield, it’s dangerous" is a fallacy that hurts many investors.


Introduction


When considering retirement, or investing in general, large juicy yields can be compelling to drive investors. The key reason investors love high yielders is because they can substantially reduce how much they need to save for their retirement. An accusation flung at many investors and retirees building an income portfolio is that they are "yield chasing".


This is often a Straw Man argument used against anything considered "high yield".

Investor: I think this stock has the potential for attractive returns.


Opponent: It has a dividend yield over 10%. You are yield-chasing and that never works out.

For some, if the yield is north of 5%, they consider it dangerous. Others may buy a 5% yield, but double digits are a double no-no. Generally, these critics are speaking from a position of bad experiences in this space. They've been burned by past mistakes, jumping into a high yielding security without proper due diligence. Like a toddler touching a hot stove, the burn leaves a reminder in their brain: high yield = pain and misfortune.


As a Retiree, you've had a long life filled with experiences that you use to create your initial opinions. Some of you have never invested individually and are risk-averse or more conservative. Others among you have invested for capital gains instead of a steady dividend income flow. So, you hear "yield chasing" and worry you're doing it all wrong. Here at High Dividend Opportunities, we look past this Straw Man mentality to find the very best opportunities that provide income and help your retirement goals. Let's talk about how you, as an individual investor can get past your bias and do this as well.


Yield Can Be Your First Filter, But It Should Never Ever Be Your Only Filter


When looking across the market, you need a means to do your initial filtering. Many wrongly think that anything high yield is inherently riskier, so they filter them out. Doing the reverse can help you find high yield opportunities, but you can never stop just there. Yield is a metric based on the current market price and the dividend paid by the company. Reliable dividends and a punished stock price can generate high yields. However, within them are many traps alongside a few good opportunities. Also, the good opportunities don't often last long. So, frequent searches alongside due diligence is important.


We look past yields into the fundamentals of a company. Take our recent pick of Vermilion Energy (VET) which yielded 14.5% at the time of our recommendation. The market smashed its share price, but fundamentally, the company’s ability to cover its dividend payment was unchanged.


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