Income shares - any Advantage?

reeac

I see that HL are extolling the merits of certain high income shares ....between 5 and 6 percent p.a. . As someone who doesn't need any income from my holdings and therefore has them all on dividend reinvestment to get capital growth is there any advantage to me in investing in such shares?

firestone

your getting the bonus of compounding dividends already by the sound of it

Linton

Assuming you are investing in individual shares rather than funds for long term growth the advantage to you of high dividends is that the companies involved tend to be of a different type to those that provide a high return purely from share price growth. The former could be highly profitable and cash generative but perhaps growth limited because of the constraints of their market (eg utilities). At the other extreme the latter could be yet to generate a profit with the share price growth coming from market expectations.

Dividends tend to be much less volatile than the share price as shareholders hate cuts in the dividend and the directors wanting a lengthy career try to avoid them.

So having a mixture of both types of companies could make your portfolio more diversified than otherwise and so more resilient when times are hard.

A high % dividend is not necessarily a good thing - the price could have collapsed. Just like any other share you consider investing in you need to carefully assess the company before buying.