Super-high yield investing: Only for the brave

In recent months I’ve written about a range of dividend stocks from the high quality end of the spectrum: from Buffett-style stocks to consumer staples and consistent inflation-beaters. But being a dividend-focused investor is not only about buying into these high quality dividend growth companies. There is another side to the search for income – perhaps the dark side – which puts yield first and quality a sometimes distant second.

The pros and cons of super-high yield investing

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. 


Picture this: You decide to invest in a somewhat mediocre company which has a 6% yield. Most investors think the dividend is about to be cut, but what if they’re wrong (a not unlikely scenario)? What if, instead of cutting the dividend, the company maintains it and copes admirably with whatever significant problems it was facing? In that situation it’s easy to imagine the share price heading upwards as investors become less fearful and more optimistic about the company’s future….

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