With inflation in double digits , some pensioners may be tempted to look for stocks offering similarly high yields to stop their purchasing power from being eroded . However , Ian Mortimer of the
Guinness Global Equity Income fund said this would be a mistake . His team ran data from 1995 to June 2022 showing the difference between the average promised yield and the realised one . Stocks with headline yields of 10 to 15 % ended up paying less than 6 % on average , while those that were on yields of 15 to 20 % fared even worse . “ High-yielding stocks work until they don ’ t ,” said Mortimer . “ If you chase yield up , you are often moving into stressed businesses or more cyclical , economically sensitive companies . In many cases you could also be moving into more regulated areas , such as utilities . “ If you move when the economy worsens , you get significant dividend reductions and don ’ t get the income , at the point you really need it .” Conversely , stocks that claim to yield less than 4 % often overdeliver , while those on a yield of 4 to 6 % tend to pay out the expected amount . Mortimer said the main lesson is not to pay too much attention to yields . “ The quality of the dividend is more important , as great companies will be more robust in a downturn and are less likely to cut ,” he added . Unfortunately , there is no easy way to measure dividend quality . You can look at dividend history or cover , but Mortimer warned neither of these tell the whole story . “ A long history of dividend
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