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The High Yield Portfolio

Stephen Bland introduced the concept of the High Yield Portfolio (HYP) on the Fool website in November 2000, and wrote articles about the strategy for several years thereafter.

It’s an income investing strategy designed as an alternative to purchasing an annuity. The total dividends received should ideally rise above the rate of inflation, therefore protecting the purchasing power of your income stream. A secondary aim is for the capital performance of the shares picked to outperform the UK market, as measured by the FTSE 100 index.

The strategy involves picking a portfolio of 15-20 high-yield shares from a wide variety of different industries. The intention is hold each share forever. In practice though, as the years go by, a number of shares are taken over and a new share has to be selected in their place.

How the strategy works

The following articles describe various aspects of operating a high yield portfolio:

Demonstration portfolios

Four demonstration portfolios (HYP1, HYP2, HYP3 and HYP4) were published on The Motley Fool site. All the picks for HYP1 and HYP2 were made on a single date, while stocks were added monthly for both HYP3 and HYP4.

HYP1 — created 13 November 2000

Year Income % change Capital % change FTSE 100 % change
2000 N/a N/a 75,000 N/a 6,275 N/a
2001 3,451 N/a 75,414 +0.6 5,238 -16.5
2002 3,474 +0.7 66,180 -12.2 4,029 -23.1
2003 3,197 -8.0 72,177 +9.1 4,371 +8.5
2004 3,205 +0.3 80,450 +11.5 4,794 +9.7
2005 3,546 +10.6 98,367 +22.3 5,465 +14.0
2006 4,131 +16.5 127,330 +29.4 6,194 +13.3
2007 4,452 +7.8 138,966 +9.1 6,564 +6.0
2008 5,040 +13.2 No data N/a 4,169 -36.5
2009 3,187 -36.8 97,485 N/a 5,277 +26.6
2010 3,297 +3.5 113,893 +16.8 5,797 +9.9

Click on the year for the full annual review.

HYP2 — created 2 April 2003

Year Income % change Capital % change FTSE 100 % change
2003 N/a N/a 75,000 N/a 3,753 N/a
2004 4,564 N/a 95,332 +27.1 4,485 +19.5
2005 4,347 -4.8 106,104 +11.3 4,914 +9.6
2006 5,008 +15.2 144,893 +36.6 5,965 +21.4
2007 5,600 +11.8 159,473 +10.1 6,352 +6.5

Click on the year for the full annual review.

In February 2008, HYP2 was valued at £140,924 and the FTSE stood at 5,755.

HYP3 — created May 2005 to August 2006

HYP4 – created September 2006 to December 2007