This week’s stock screen is the Safe Yields method devised by my predecessor Algy Hall, and has now been running for 12 years. By selecting reliable and well-covered dividend-payers, it aims to find quality businesses whose strengths may be masked by a perceived dullness.
Although this feels like an intelligent way to approach stockpicking, there is something slightly odd about its name and methodology. For a start, what do we mean by a safe yield? While this is a question many investors think about, it requires some unpacking. Even then, it isn’t always clear-cut.
In the world of fixed income, yields are usually very safe. Unless a country or company defaults on their obligation to meet coupon payments, a bond’s yield can be considered locked in until maturity. And because defaults are mercifully rare, the balance of risks equates to safety.