Questor: the market's still so wrong on Lloyds and other banks

Two Lloyds ATMs
Cash generative: Lloyds' future dividends are not being fully appreciated in its price

This income portfolio is not a stream of “buy” tips to be followed by occasional updates: it’s a focused portfolio aiming to generate a sustainable 5pc income.

It seeks to meet, for example, the needs of someone managing their own pension pot into retirement. Readers can judge our success for themselves.

We are often asked for information about our process and so here is an answer, with reference to individual stocks. We firstly have to be able to justify the price paid. A screen of yield that also takes into account other measures of value, such as price-earnings ratio, is the start.

But screening alone can throw up some spectacular duds. High dividend yields in particular often signal a problem, not an opportunity. That said, if shareholders have enough time on their side, mechanical screens which pick out stocks based on yield or p/e demonstrably work.


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