It’s a good question Phil and one that I’ve been asked many times.
The answer is that I believe large companies are more secure in general and less likely to have problems. That doesn’t mean they cannot have problems causing a dividend cut or suspension, or even go completely bust, it just means that in my view this is less likely to happen than with smaller businesses. I do occasionally select shares from the FTSE250, which consists of the next 250 shares ranked by capitalisation below the FTSE100, but that is only when I run out of suitable candidates from the 100 index required to maintain the essential diversification of the strategy.
Remember that I select shares to be held forever as an absolute minimum, so that only what I term Market Trading will alter a portfolio. Nobody can know what will happen to a company even in the short term, let alone forever, so I have to consider the chances of it surviving and continuing to pay dividends over such a long period. There are no guarantees because dividend income is risk income but my view is that a large company has a better chance of doing so than a smaller one in general.
One of the features of my HYP strategy is to try and reduce risk because investors will be depending upon the income. The risk cannot be eliminated but some reduction measures can be utilised. Diversification is the main one and sticking to big caps is another, as I see it.
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