Newspaper article The Evening Standard (London, England)

Surviving the Great Slide; How You Can Still Get a Good Return on Shares

Newspaper article The Evening Standard (London, England)

Surviving the Great Slide; How You Can Still Get a Good Return on Shares

Article excerpt

Byline: TREVOR WEBSTER

THE headlong slide in stocks following some spectacular company collapses and a flight from the dollar this summer has a silver lining for small investors.

Suddenly, it is a lot easier to find a high income from shares.

Plunging prices have driven dividend yields on blue-chip market leaders to levels not seen since the terrorist attacks on America last September.

Nearly a third of Britain's 200 biggest firms now offer dividend yields of more than 4%, stretching to 7%-9% in the case of Britain's top 100 companies such as AWG, FKI, Scottish Power and United Utilities.

The highest yields could spell danger because some dividends are now suspect in dramatically changed circumstances. Aviva, formerly CGNU, is still listed in the papers with a yield of 9% but has signalled this will be cut.

But it is not hard to find a broad spread of safe-looking shares with yields averaging 5% to 6% in defensive industries such as banking, insurance, building, leisure, electricity, water, food, drink and tobacco.

These are mouth-watering returns in a period that has seen inflation drop below 2%, bank base rates plunge in successive steps to 4% and the best building society rates on instant access, postal and individual savings accounts slide to a range of 4% to 5%.

They are also a good foundation on which to build a long-term portfolio at a time when the stock market is about 40% off its all-time peak.

Many investors tend to shun income shares in the belief that they are dull performers and that "high yield spells high risk". But shares are a risky business anyway, while historical evidence suggests low yields carry a higher risk and that high income shares are the most defensive investments.

They offer good dividends to offset the blow of falling share prices in gyrating markets and, over the past century, dividend income has provided two-thirds of total returns on shares. …

Search by... Author
Show... All Results Primary Sources Peer-reviewed

Oops!

An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.