Derek Pain: Why not be bold and take a punt on the stock exchange?
No Pain, No Gain
Saturday 07 May 2011
In these low interest rate days, the stock market is offering increasingly handsome cash rewards as dividends are jacked up. Already it looks as though 2011 will be a particularly good year for income-seeking investors with Capita Registrars estimating that companies will dole out £64.2bn to shareholders, a 13.6 per cent improvement on last year.
If the share registrars are correct the dividend yield is around 4.2 per cent, a return that shames the high street banks and building societies where interest rates are often below one per cent and can even disappear into near oblivion. With inflation so rampant trusting savers are being ripped off.
I am not suggesting those unfamiliar with the often wayward ways of the stock market should rush to buy shares. After all we all know that they can go down, as well as up. But shares do seem these days to be more impervious to worldwide calamities than in the past and there is a strong City belief that they will continue to hold up reasonably well and may resume their advance. Of course, we live in an uncertain world and today's realistic thoughts can appear nonsensical tomorrow. Still for the average saver who follows, even to a limited degree, the stock market, it is a question of being eaten alive by inflation or venturing forth. There are, indeed, signs that individual investors are taking advantage of the current climate as Capita estimates that private shareholders now account for their biggest slice for more than four years of the nation's quoted shares.
This increased interest must, at least in part, be due to dividend considerations, with some Footsie constituents offering comparatively handsome yields. Vodafone, for example, is on 4.7 per cent. I suspect most investors are now prepared to ignore the largely discredited adage – sell in May, go away and come back on St Leger Day (when the horse racing classic is held in September). Such an illogical piece of reasoning stems from distant days when the City slumbered in the summer months as the top hat brigade attended social events (Wimbledon and Henley etc) and other bigwigs decamped to the south of France for extended holidays. Consequently with so many away from the square mile, trading was exceedingly thin and shares drifted lower due to lack of interest.
Examining the past decade, with six summer retreats (averaging 9.15 per cent) and four gains (9.67 per cent), the F&C investment house concludes the stock market these days "is pretty much as likely to rise as it is to fall". F&C's Jason Holland observes: "The fact that sell in May has historically been wrong about as much as it has been right suggests that do nothing could well be the best option."
Capita calculate that £15bn, a near 8 per cent increase, was distributed in dividends in the first three months but points out that this year's total return could still lag behind 2008. Then the financial disasters started to take their inevitable toll with high paying banks under intense pressure and last year the BP oil giant, a major contributor to the dividend jackpot, was forced to suspend payments although it has since returned to the dividend list.
Share buybacks are also a major feature of cash distribution. It is estimated that about £16.5bn will be handed out this year. But, as I discussed last week, the vast body of shareholders will see little, if any, of this return which mainly ends up in the coffers of institutional shareholders.
Ernst & Young's Item Club, one of the multiplicity of organisations offering advice to all and sundry, has said that the nation's firms should, with consumers under pressure, spend hoarded cash. It would appear that the City's cash tide is flowing strongly and, I believe, banks are being unfairly castigated for not handing out business loans quickly enough. And, don't forget, City workers (bonuses and all) are said to have contributed £11bn to the public purse last year through income tax and national insurance contributions. In addition City firms are subject to corporation tax and investors suffer stamp duty. Regulators were largely responsible for the financial meltdown but the City must accept some blame. Even so its contribution to the nation's coffers should not be overlooked.
- 1 Sabrina Corgatelli: US hunting tourist posts picture of herself with dead giraffe after Cecil the lion outrage
- 2 Dutch King Willem-Alexander declares the end of the welfare state
- 3 A-level results 2015: UK exam board OCR admits it 'estimates' hundreds of pupils' grades after papers 'go missing'
- 4 Giant Minion terrorises drivers in Ireland as 40ft inflatable blocks busy Dublin road
- 5 'Cool kids' can go on to become losers in later life, study finds
Is Britain really full up? Are migrants taking our jobs? Leading academic answers the most common anti-immigration claims
Calais Migrant Crisis: Deputy Mayor of Calais labels Cameron's use of 'swarm' as 'racist' and 'ignorant'
Chris Leslie: Jeremy Corbyn's anti-austerity agenda will harm the poor, says Labour shadow Chancellor
Landlords renting properties to illegal immigrants to face up to five years in prison
While we fixate on Calais, the Home Office is quietly deporting dozens of migrants on 'ghost flights'
Calais crisis: The seven claims made about the migrants - and the reality
iJobs Money & Business
£20000 - £25000 per annum + OTE £45K: SThree: SThree Group have been well esta...
£21000 per annum: Recruitment Genius: This is an exciting opportunity to join ...
Up to 70k DOE: Guru Careers: We are seeking an experienced Financial Director ...
£11000 - £50000 per annum: Recruitment Genius: This financial company offer ma...
Day In a Page
Set sail for this four-bedroom farmhouse in Cowes. With five acres of land and an indoor pool, this home oozes character. There is even potential to let a one-bedroom annexe.
With five bedrooms, this spacious home offers beautiful gardens and modern interiors - set within the popular market town of Bingley.
A few miles from the seaside at Perranporth, this four-bedroom farmhouse sits amongst nine acres of idyllic grounds - including a lake and two barns used as holiday lets.
In the pretty market town of Bungay, this grade II-listed Mill House is arranged over four floors, offering four bedrooms and three reception areas.
This first-floor flat comes with two bedrooms, an impressive open-plan reception room and two lovely roof terraces.
This five-bedroom home comes with a range of outbuildings including a large barn which could be converted into a self-contained granny-flat or rental.
Moored at Taggs Island and reached via a pretty garden, this two-bedroom houseboat has a vaulted reception room and skylit garden studio - currently a beauty salon.
On the edge of the city, this six-bedroom home comes with an outdoor swimming pool and a large garage block that has annexe potential.
A contemporary house spread over three storeys, this three-bedroom detached home has large sliding doors that open out to the River Quaggy.
Moored in Chelsea's Cheyne Walk, this houseboat offers two double bedrooms and a teak deck that's ideal for al-fresco dining.
This former village bakery, dating back to the 17th century, is now a three-bedroom detached home just a few miles from the East Sussex coast.
On the picturesque Isle of Man, this four-bedroom character home has a ground-floor shop that's currently run as a newsagents and a flat that would make an ideal holiday let.
In a new collection of flats, this first-floor two-bedroom apartment offers ample entertaining space and a prime view of Furze Green from a private balcony.
This three-bedroom stone-built cottage currently trades as the village store with a restaurant in the annexe and family accommodation on the upper floors.
Previously two semi-detached properties, this five-bedroom home is spread over three floors with a large breakfast kitchen, orangery, office and gym on the second floor.
This five-bedroom home enjoys countryside views over the Blyth estuary to Southwold, offering flexible living space with a ground-floor annexe - ideal for use as a holiday let.
Close to the market town of Eye, this four-bedroom detached home offers a double-height living room which takes the place of the original, 19th-century, chapel nave.
Dating back to the 19th century, this four-bedroom home needs modernising. Spanning three storeys, the red-brick house has a fireplace, a small terrace and a cellar.
Just outside of Cambridge, this single-storey home offers three double bedrooms, a living room with vaulted timber ceiling and ladder steps that lead to a mezzanine study area.
This six-bedroom Georgian home is on three floors with open fireplaces, a two oven Aga, an annexe, and cottage gardens with outbuildings and a car barn.
A former coach house, Glebe Farm Stable is now a three-bedroom cottage with a double car barn, an attached office, kennels and an outbuilding that's currently used as a gym.
Located beside an impressive Victorian viaduct, this four-bedroom home has an open-plan living area that is glazed on two sides, with skylights and high ceilings.
A former furniture workshop, this three-bedroom home has high ceilings and painted brick walls, in a village setting only fifteen miles from the coast.
This five-bedroom stone townhouse features a pine staircase and an Inglenuk fireplace, double doors from the lounge give access to an enclosed courtyard.
This five-bedroom, detached home blends traditional and modern design; the sleek kitchen features a gas hob and oven set within an exposed chimney breast.
Capitalise on the fabulous views of Trevone Bay by taking two homes and creating one spacious boutique B&B. Just a cliff-top walk from Padstow.
Surrounded by woodland, this five-bedroom manor house has plenty of outdoor storage space in the form of three converted loose boxes, two smaller outhouses and a woodstore.
This six-bedroom home is set amongst three acres of grounds. Currently a large family home, Clift Hill has potential to make a B&B or countryside retreat, subject to change of use permissions.
This Grade II-listed three-bedroom home is situated on a private road, just a short walk from the sandy beaches of Frinton-on-Sea.
Less than five miles from Malmesbury, this four-bedroom cottage comes with equestrian facilities and gardens that extend to approximately three acres.
Spanning three storeys, this late-Victorian five-bedroom farmhouse is a spacious family home with a modern interior and B&B potential.
With an original church arch, this triplex one-bedroom church conversion has a light, spacious, feel and comes with a secure off-street parking space.
This recently-refurbished three-bedroom home has bi-folding doors that lead out to a decked seating area - ideal for alfresco dining this summer.
Well-located for coastal walks and popular restaurants, this detached four-bedroom home offers views over farmland, to the Solent, the Purbecks and Bournemouth.
If you love high ceilings, school conversions like this one are bang on the money. This two-bedroom flat is minutes from Burgess Park and the foodie haven at Borough Market.
Set within a church conversion in Bermondsey, this two-bedroom maisonette combines existing features, such as original arches and brickwork, with a contemporary finish.
This four-bedroom Edwardian home offers a combination of original features and contemporary design after a renovation by the current owners.
This four-bedroom home offers a vaulted ceiling in a breakfast room that's ideal for summer entertaining with doors that open to the patio and garden.
On the market for the first time in more than 50 years, this six-bedroom home is a project with vast potential - spread over three floors of living space.
Surrounded by rolling countryside, this four-bedroom barn conversion comes with a self-contained, one-bedroom annexe that could serve as an office or a holiday let.
Located near Harrogate town centre, this five-bedroom Victorian terrace is arranged over three storeys while a current study serves as an optional sixth bedroom.
A ground-floor flat in a country house, located a mile from Sway; this two-bedroom home would make an ideal weekend retreat on the edge of the New Forest.
On a popular residential lane in Caterham on the Hill, this four-bedroom family home offers a secluded garden and a convenient location for local schools and public transport.
Just a short walk from Westerham green, this three-bedroom cottage has a light kitchen with exposed brickwork and double doors that lead to a south-facing garden.
In a prime spot opposite the River Thames, this one-bedroom flat has an 18sq ft reception room with glass doors that open out to a private terrace.
Set in the hills above Llanwrda Village, west Wales, this 18th-century three-bedroom farmhouse has holiday-let potential from a separate barn conversion and annexe.
This charming end-of-terrace townhouse is arranged over three floors, with two double bedrooms and a private courtyard garden located at the rear of the property.
Located in the University area, this semi-detached five-bedroom home is arranged over three floors - there's even a rear garden and off-road parking too.
Only a few minutes' drive from the charming town of Marlow, this two-bedroom home sits on the private riverside estate of Harleyford.
This detached four-bedroom home in Middleyard is arranged over two floors, with features that include a wood-burning stove and bespoke oak staircase.