Derek Pain: Why not be bold and take a punt on the stock exchange?

No Pain, No Gain

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.

yourmoney@independent.co.uk

Independent Partners; Do you need financial advice on your investments, pension or insurance? Book a free consultation with an independent Financial Adviser at VouchedFor.co.uk

Finacial products from our partners
Property search
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
SPONSORED FEATURES
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    Recruitment Genius: Sales Executive / Foreign Exchange Dealer - OTE £40,000+

    £16000 - £40000 per annum: Recruitment Genius: A Foreign Exchange Dealer is re...

    SThree: Experienced Recruitment Consultant

    £20000 - £40000 per annum + OTE + Incentives + Benefits: SThree: Established f...

    SThree: Trainee Recruitment Consultant

    £20000 - £25000 per annum + OTE 40/45k + INCENTIVES + BENEFITS: SThree: The su...

    Recruitment Genius: Collections Agent

    £14000 - £16000 per annum: Recruitment Genius: This company was established in...

    Day In a Page

    Refugee crisis: David Cameron lowered the flag for the dead king of Saudi Arabia - will he do the same honour for little Aylan Kurdi?

    Cameron lowered the flag for the dead king of Saudi Arabia...

    But will he do the same honour for little Aylan Kurdi, asks Robert Fisk
    Our leaders lack courage in this refugee crisis. We are shamed by our European neighbours

    Our leaders lack courage in this refugee crisis. We are shamed by our European neighbours

    Humanity must be at the heart of politics, says Jeremy Corbyn
    Joe Biden's 'tease tour': Could the US Vice-President be testing the water for a presidential run?

    Joe Biden's 'tease tour'

    Could the US Vice-President be testing the water for a presidential run?
    Britain's 24-hour culture: With the 'leisured society' a distant dream we're working longer and less regular hours than ever

    Britain's 24-hour culture

    With the 'leisured society' a distant dream we're working longer and less regular hours than ever
    Diplomacy board game: Treachery is the way to win - which makes it just like the real thing

    The addictive nature of Diplomacy

    Bullying, betrayal, aggression – it may be just a board game, but the family that plays Diplomacy may never look at each other in the same way again
    Lady Chatterley's Lover: Racy underwear for fans of DH Lawrence's equally racy tome

    Fashion: Ooh, Lady Chatterley!

    Take inspiration from DH Lawrence's racy tome with equally racy underwear
    8 best children's clocks

    Tick-tock: 8 best children's clocks

    Whether you’re teaching them to tell the time or putting the finishing touches to a nursery, there’s a ticker for that
    Charlie Austin: Queens Park Rangers striker says ‘If the move is not right, I’m not going’

    Charlie Austin: ‘If the move is not right, I’m not going’

    After hitting 18 goals in the Premier League last season, the QPR striker was the great non-deal of transfer deadline day. But he says he'd preferred another shot at promotion
    Isis profits from destruction of antiquities by selling relics to dealers - and then blowing up the buildings they come from to conceal the evidence of looting

    How Isis profits from destruction of antiquities

    Robert Fisk on the terrorist group's manipulation of the market to increase the price of artefacts
    Labour leadership: Andy Burnham urges Jeremy Corbyn voters to think again in last-minute plea

    'If we lose touch we’ll end up with two decades of the Tories'

    In an exclusive interview, Andy Burnham urges Jeremy Corbyn voters to think again in last-minute plea
    Tunisia fears its Arab Spring could be reversed as the new regime becomes as intolerant of dissent as its predecessor

    The Arab Spring reversed

    Tunisian protesters fear that a new law will whitewash corrupt businessmen and officials, but they are finding that the new regime is becoming as intolerant of dissent as its predecessor
    King Arthur: Legendary figure was real and lived most of his life in Strathclyde, academic claims

    Academic claims King Arthur was real - and reveals where he lived

    Dr Andrew Breeze says the legendary figure did exist – but was a general, not a king
    Who is Oliver Bonas and how has he captured middle-class hearts?

    Who is Oliver Bonas?

    It's the first high-street store to pay its staff the living wage, and it saw out the recession in style
    Earth has 'lost more than half its trees' since humans first started cutting them down

    Axe-wielding Man fells half the world’s trees – leaving us just 422 each

    However, the number of trees may be eight times higher than previously thought
    60 years of Scalextric: Model cars are now stuffed with as much tech as real ones

    60 years of Scalextric

    Model cars are now stuffed with as much tech as real ones