Shares can perk you up

Most companies are reluctant to give shareholders freebies and discounts, but analysts believe they could be a valid way of keeping and attracting them.

If you invest in equities, you probably do so because you hope the price will go up and you will make a nice fat profit. Fair enough - why else would you bother? But there is another advantage to buying some shares. A few companies offer handy freebies which can range from anything from half-price magazines to £1,000s off a new home. In fact a few, like P&O's preference shares which offer half-price tickets to France to their shareholders, find their shares are bought primarily for the perks.

If you invest in equities, you probably do so because you hope the price will go up and you will make a nice fat profit. Fair enough - why else would you bother? But there is another advantage to buying some shares. A few companies offer handy freebies which can range from anything from half-price magazines to £1,000s off a new home. In fact a few, like P&O's preference shares which offer half-price tickets to France to their shareholders, find their shares are bought primarily for the perks.

Originally companies introduced perks to shareholders to keep them loyal and stop them selling precipitously. But comparatively few now do it and many of those who do only offer small vouchers or mini-discounts, which makes one wonder why they bother.

Boots the Chemist gives out a measly £10 for the whole year; Bemrose give a 15-month diary (be still my beating heart), and Moran Holdings, in a fit of extreme generosity, send shareholders an exciting tin of tea once a year. But at least they bother to send something. Many companies offer no incentive at all, which, analysts increasingly believe, is short-term thinking.

Justin Urquhart Stewart of Barclays Stockbrokers says: "In the past it hasn't really been worth it for most companies. But now, with more electronic shareholding, the cost of maintaining a shareholder is dropping significantly from around £15 or £25, as it was before, to as low as 50p or £1, as it is now. So suddenly the individual shareholder, instead of being a burden to the company, can be seen as something positive. I think more companies will find that they want even more of them and will have to think of other ways of attracting and keeping them."

Retired lecturer Fred Hunter from Surrey has a number of shares in his portfolio that have provided useful freebies as well as profit, but he believes companies should take more interest in their private shareholders. "I think they should not only give more perks but also different ones so shareholders feel some relationship to the company. Not enough companies give you freebies of their own products. They really regard their AGM as a bit of a trial but their marketing people should realise their potential as a selling point," he says.

Mr Hunter has benefited from shares in the Queen's Moat chain of hotels where he put up a family for virtually nothing for a wedding thanks to a 10 per cent discount, a group deal and cash vouchers. He also plans to use his 10 per cent discount with Thompson Tours (although many travel agents would offer that anyway) and the possibility of £1,000s off a new Barratt home if he and his wife decide to move.

Of course, not all companies are in a position to offer perks. Few people would be excited by the prospect of a free lump of steel if they invested in Corus, for example. But in an increasingly competitive market where companies are vying for customer loyalty as well as shareholder interest, it seems clear that many are missing a trick.

"Take companies like Tesco," says Justin Urquhart Stewart, "they have a large loyalty scheme. Lots of people participate in it. They get given vouchers every few months to get a few pence off a tin of baked beans. But why not convert some of those vouchers into shares? You'll probably get a lot more loyalty that way. After all it's not new, it was done 150 years ago when it was called the Co-op."

Even if you do have shares in a company that offers freebies, they don't like to make it easy for you to receive your perks. Typically they will require you to have a certain amount of shares, so it is no good buying one share and hoping to cash in on the perk. There might also be a qualifying period. Also, with internet dealing, a lot of stockbrokers deal via nominee accounts where they hold the shares on your behalf and their name is on the share rather than yours, which means they get the perks and you don't. In such cases, you need to ensure your stockbroker operates a designated nominee account, where shares are designated as being in your name rather than the stockbroker's. If it is a pooled account they hold shares on everyone's behalf, and you probably won't get any advantages.

There are a number of perk-giving sharesthat are worth looking at for investment.

Jeremy Batstone of NatWest Stockbrokers says the house-building groups are very much in favour with them. Persimmon, Bellway, Barratt and Redrow all offer the equivalent of a few thousand pounds off a home if you have enough shares (generally a minimum of 1,000-2,500). "Transport stocks are mostly leading at the moment," he adds. You also get discounts on Avis's services if you have at least 1,000 of their shares. And you only need 200 BA shares to qualify for discount vouchers. Other perk-giving shares worth considering are Hilton Hotels and Park Group which does Christmas hampers.

Of course perks, like the value of shares, are subject to change at any moment so check with the registrar first to see if they are still being offered on the share you have your eye on. But if the share is good and the perk is not there any more don't let that stop you investing. As Justin Urquhart Stewart comments: "Perks aren't the icing on the cake, they're the cherry on the icing on the cake.That's all."

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

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