Derek Pain: 'Dividends defy gravity as the market turmoil takes its toll'

Although Britain's economy seems to be behaving relatively well, there is little confidence that the world will be quick to get over the Chinese slowdown and various severe problems

The No Pain, No Gain portfolio has, like many investors, experienced a miserable time of late. Its overall value has decreased considerably, with some of my 2015 recruits suffering sharp reverses.

To pile on the agony, some long-time constituents have also felt the strain of what has been a torrid run for the stock market. It seems light years away but it was only last April that the FTSE 100 topped 7,100 points. Since then it has toppled to a three-year low – and worryingly, many experts think it could slump even lower.

On the home front, profit warnings are two a penny and in many cases dividends are under pressure. Although Britain's economy seems to be behaving relatively well, there is little confidence that the world will be quick to get over the Chinese slowdown and various severe problems.

There is, inevitably, talk of a full-blown worldwide recession only eight years after the financial crisis erupted. True, many central banks and the legions of uninspired regulators have not helped, but I believe such chatter is wide of the mark.

The insistence of central bankers on almost non-existent interest rates has smothered many sections of the economy, but it has also meant some shares offer much better returns than alleged high- street safe havens. Indeed around half the Footsie's constituents offer a dividend yield of more than 3 per cent – even if some of the more exotic yields indicate that payments could be reduced savagely or dropped altogether.

Last week two oil giants – BP and Shell – held dividends in the face of slumps in profitability caused by the precipitous decline in the oil price. And their decisions will not be exceptional. Despite a deluge of profit warnings and indications that overall dividends will not match last year's level, I would expect many Footsie companies to at least hold payments. There will, of course, be dividend casualties but I suspect not many.

Diligent investors should have little difficulty picking the most vulnerable candidates.

My portfolio has, since its inception 17 years ago, played down the merits of dividends; it has always looked for capital appreciation. Perhaps, in this day and age, such a policy has become flawed – but it is too late to change now and, anyway, I expect more normal conditions to prevail on the markets soon.

I do, however, now regret my initial decision to ignore dividends when calculating the quarterly return. If I had included them, the overall gain would have been much higher. After all, over time the portfolio has included a multitude of high yielders such as Printing.com (now called Grafenia) and brewer Scottish & Newcastle.

SnackTime is one constituent that has survived the carnage. The price has stuck at 8p because a share suspension preventing any stock market trading. It is also a complete stranger to the dividend list.

The shares have been frozen since September, when the vending group was unable to publish its accounts for the year to last March. There are now hopes that the figures will appear before the end of this month, so the suspension should then be lifted. Interim results could materialise at around the same time.

Since September the group has carried out another reconstruction, which has included the issue of shares and a new agreement with the Co-operative Bank.

I descended on the shares at 119p. For a time it looked a good capital-appreciation investment, with the price brushing 200p. But then the group ran into difficulties. And it has been downhill all the way since those balmy earlier days.