Wednesday 6 April 2011

Where next for dividends?

Equity Gilt study shows that £ 100 invested in the end of the second world war would have been useful to only £ 5,721 at the end of 2008 in nominal terms. Reinvested gross dividends and the same £ 100 would have grown to £ 92,460.

However, the report shows that UK investors are highly dependent on living a little paying dividends. In 2010, the 38pc of all distributions came only five companies, Shell, Vodafone, HSBC, GlaxoSmithKline and AstraZeneca. The 15 companies paid 61pc of all dividends. 2009 was high water concentration of dividend. Last year, more than half (46pc) has been paid by the top five and two thirds of the top fifteen as two oil majors were Stern. The BP disaster shows how dangerous this lack of diversification of revenue for UK investors.

Three of its four annual payments are equivalent to approximately one-tenth of all dividends from the UK. Indeed the BP, despite one payment in 2010, is still the payer seventh in the UK. BP will pay more than £ 2 more in 2011 to ensure a place in the top five.

Investors who purchase two or more shares, income fund believe that by organizing multiple funds, they receive diversity, but in reality, they have only a handful of stocks. Vodafone is held by UK income fund 93pc, two-thirds have BT and more than half hold Aviva.

Martin Brown, Director of the Ignis UK Equity Income Fund said: "this issue has been carefully characterized by the events surrounding BP last year." Before the disaster of the Horizon deepwater platform, BP has been the largest company FTSE 100 and 10pc of the paid market dividend. Despite its huge size, failure management leads to an event that caused the stock prices to plunge by 50pc in two months and for the company to cancel their dividend for the year. »

Mr. Brown said that managers must find ways to offer investors a different portfolio of their peers Fund - or an investor can also hold a tracker and save on administrative costs.

He said: "there is a difference between a research company and arrive at the conclusion that its price of dividend and share offers good value and all simply buying a business, because it is big and your peers the owner." If the latter is true, then you are does not warrant a tax of active management, and customers would better have a tracker Fund.

As a 10 best stocks pay an amount disproportionate income, many managers assign an amount disproportionate their funds to them.

Mr Kirrage said that, in order to avoid a portfolio of income being too focused he sought outside of the FTSE 100 stocks generate revenue.

Date of dividend monitor supports this position - dividends from the 250 FTSE rose 16 3pc in 2010, while those of the FTSE 100 rose much less 6 8pc.

"It is not only about who has the highest performance today," said Mr. Kirrage. "You haven't think about who has the best opportunities for growth dividend - and capital - growth in the future."

Sectors show high in terms of increased dividend from 2009 to 2010 are cars, leisure property services real estate and construction - which are made of most small businesses according to Mr. Kirrage. Leisure goods sector contributes to a negligible amount - less of 0 5pc on the part of the dividends UK, but its increased dividend 221pc the sector as a whole in 2010.

But, although companies in the FTSE 250 dividends may have increased at a faster pace, they only paid £ 5-a whopping billion. 8bn £ 49 by FTSE 100 companies last year.

"The pharmaceutical sector is a good dividend has the ability to grow its dividend, stated Mr. Kirrage." AstraZeneca seeks cheap now and is a quality stock. »

PSigma income fund manager Bill Mott is in agreement. "Twenty years ago, it would have been difficult for a fund oriented on what income whatsoever in the pharmaceutical sector. It is stocks Go - GB growth on big premium valuations and dividends were minimal. GlaxoSmithKline has now a report price-to-earnings barely two-digit and 5 5pc yield. We believe that the entire sector is now seriously undervalued. We have 6 Fund 3pc 3 8pc AstraZeneca and GlaxoSmithKline too.

Mr. Mott is also heavily overweight in public services where we love to National Grid, Centrica, Scottish & South energy and power International. "We keep our Kit 110U overweight in the food retail, owner of J Sainsbury, Wm Morrison supermarkets and Tesco.

Councillor Adrian Lowcock, Bestinvest said that although income equity was a precarious in recent years, in the long term, the advantage of investing in companies that pay dividends should not be ignored. He recommended that investors hold income Artemis or Threadneedle UK equity.

Investors who do not need income now, should consider the merits of reinvested earnings.

"The power of dividend reinvestment is often underestimated,", said Mr. Lowcock.

It is not just the UK dividends are back in 2011.

Meanwhile, Brian Dennehy, financial advisors Dennehy Weller & Co, said: "we must also recognize that the United Kingdom offers limited choices available subcategorization.". "It is negligent to ignore the huge potential for equity income in the world, where the Fund operate these as M & G Global dividend seek a 16pc increase in their payment this year. On the front of the UK Mr. Dennehy's UK peaks include Schroder income and JOHCM UK equity.

Energy & utilities and the vacancies of oil & gas jobs Telegraph


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