You are here:
Celebrate our 150th anniversary with fantastic savings on a joint magazine and IC Advantage subscription.
With the investment media so focused on share price moves and earnings forecasts, it's often all too easy to forget about dividends. They seemed to fall out of fashion with the rise of the technology industry, which spread the mantra that jumping on the tech escalator meant growth was all but assured. These have never really found their way back into favour, despite overwhelming evidence that, as Capita Registrars reminds us in its latest quarterly UK Dividend Monitor, "dividends matter".
Advertising
Capita cites the Barclays Equity Gilt study to show the miraculous effects of compounded, reinvested dividends on investment returns – it shows that £100 invested in 1945 would be worth £92,460 with dividend reinvestment, against just £5,721 without. But that's just one of countless studies we could turn to, to provide the irrefutable proof of the wonders of reinvested dividends, as we've written many times before.
The UK has historically been the home of the dividend. "The distribution and payout ratio has always been reasonably high in the UK and it's been sacrosanct to try to maintain that. Boards in the City have spent many hours with wet towels around their heads when they've had to cut," says Guy Monson, chief investment officer at investment manager Sarasin. Three years ago, if you had to leave the UK and go into a global equity income market, you had to take a near-50 per cent cut, he says.
But the historically dividend-abstemious nature of foreign companies is changing. The UK slashed dividends at an extraordinary rate in 2009. Other regions did too, but at a much slower rate. UK cuts of a third dwarfed the 13 per cent of other European companies and 19 per cent seen across the world as a whole. And while UK dividends will to some degree bounce back in 2010 and 2011, cash-rich foreign companies look poised to grow their distributions faster, particularly those in the rest of Europe.
As Mr Monson argues: "Equity income is no longer just the preserve of the British."
In part two, John Hughman explains where to look for the best income from around the globe and in part three, he names the best dividend payers.
To read parts two and three, you can either buy today's issue of the Investors Chronicle magazine (cover date: 5-11 Mar - find your nearest stockist here) and read the feature in full, or you can read it online now if you are an IC Advantage subscriber.
Why not take our new site tour and a trial (no-obligation) subscription?
Read more Investors Chronicle cover features here.
Free access to financial data, charts, portfolio tools and more - registration is quick, secure and free!
Profit from IC share tips; discover the benefits of IC Advantage and sign up for a free trial.
© The Financial Times Limited 2010. All rights reserved. "Investors Chronicle", "FT" and "Financial Times" are trademarks of The Financial Times Limited. No part of these web pages may be reproduced or transmitted to or stored in any other website or other form of electronic retrieval system, without prior permission in writing from the editor.
Warning: Do remember, particularly if you are new to stock market investment that the prices of shares and other investments can fall sharply. You may not get back the money you originally invested. The material here is for general information only and is not intended to be relied upon for individual investment decisions. Take independent advice before making such decisions. This site is aimed at UK residents only. To read more please see our Important Warning
v6.2.10.5 running on www.investorschronicle.co.uk
