BEAT THE DIP BY GOING FOR DIVIDENDS

COOL-HEADED savers can get an income boost by swooping on firms whose share price has fallen. This is because as prices fall, you can afford to buy more shares and therefore reap a greater number of dividends.

For example, let’s say Company A has a share price of £2 and pays an income of 10p per share. That gives you a so-called dividend yield of 5 pc.

If you buy £10,000 of its shares, that will give you an income of £500. But if the company’s share price falls to £1.80, the dividend yield will increase to 5.55 pc. That means your £10,000 investment now generates £555 income.

This happened to some well-known stocks this week. Lloyds now has a yield of 4.8 pc, meaning £10,000 worth of its shares generates £480 income. This compares with £460 a couple of days earlier.

The same thing happened to insurance group Aviva. On Friday, £10,000-worth of its shares generated an income of £470, but by Tuesday this had increased to nearly £490.