These great shares are now even bet­ter value

The Daily Telegraph - Your Money - - FRONT PAGE -

No one knows whether this week’s mar­ket tur­moil is pre­lude to a more sus­tained fall. But for in­vestors seek­ing in­come in the form of div­i­dends, any drop in price is wel­come. It en­ables you to buy fu­ture in­come for less.

The fol­low­ing “crash buylist” draws on rec­om­men­da­tions in the Tele­graph’s Questor col­umn. The premise is that div­i­dend pay­ments are se­cure and that cur­rent yields – al­ready high – will im­prove if prices fall fur­ther.

Share price/yield:

257p/5.6pc In­sur­ance gi­ant L&G is en­joy­ing a boom in its re­tire­ment busi­ness. It has a “free cash­flow yield” – cash gen­er­ated per share relative to the share price – of 20pc. This is an ex­cel­lent in­di­ca­tor of div­i­dend sus­tain­abil­ity. L&G has in­creased its div­i­dend con­sis­tently, and the cur­rent 7pc div­i­dend growth rate is likely to be main­tained. Over the past week the shares have fallen 7pc.

Share price/yield:

£26.82/6.4pc To­bacco firms have proven re­silient div­i­dend pay­ers in the face of puni­tive tax and reg­u­la­tion. Im­pe­rial’s cur­rent high yield is in part due to a steep fall in share price in the past year, trig­gered by threats of fur­ther Amer­i­can reg­u­la­tion. The div­i­dend is cov­ered by prof­its at to­day’s level, and it seems un­der­val­ued even at this price.

Share price/yield:

757p/6pc Util­ity firm Na­tional Grid also has a 6pc yield boosted by share price de­cline over the past year – sparked in part by politi­cians on the right and left talk­ing about price con­trols and other forms of state in­ter­ven­tion. But div­i­dend rises linked to in­fla­tion will con­tinue for the time be­ing, while its growth abroad is re­duc­ing risk.

Share price/yield:

£4.81/6pc Oil gi­ant BP’s lat­est re­sults, pub­lished this week, show mas­sive profit growth, a re­duc­tion in costs (in­clud­ing costs as­so­ci­ated with the Mex­i­can Gulf spill) and some se­cu­rity of in­come even if the oil price doesn’t rise fur­ther. Debts are be­ing slowly re­duced and a move to buy back shares should also help div­i­dend prospects.

BP has achieved mas­sive profit growth and a re­duc­tion in costs

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