Citywire for Financial Professionals
Share this page:
Stay connected:

Citywire printed articles sponsored by:


View the article online at http://citywire.co.uk/money/article/a607287

A beginner's guide to dividends

As one of the two ways to make a gain from shares, dividends deserve attention. Citywire's Smart Investor columnist takes you through the basics.

 

by Smart Investor on Jul 30, 2012 at 09:11

A beginner's guide to dividends

Since this is the first article I have written for The Lolly, I thought dividends would be a good place to start.

Private investors receive only two forms of profit when share dealing: a dividend and, hopefully, a capital gain.

Various studies have shown that it is dividends and their re-investment that really makes the difference when investing. For instance, the chart below shows the difference in returns from re-investing dividends (the red line) and not doing so (the blue line) over the past 22 years. Clearly, it's worth paying attention to dividends.

The power of re-investing dividends: Click to enlarge

Of course, just buying the companies that pay the highest dividend yield does not necessarily equate to long-term investment success. There are plenty of other factors that must first be considered (which I will discuss in future articles) but, for now at least, let’s assume that all we are focusing on is dividends.

Dividend yield

The first port of call is the dividend yield. This is the proportion of the share price which is paid out as a dividend each year, with most UK-listed companies paying two dividends per annum: an interim and a final dividend.

Normally, the final dividend is larger than the interim and, together, they amount to the total full-year dividend. When the total dividend per share is divided by the share price, it expresses total dividends per share as a percentage of the share price. This is the dividend yield.

With inflation having been above the Bank of England’s target rate for some time now and the FTSE 100 down 1.5% in the past year, a yield of 4% or more has been seen as highly beneficial. Of course, with inflation falling to 2.4% in June, perhaps private investors can afford to be a little more relaxed when it comes to yield.

The current FTSE 100 average yield is around 3.6%, and I would suggest that you focus on companies which yield at least the average amount. For a portfolio containing a number of stocks, this should give an average yield of 4% or more.

Dividend cover

Various commentators focus on dividend growth and dividend cover. Dividend growth is ‘what it says on the tin’: simply at what rate dividends per share have grown in the past or are forecast to grow at in the future. Note that forecasts are not always correct.

Dividend cover, meanwhile, is also fairly straightforward: it is a measure of how many times the company could have afforded to pay the most recent full-year dividend. For example, a company which made a net profit of £100 million and paid a dividend of £50 million has a dividend cover of 2x.

Sign in / register to view full article on one page

78 comments so far. Why not have your say?

JEL G

Jul 30, 2012 at 09:55

My dividend income now well exceeds my two pensions.

Best planning I ever did.

report this

sgjhaghsdg

Jul 30, 2012 at 13:39

My wife has a portfolio of around 20 good dividend paying shares and she's going to keep adding to this over the next few years. She's also got a few Investment Trusts holdings to add more overseas and smaller companies exposure. She'll be a basic rate tax payer in retirement so no more tax to pay on her dividends. Happy days!

report this

Maverick

Jul 30, 2012 at 15:07

It's all money.

If I buy £1,000 of (say) Tesco shares and I get a 5% dividend, at the end of the year I get £50 - but the value of the Tesco shares has fallen to £800 - so I have £850.

If I buy £1,000 of (say) Dialight shares and I get a 1.2% dividend, at the end of the year I get £12 - but the value of the shares has risen to £1,400 - so I have £1,412.

The dividends have 20% tax deducted from them before I get them. I have to earn £10,600 of capital gains in the tax year before I pay any tax on them at all.

Forgive me thinking this is a no-brainer.

I accept it is more difficult to pick a capital gainer. Anyone can get a 5% dividend - unless you buy BP shares just before their deep well in the Gulf of Mexico blows out . . . . .

report this

Paul Eden

Jul 30, 2012 at 15:20

I would like very much for Jel G to give me a tip or two about how she/he planned and chose this successful portfolio - point me in the right direction so as I am able to see if the same or similar portfolio might suit me! I am interested to know the shares chosen too, of course.

I think it is a very good way of supplementing a pension which is going to suffer from taxation.

report this

sgjhaghsdg

Jul 30, 2012 at 15:25

@Maverick - where do you get your 20% tax figure from? The tax credit is 10% but this isn't the amount of tax deducted either!

As for growth shares regards income shares, income investing tends to have the edge and particularly for novice investors. There is always risk, but that's why you should avoid >5% in any one company and >10% in any single sector.

Of course, you should also ensure that you use your capital gains allowances every year, but "quality" shares also tend to show the best long term growth too, so that's not too hard.

report this

MARK LOCKYEAR

Jul 30, 2012 at 15:36

If you buy any share paying a good divi, and the shares go down a bit, but the company still pays the same divi, buy some more.

report this

snoekie

Jul 30, 2012 at 17:11

Paul, it is reading and watching.

I got a number of tips from Questor, some AIM and others in the 350 and better and when somebody suggests a share I do my own investigation. If it makes sense to me, I buy. I hesitated on James Fisher, when £1.56, also on Weir when they were about £2, and so the list goes on, on the missed items, for me.

Many, but not all, of the questor tips have yielded good results, with the odd dog, but overall I am well up. For example, following a tip back in 2002 I bought into Billiton initially when it was @£2.89, but the broker screwed up, so when I kicked rear end, I got in at £3.38. Good divis and they have been as high as £26,currently £18.86. That puts my current divi at about 18% on my original investment.

Other questor tips, Morgan Crucible @£189, Northumbrian Water, bought out, Arla, bought out, Regus, BTG (then Proteus aka Protherics), Carillion, Wetherspoon, Reed International, Pearson, Morrison and the list goes on. All showing good gains and on some AIM then started paying divis.

I have 2 largish ships at sea, Lonrho and IFL, both below what I have paid for them, but I have hopes. Be careful about IFL, SA are making more and more noises about nationalisation of miners. Lonrho should berth sometime next year, and they are currently cheap, with a promise of divis next year, after years of losses (decreasing steadily, and now in profit).

Questor also punted Aviva, but that is currently one of my losers, albeit paying a good divi. They also tipped L & G and OML and I made good profits on both.

So in essence, read, digest and decide, after some research. Don't buy just because it is tipped. With reinvestment of divis over 15 years my ex SIPP portfolio is well over 100% up, yielding far more than my SIPPs.

By all means take punts, but those should be less than 5% (in total) of the portfolio, but invest in shares paying divis (and have paid steady divis), and reinvest the divis. Watch out for companies with big debts, and avoid.

Finally, NEVER borrow to buy shares.

report this

Hilary hames

Jul 30, 2012 at 17:26

Snoekie and others who go for dividend paying shares, did you, when building up a portfolio, take your dividends and use them towards a new investment, or go for automatic re-investment of the dividends?

report this

gggggg hjhjkl;'

Jul 30, 2012 at 17:33

When I retired at 50 my investment portfolio paid virtually nothing. It now provides some 75% of my income.

This is despite 20% of my total being invested in a with profits fund as an hedge against falls. This it has provided handsomely over the years.

However be warned it is not as simple as some people would imply. Bare in mind that some 85% or so of investors regularly lose money, what ever system they use!! Over the years I have suffered 4 major significant losses any one of which would have put most people off for life.

report this

J Thomas

Jul 30, 2012 at 17:49

I take the opposite view to most commentators in that I always take out the cash dividend and refuse to reinvest.

By taking the cash you are insuring yourself against default in the future by the Company. Examples are RBS, Lloyds, Marconi, etc, etc, etc. Reinvesting here would have meant a near total loss on your investment. However taking the cash at a 5% yield compounded over 18 years would have repaid the capital invested.

By all means use the dividend income to invest elsewhere, just not in the payee Company

report this

Dislexic Landlord

Jul 30, 2012 at 17:54

I have just started looking at Dividend shares I think its good ideir

Ive just opened and ISA Share account and will be buying the following shares and would like to recive comments on my choices OnceI buy the above shares I dont intend to sell them im very much in line with the way Ive bought property I never sell anything

National Grid

Vodaphone

Glaxosmithkline

BAE Ststems

Astra Zenica

Legal & Genaral

Sainsburys

British Land

Shell

M&S

I intend to put £1000 in each and see what happens

I like a chalange but as a simple investor buying shares for dividens sounds very much like BTL Dividends equel Rent

I would like to here others views thanks

report this

sgjhaghsdg

Jul 30, 2012 at 22:06

I tend to take income/dividends from all of my investments as cash and then decide for myself when/where to reinvest it. This lets me continue to diversify and rebalance as I see fit, including pushing money into bonds if I think that equities are toppy. Works for me.

report this

gggggg hjhjkl;'

Jul 31, 2012 at 00:22

Dislexic Landlord

A good defensive choice.

I cannot see you coming to much harm with lot whilst receiving a dividend better than the FTSE 100 index.

As you presumably receive good income from your property, I presume you will be using an ISA to avoid having to declare dividends on self assessment, which is very useful if you are a high income tax payer.

report this

snoekie

Jul 31, 2012 at 00:34

Hilary, depends on the company, for Prudential and HSBC I did take their scheme, and substantially added to value for the former, and done not too badly out of the latter.

But watch out for Capita (even the other registrars), they are sneaky, they will take the dividend and buy in the market charging a fee in the process whereas if the company issues the shares instead of divi, that is better, no charges or stamp duty, but always NEVER an outright election for the future, I take it one divi at a time, depending on the price at the time they ask. If high, I take the divi, if low, I reinvest.

In others I build up the cash from the dividends and either add to existing investments, or take up a tip. Currently I am awaiting funds, when I will buy into BG, Nat Grid, perhaps add to Centrica, Investec, UU, SSE, maybe buy some Taylor Wimpey, add to Morgan Cr, and perhaps more Lonrho. I will decide when I get the funds, depending on prices at the time, but I will not rush, a cliff is rapidly approaching, I think. I haven't ruled out others, e.g. BP, Aviva, Afren, RSA. too high at the moment.

However, now I need to live off the divis, but there should be a decent surplus.

I would like some more AZN (I have a miniscule holding), but the price is high for the cliff they are near.

Sorry, no cast iron rules. Depends on the company, and the NEED for the income. When I was earning, virtually all my divis were reinvested, and with a divi income of about £8-10k a year, in the last years before retirement, I was able to materially add to my holdings (and that took a number of years to build up to), and decently add to the divi income, no thanks to Mugabruin/Balls.

report this

Neil Liversidge

Jul 31, 2012 at 08:31

Why does the above text and chart refer to 'the last 22 years' and end in 2008? Is this an old article recycled from four years ago?

report this

Dislexic Landlord

Jul 31, 2012 at 08:35

FAO GGGGGGG

THank you so much for conferming my thoughts

Im very new to this sort of investing and you are right I will be useing my ISA allowance

It will be intresting to see how much I make in a twelve month period

report this

gggggg hjhjkl;'

Jul 31, 2012 at 10:50

Dislexic Landlord

Remember to measure the total Return (Capital Growth + Dividends) as over time dividends produce the bigger part of the return. Incidentally research shows that again over time, higher yielding shares have produced, in general, better returns than other shares.

report this

Dislexic Landlord

Jul 31, 2012 at 11:10

ggggggg

Yes I have relised your point after reading a great deal more about shares

Of course if I buy shares outside my ISA I can sell and make a capital Gain but hopefully I can use my allwances for this too

But at present its slowly away untill I understand a little more about this topic

report this

kenneth douglas

Jul 31, 2012 at 11:22

Don't shout at me, but I have been told, that even though your income is still within your personal allowance, you can not claim back tax on dividends, reason being, this is a fixed tax irrespective of income.

report this

JEL G

Jul 31, 2012 at 11:28

I always take the cash dividend being paid directly into my current account so that gives me my own choice on where to spend or reinvest.

My share portfolio consists of over 35 companies returning 6.5% net of tax.

This has been built up over many years and then added to considerably when taking my maximum tax free lump sum from my pension on retiring last year and investing in the portfolio all aiming for stable high yield.

The dividends roll in throughout the year and bring in considerably more than my reasonable pension.

More risky than a stable pension, but with a good spread should make it safer and the tax take plus the probability of capital gain (which is secondary to me) makes it a complete "no brainer" to me.

This provides a very comfortable life style............. Thoroughly recommend this.

report this

JEL G

Jul 31, 2012 at 11:48

Quite correct Kenneth Douglas. Gordon Brown and Ed Balls stopped that when they got into power in 1997. An absolute disaster for the pension industry.

Prior to those clowns getting into power one could claim back ACT paid on dividends up to one's personal allowance, assuming no other income.

Likewise you still have 10% ACT deducted at source on dividends irrespective of being sheltered in an ISA. Worth thinking about if you are a basic rate tax payer.

report this

Dislexic Landlord

Jul 31, 2012 at 11:57

FAO Jel G

I read you comments with great intrest

Ive been a BTL investor for avery long time and I feel at present the Property market is not the place to invest

Im lucky I have a very good Rental Income over half being Profit and feel that I need to look at other places to invest

Its intresing 6.5% neing made over 35 shares I think I want your model

Putting Hard cash into property little sence if you can get 6.5% in shares without the heart ache that can come from being a Landlord especialy if you can get the income TaxFree

I am a 40% Tax payer so Isa is a gift Horse

Can I ask which are your major holding I would be intrested in compareing notes

Hope it dosent sound cheacky

report this

Ian MacLean-Boyle

Jul 31, 2012 at 12:40

I have read all the comments with great interest. I have ventured into the market by buying Investment Trusts, they give the spread that I may never achieve, but British Assets at least give me a dividend return of about 5% net. At the moment I am reinvesting the income to continue building the holding, until at such time as I need to suppliment my pension. I appreciate that currently Capital Growth is very slow, but things will change for the better - We have been through it all before and come out the other end smiling !!!!!

report this

JEL G

Jul 31, 2012 at 13:01

Hi Dislexic Landlord.

The total return on my Portfolio (based currently at 6.5% net) is through firstly shares I have bought over the years which have gradually increased their dividends and secondly investing my Pension lump sum last September when the stock market was much lower and therefore dividend yields were much higher. Lucky timing....... and an opportunity not to be missed.

I have never invested in property as I feel that to be too much hassle. Owning one 250 year old cottage in 4 acres is enough for me! Far less of a worry investing in quality companies where as long as the dividends keep rolling in I do not worry about the share prices.

Very rarely ever sell my shares.

report this

Dislexic Landlord

Jul 31, 2012 at 16:13

FAO Jel

I cant knock BTL I retd at 40 Ive worked hard had the knocks but its through BTL that I now have the money to spend on shares

If I had not bought BTL I would have had to work till aged 66 most likely liveing on an old age pension and a company pension

But shares look a good bet to me but I would never never give up on being a Landlord

I look back at what I had in 1982 when i started in BTL and know its not been an easy ride but life is never easy

Thanks for the advice im sure I can take a leaf from your book

report this

J Thomas

Jul 31, 2012 at 16:20

DL - a good defensive selection, I would also add SSE and Standard Life to your portfolio for a solid high yield.

Jel G - all good valid points and indeed many investors, myself included, are simply becoming their own fund and asset managers with our investments held directly, and cash paid directly into our own bank accounts.

No wonder the pension industry and financial advisors wish the internet had never been invented, there is very little or no need for them anymore.

report this

Dislexic Landlord

Jul 31, 2012 at 16:32

FAO J THOMPSON

I do totaly agree with your points especialy about IFA and Fund managers

Ive had a number of meetings with IFA,s and have thought that managed funds and pension funds are a con

I asked this question to and IFA

Is there a fund manager who works on results only ie if they dont make money they dont get paid

Guess what no fund managers who will comit to that

Thats why im looking at doing it myself

I may get it wrong at times but atleast I will not be paying fees to men in red braces

LOL LOL

report this

gggggg hjhjkl;'

Jul 31, 2012 at 16:37

J Thomas

Could not agree more!! I have never used an IFA of any kind and never would.

I have met a number over the years at meetings, conferences, etc and whilst most were nice enough (they would be, would'nt they) they did'nt exhibit any special skills.

No one cares more about your money than you and as Warren Buffet said "investing does not require an high IQ".

report this

Dislexic Landlord

Jul 31, 2012 at 16:47

Ive always said to IFA,s if you are so good at investing why are you not investing your own money and staying at home

report this

Neil Liversidge

Jul 31, 2012 at 18:32

Dislexic, have you ever thought of asking Warren Buffet that question? Nobody forces clients to use us. We hardly advertise apart from a website. Our clients come by referral because, guess what, we're GOOD at what we do. Also, to have money to invest in the first place, you have to earn it and that's what I do. I earn it for 80hpw on average, all of it spent looking after my clients and doing my best for them. Don't bother applying to be one of them though; I have a policy of only accepting clients who are polite and who appreciate what we do. The rest can take a hike, however rich they are, you included my friend. I do have investments but I just choose not to sit at home. My investments are all doing very well incidentally. Why? Because I take my own advice which is the same as I give my clients. Sadly for you, you won't benefit from it.

report this

sgjhaghsdg

Jul 31, 2012 at 19:09

I've used IFAs in the past, but grew weary of paying sky-high fees for rather mundane investment performance and infrequent reviews.

I now manage all of my own investments, which is giving me much better results (at least partly due to getting rid of those high fees) BUT before doing this I did a lot of reading regards asset allocation, portfolio theory, fixed interesting investing (I can bore for my country on subjects such as bond yield curves!), taxation, pension rules and regulations, and much much more. As NeilL said, no-one forces anyone to use an IFA, so spend a few bob on books instead.

Those who aren't prepared to learn how to DIY could well be better using an IFA and just accepting that the fees will adversely affect their long-term results.

The world of investing has been totally changed by the arrival of the internet, and as I'm very much in favour of empowerment and disintermediation, I'm all for it.

report this

JEL G

Jul 31, 2012 at 19:32

I have never ever used the advice of an IFA or bought into any managed funds whatsoever in 40 years of investing.

I have always invested directly into companies and done all the research myself, hence I can only blame one person. Also there are no fees to pay.

I feel I have done very well over these many years and am comfortably placed now........... come on chaps, it is not rocket science, just turn investing into a serious hobby, fitting in with the sheep breeding, tennis, gardening, renovating an old cottage, etc........

report this

Dislexic Landlord

Aug 01, 2012 at 07:41

FAO Neil Liversidge

Neil im sure you are a lovey person and you do your leval best for cliants and power to your elbow and i wish you all the best

My problem with IFA and alike is historic I remmember the days of Allied Dunbar and the Like Direct Sales forces to customers for a ride and charged them with the help of there companys outraguos commisions

I refered to them as East End Boys in West End Suits you only have to look at the regulation that has been forced on your own industry

I would take advice and pay for it on results but you can not fined an IFA who would work that way or fund manager

Investment inb shares is a bit like BTL there were companys such as Insidetrack that could do it alll for ypou buy the property mortgage the property rent the property and the investor could just sit back on a sunny beach and do nothing

Well we all now what happened BTL became a big problem Most Proffesional BTL investers did not come unstuck infact a lot I know have become very Rich since 2008

Im going to use my own sence of investment skills and hopefully it will pay off but if it dosent I only have myself to blame and i wont have paid a boat load of fees

If you notice a lot of this blog is about fees so maybe there is a market out there for you to give the savey investers what they are looking for

Good always comes from bad think about it jump outside of the circle and prove you are differant and i dont just mean buy asking the customer for a fee before you have made them a penny

do the investing for them after you have made them money THEN charge them a fee

NO WIN NO FEE simpllese

report this

Neil Liversidge

Aug 01, 2012 at 09:25

We do work for fees and have done since I set my business up in July 2004. From day one I engineered out all the practices I'd seen and disliked during my previous 24 years on the technical side of the industry. Our annual charge is 0.5%. We don't offer 'no win no fee' because our staff don't have salaries that are conditional and we don't have electric bills, rent or FSA fees that are conditional either. Another of my golden rules is that any prospective client who wants to haggle over fees from day one gets turned around and is politely shown the door. Our charges are fair and excellent value. If you want to haggle, go buy a carpet in a Baghdad bazaar - don't come to me; I'm not interested. We have more than enough clients who appreciate what we do for them. I wish those well who pronounce themselves so keen on disintermediation. Perhaps in due course they will disintermediate their barbers and cut their own hair, disintermediate their garages and fix their own cars, and disintermediate their butchers and slaughter their own cars. Perhaps they too will find themselves disintermediated out of their livings also. Simple message folks - if you don't want to use us, don't. Plenty more will because we deliver service and value. We don't want clients who know the price of everything and the value of nothing.

report this

Neil Liversidge

Aug 01, 2012 at 09:26

It's unwise to pay too much. But it's worse to pay too little. When you pay too much, you lose a little money; that is all. When you pay too little, you sometimes lose everything because the thing you bought was incapable of doing the thing it was bought to do.

The common law of business balance prohibits paying a little and getting a lot. It can't be done. If you deal with the lowest bidder, it is well to add something for the risk you run. And if you do that, you will have enough to pay for something better.

There is hardly anything in the world that someone can't make a little worse and sell a little cheaper and people who consider price alone are this man's lawful prey.

John Ruskin 1819 – 1900

report this

sgjhaghsdg

Aug 01, 2012 at 09:57

Barbers and car mechanics aren't middle-men who add little in the way of value and are therefore unlikely to suffer disintermediation. They therefore probably don't know what the word means as they have little to fear from it. The world's middlemen on the other hand have a lot to fear from it, and will put a lot of energy into explaining what excellent value they add and how their eye-watering fees are actually very cheap. The louder and more shrill they get, the more I know they are doomed: I've seen it happen enough times to be able to spot it a mile away. And no, it won't happen to me because I've always worked at creating things rather than trying to extract margin while being a non-essential part of the supply chain. (BTW, people might like Buffet's story of the "gotrocks".)

report this

Dislexic Landlord

Aug 01, 2012 at 10:07

FAO Neil

See this is where you shoot yourself in the foot

Why cant you be paid for results ?????

would it not be a breath of fresh air if you said to a cliant I will invest your money and when I make you a profit I will visit you say in six months and you can pay me a percentage agreed at the start of the Bussiness arrangement

its strange you use a Barber as an example I used to be a Hairdresser and my Claints paid me on the finished Job ie the finished job

I would never dream of paying for my car to be serviced in advance I pay when im happy the job has been done correctly

You see you get paid front end Bid Offer Spread ect for investmenst in Bonds Isa ect

and you pocket the fee even ifthe investment is bad

I can understand charging a fee for arrangeing Life Asurance the customer gets the insurance from day one

But to take the money upfront and for what its worth Im happy to pay a fee to accoutants architects and surveyors because they all give me profit from day one

You should be paid on results over a period of time when you visit your cliant at a review date

All Self Empoyed get paid on results so why not the investment world

report this

Neil Liversidge

Aug 01, 2012 at 10:42

Oh I see. So when I arrange a life assurance policy for a client I should only be paid when the the claim is paid for death or critical illness. On that basis you should perhaps be charging your tenants rent yearly in arrears, at which point they could then decide whether you had done a good job for them and make any appropriate deductions for repairs not done on time or at all. Lots of clouds and cuckoos around here methinks.

report this

gggggg hjhjkl;'

Aug 01, 2012 at 10:47

Neil Liversidge

If you treat your clients the way you have replied to DL, then god help them!!

"We have more than enough clients who appreciate what we do for them.".

That no doubt will be the foolish, the ignorant and those with more money than sense.

report this

Dislexic Landlord

Aug 01, 2012 at 10:57

Neil You did not read what I said

I said I understand you chargeing a fee when you have arranged life Insurance or Crititcal Illness

Listen to me The Customer is getting what you have arranged from the start ie Life Cover

My Ideir was if you arrange a pension or other investment you dont take commison from the start

When you review your cliants Investmenst say every 12 months you visit them with a statment and you then charge a fee if you have made them money

This is not hard Neil but you are not thinkinbg outside the box

Just becase something has been done for years dosent stop some bright spark comeing up with a sound bussiness Idier

and im quoteing nobody only my own thoughts

report this

Neil Liversidge

Aug 01, 2012 at 11:03

To sgjhaghsdg and gggggg hjhjkl;' and all other silly people who hide behind silly anonymous IDs: Our fees aren't eye-watering - far from it. If you've paid eye-watering fees in the past more fool you. And if you can't take it chaps, don't dish it out. I make no apologies for what I do; on the contrary, I'm proud of it. That's why I don't post anonymously. And far from being 'ignorant' etc etc my clients comprise barristers, solicitors and a greaty many highly successful businessmen. Sorry to shatter your delusions with a hefty dollop of truth. Have a nice day.

report this

Neil Liversidge

Aug 01, 2012 at 11:43

DL - we charge a fee for planning at the outset. we don't 'take commission from the start'. Planning involves a lot more than just fund picking. Our 0.5% annual charge comes with a written 'no churn' guarantee whereby we specify that any investment we sell will be reinvested on nil initial commission if it needs switching. Our compliance people reckon it's a brilliant deal and so did the FSA bod who performed our TCF check. The annual fee covers all ongoing minitoring, tax advice, reviews etc. I refer you to my previous reply re' the reality of fixed costs in business.

report this

Neil Liversidge

Aug 01, 2012 at 11:54

And by the way, I am also a landlord - residential. When I rent a house it's immaculate and at a fair rent and the deposit is protected via the RLA. I also don't discriminate against DSS tenants. Why is it though that most landlords I meet are not RLA members, treat DSS claimants like fourth-class citizens and still aren't protecting deposits as the law requires? And commecial landlords are another story altogether. The pitch of many seems to be 'rent my rathole, spend your own money doing it up and sign a full repairing lease to boot'. This town - Castleford - is being ruined by bad commercial landlords and their agents who let premises go to rack and ruin and devalue their neighbours. Then they wonder why they stand empty. Shameful. I suspect there are many such on these forums, decrying those of us who work hard and earn a honest living whilst being petty Rachmans themselves. Amazing too how many residential landlords have got where they are by doing corrupt deals with estate agents to buy up repos on the cheap with inside information, and/or have renal properties bought on residential mortgages. Let those without sin cast the first stone my friend!

report this

Dislexic Landlord

Aug 01, 2012 at 13:01

FAO Neil

God your going off the topic here Im happy to talk about being a Landlord and the points you raise such as Protection deposits ect ect

Im far from being a Rachman there day has been and gone and good riddens

and Im sure you are a very Good Landlord im an NLA Member and im accredited

Im not going to blow my own truppet here because I dont have too

I notice you say your compliance Pepole say your doing a Good Job

But look at that statement alone you have compliance in your industry because of your bad record

Miss selling of endowmensts miss selling of PPI Miss selling of pensions

its not a super record to be proud of

I come back to Dont charge any fees for investment advice until you have made a profit

and as for Barristers Solicitors being your cliants I think this was the self same group that invested in dear old Equitable Life

again another company who brought your proffesion into the press for all the wrong reasons

If you really want to make a differance do something differant do follow the heard

Regards DL

report this

Dislexic Landlord

Aug 01, 2012 at 13:02

THat sould be DONT FOLLOW THE HEARD NEIL

report this

sgjhaghsdg

Aug 01, 2012 at 13:05

Yes, I was stupid enough to pay an IFA 0.5% per year to "manage" a motley collection of high-fee active funds.Yes, I was so stupid as to think that paying more meant I'd get better results. I now know better and doubt that I will ever have anything to do with IFAs ever again.

BTW, I'm sure we'll have IFAs for the foreseeable future, but nothing like as many as now and very few will be able to continue charging at anything like current levels.

There's a storm coming...

report this

Neil Liversidge

Aug 01, 2012 at 14:23

DL, all I ever bought from Equitable Life for any of my clients (back in the late 80s / early 90s) was fixed annuities (which are still being paid in full) and I charged the clients a fee as EL paid no commission. I invested nothing with them. Some folk - the kind of people who seem to populate this forum - alleged at the time that I didn't recommend them owing to the lack of commission. I demonstrated that it was because EL was making promises it did not have the wherewithal to fulfil, and time proved me right. At home I still have an old VHS tape with the EL adverts on, trumpeting how they didn't pay commission to the likes of me. But 20 years on I've never let a client down. Pity they couldn't say the same! I've never folowed the herd. Hence I didn't invest in the likes of Barlow Clowes, Imperial Consolidated, Icelandic banks et al. It's an equitable life DL!!!

report this

Dislexic Landlord

Aug 01, 2012 at 14:49

FAO Neil

I wish I had known you when I worked for Local Govt

I joined the Final Salary Pension and though I must make extra pension contrabutions

An AVC was avalible with EL I paid into the AVC 11% of my salary over 7 years

I retired and now recive 28.00 pcm which is also taxed My nett income is £17.00 for 7 years salary

I also transfered my old Personal Pension into the final salary which bought extra years

I retired at age 50 due to an accident and recived a 25 Year pension which worked well

So im not grumbleing in genaral but it was the final salary pension that came up trumps

As an IFA you have to shoot the bullits that are made by life companys and you have to stand and fall by how they perform

My Bank has an IFA and i asked about stakeholder pension being a 40 Tax payer I thought it might be worth while I can put £3600 into a stake holder pension but his fee would have been £500

I still wish I could find a pension provider who would take fees on performance in other words when i see a Profit

he advised me to go to Cavindish Online I think one of the commentators has said there will be very few IFA,s and I think he is right

The poor can not afford fees so advice will not be given

Regards DL

report this

sgjhaghsdg

Aug 01, 2012 at 15:23

I doubt your bank has an *I*FA but I could be wrong. Banks are terrible places to get any investment product, which is partly why they generate many more complaints and scandals than IFAs. The exams that IFAs have to pass aren't particularly demanding, but the banks stick people on the job with nothing more than a cheap suit, a wodge of glossy brochures and some pimple cream.

report this

Dislexic Landlord

Aug 01, 2012 at 15:30

HI SGIJ

Yes its an IFA but you have to ask for and IFA otherwise you geta a insurance sales man

he works for coop bank but there IFA dept has closed so they now work for a brokerage

But Im not paying £500 to find out what I alraedy know

thanks DL

report this

Neil Liversidge

Aug 01, 2012 at 15:44

DL, I'm sorry you were done over by EL, I really am. It's a misconception though when you say 'As an IFA you have to shoot the bullits that are made by life companys ' We use life companies for SIPPs, term assurance and the very occasional bond - maybe 2 or 3 a year max. The bulk of our investment goes via unit trusts/OEICs/ISAs/Investment Trusts/ETFs. Even with SIPPs we hardly ever use the insurance companies underlying funds. Insurance companies don't even bother sending their reps to see me, they get so little from us. The only other life funds we run are legacy holdings we run for clients who already have them, and those we run as a favour. We've just finished reviewing the 393 funds we oversee in one capacity or another. Of those we selected - as opposed to legacy stuff we got stuck with - we're changing less than 5%. The other 95%+ of our selections have outperformed.

report this

gggggg hjhjkl;'

Aug 01, 2012 at 16:46

Neil Liversidge

Not just happy at having a go at DLs very reasonable suggestions, you are now having go at peoples names!! What will you stoop to next, I wonder.

Just because you claim professionals amongst your clients (I am one too) does not mean they are investment savvy or do not have more money than sense.

I am sure they stay with you. Judging by your tone, they are probably to frightened and/or intimidated to either question your charges (a loss of 15% over 25 years including VAT) or leave.

report this

Neil Liversidge

Aug 01, 2012 at 17:09

The point, gggggg hjhjkl;', is that people such as I, who have nothing to hide, do not post anonymously. Your fictional mathematics above are as shaky as the rest of your logic. Almost all our new clients come to us by referral from existing clients. Why do you think our clients refer their family and friends? Good service and results my friend, no other reason. How annoying it must be for you to have your delusions shattered by facts.

report this

sgjhaghsdg

Aug 01, 2012 at 19:38

Isn't it interesting the way that every IFA, and every active fund manager, claims to have better than average results? What should we read into that? Would we be deluded if we treated all of their claims as facts?

I guess that's a decision everyone has to make for themselves, and then they can decide whether the higher fees for adding yet another layer of management is worthwhile. Has everyone now read the gotrocks parable?

report this

J Thomas

Aug 01, 2012 at 22:12

Neil - I respect you for using your own name and running your own business, having myself left for work at 6am this morning and returning at 9pm running mine.

However could I ask a pertinent question? You have been posting on this site all day, could your time and energy not have been better spent engaged on your clients portfolios to add value for your trail fees of 0.5%?

Joe Thomas

report this

gggggg hjhjkl;'

Aug 02, 2012 at 00:17

J Thomas

How do you now he is using his own name? Oh that's right because he says so!!!

Do bear in mind he says he is a banker, oops sorry an IFA. So it must be right.

report this

Dislexic Landlord

Aug 02, 2012 at 08:12

The Truth is investors are getting wise the internet has changed the whole investment world

IFA,s will only be there while the genaral public decideds not to learn about the investment world

The bad press from IFA,s and Bankers is not helping to inprove there own imiige Im very sorry to say

My farther had a Finacial Adviser and a Bank Manager from the old school they were respected Gentlemen and gave advice at the time which i think was good

I belive at the time there was little regulation and it was a time before the get rich wizz kids came into Finacial Services

We will never go back to that situation

I have been a investor since1982 one way or another and I woud never use an IFA

I will take my own advice its set me up well ive made mastakes but thats what life is all about

Ive enjoyed the Blogg its been fun and good to express ones opinions

report this

Neil Liversidge

Aug 02, 2012 at 08:59

Joe - when I work from 6am to 8pm and often later, plus most weekends, and own the business, how I apply my time is my affair. I allocate a portion of it to refuting lies, untruths, misconceptions and delusions for the benefit of the populace.

gggggg hjhjkl;' - you can google me and find my website. I'm in Castleford.

Keep on pitching them up guys, and I'll keep slugging them out of the park.

report this

Paul Eden

Aug 02, 2012 at 09:37

Snoekie, I appreciate your advice on the site. I never even heard of Questor, Aim, or some of the companies you mention such as James Fisher. It is well worth the effort in reading so many of these articles, including the debate about whether to use IFAs or adopt a DIY approach - or perhaps both!

report this

Paul Eden

Aug 02, 2012 at 09:37

Snoekie, I appreciate your advice on the site. I never even heard of Questor, Aim, or some of the companies you mention such as James Fisher. It is well worth the effort in reading so many of these articles, including the debate about whether to use IFAs or adopt a DIY approach - or perhaps both!

report this

sgjhaghsdg

Aug 02, 2012 at 09:48

I think Neil is doing a very good job of reminding us all why we don't use IFAs!

I don't have any particular axe to grind with IFAs, but I now very much regard them as akin to Personal Shoppers, Interior Designers, Management Consultants, Poodle Clippers, Personal Trainers, and all the other "B ark" professions: I'm sure they are very good at what they do, but I have exactly zero need for their services.

However, it's a free country, and people can choose to be parted from their money in any way they fancy.

report this

Dislexic Landlord

Aug 02, 2012 at 10:13

Not useing your real name is good for security

If you google Dislexic Landlord you will see other blogs from this site

I have nothing to hide infact Citywire contacted me to ask a little more about me and I was happy to give them my background

Blogs are like writeing on a street corner wall so you have to be carefull

report this

gggggg hjhjkl;'

Aug 02, 2012 at 14:08

"you can google me and find my website. I'm in Castleford"

Neil (if indeed that is your name!) googling an address proves nothing, you could have searched IFAs ( there are still for the moment enough about) and picked one at random.

Indeed your aggressive attitude, tone and time available for this would venture to suggest that maybe you are not what or indeed who you claim to be.

For all you know sgjhaghsdg may not be sgjhaghsdg or me gggggg hjhjkl living in neverland either.

report this

Neil Liversidge

Aug 02, 2012 at 14:44

gggggg hjhjkl;' - what an empty life you must have to be so suspicious minded and eaten up by your jealousy of the success of others. This is my final word on this, because you really aren't worth any more. IFAs are successful because we provide a valuable service. We demonstrate that worth to our clients day in day out. We'll still be here tomorrow, next year and in ten years time for that very reasio, for all your malice and wishful thinking. And finally, if you , really doubt I am who i say, feel free to phone or email. I'm always glad to put the delusional right.

report this

gggggg hjhjkl;'

Aug 02, 2012 at 15:08

Neil still does not answer the question, does it?

No wonder you have no more to say!!!

report this

Ian MacLean-Boyle

Aug 02, 2012 at 15:24

Thought I would glean some useful information from these comments, but sniping seems the only thing available !!!!!!!!!!!

report this

sgjhaghsdg

Aug 02, 2012 at 15:28

I'm sure that most IFAs will be here tomorrow, but with the final shoe of RDR dropping at the end of December, next year will be interesting.

report this

JEL G

Aug 02, 2012 at 20:03

Come on chaps............ a little respect of each other would not go amiss.

Otherwise I might have to bore you with my sheep breeding program.

Loosen up, its a lovely wet day outside today down here in deepest Somerset.

report this

Pat Stubbs

Aug 14, 2012 at 11:12

Sgjhaghsdg you mention your wife not having tax to pay on dividends. I am retired and basic tax payer. I have just bought shares for the first time but thought I would have to pay 10% tax. Please can you explain? Many thanks

report this

sgjhaghsdg

Aug 14, 2012 at 11:23

A notional 10% is deducted before you get your dividends. So, if you get 90p in dividends, you have to treat this as 100p when comparing your total income to the various tax bands, but you will get informed about the 10% tax credit when you get your divis and this effectively covers your 10% basic rate tax bill so nothing more to pay.

Note that some companies domicile in Ireland and the Channel Islands so these need to be treated as overseas dividends, and REITs pay some money as dividends and some as income. If you don't hold any of these, then life is simple and you can spend your dividends without worrying.

You should keep detailed records of what you've had when in a spreadsheet, and also records of what you purchased when, for how much, and what your trading costs were. Alternatively, do everything via a S&S ISA and avoid all of these worries!

report this

Pat Stubbs

Aug 14, 2012 at 12:19

Thank you so much. That's a real help. I am a widow trying to wring out my savings to the maximum. I am horrified by the proposed charges of IFA's for very poor returns but am quite scared about the responsibility of 'doing the right thing' if I go it alone. All I know is that after everyone has taken their cut there's not much left for me!

report this

sgjhaghsdg

Aug 14, 2012 at 12:56

@Pat - Be aware that it's hard running a small share portfolio. If each holding is too small, your trading costs are a problem, yet you still need a good spread of companies and sectors.

Investment Trusts can be a better alternative as they both spread the risk and also have a dividend reserve, which makes income more predictable

report this

Pat Stubbs

Aug 14, 2012 at 20:48

Thank you once again. Selection is the problem. I searched for the best performing Investment Trusts but of course results are retrospective so I've probably missed the boat. I know it's presumptious to ask but any ideas?

report this

sgjhaghsdg

Aug 14, 2012 at 21:59

I'm afraid that your needs and mine are different. You need "steady Eddie" income and growth ITs, which are mostly on premiums, whereas I'm happy "bottom fishing" for out-of-favour ITs in deeply unfashionable sectors.

Maybe trying asking in the UT and IT forums of the Motley Fool boards? Loads of Income and Growth hounds hand around there.

You probably need to be holding 6-8 ITs to derisk, and maybe £2k minimum in each. Dunno your pot size nor what cash buffer you have.

report this

gggggg hjhjkl;'

Aug 15, 2012 at 00:20

You might look at City Merchants, Merchants Trust, City Of London, British Assets, Temple Bar Murry Income, Murry International, Troy Income & Growth and Shires Income.

They are suggestions NOT TIPS, If you go to Trustnet you will be able to do your own research on these and any others that take your fancy.

For your information two thirds of my portfolio is in ITs which at various times have included some of the above trusts.

In general there is risk attached to them, but risk and reward go together I am afraid.

Good Luck

report this

Pat Stubbs

Aug 15, 2012 at 10:32

Thank you so much (again). It's helpful to talk to an actual investor rather than a third party whose main concern is to secure a fee/commission. I'd much rather take a calculated risk that hasn't cost me a fee for the privilege whether I win or lose.

report this

Ian MacLean-Boyle

Aug 15, 2012 at 10:57

Pat, like you I wanted a reasonable spread, with good income, so as ggggggg suggested to you I went for Investment Trusts, let the experienced managers do most of the worrying. I agree British Assets is a good one, though a bit slow in capital appreciation, would also add to the list Scottish American, and some of the BlackRock ITs. I started mine with British Assets as a Personal Investment Plan, reinvesting the quarterly dividends, until at such time I need extra income, and compared to the field they offer a reasonable dividend yield of 5%. If you look at the IT Portfolios, they all seem a lot similar, ( Glaxo, Vodophone, BP, BATs etc. ). You can always have a little gamble, if you so wish with penny shares - I have gone for Lonrho Plc, in the hope that history will repeat itself, and 2000 shares at 8 pence can't be too bad.

report this

Dividend Income investor.com

Sep 04, 2012 at 18:08

Prices of shares go through cycles which can take years. When a dividend paying company offers a relatively high dividend yield, income orientated investors will buy, which eventually will push the share price up, thereby gradually eroding its dividend yield. When the dividend yield start falling, demand for the shares will become less, until an absence of demand will allow its share price to fall to a level at which again its dividend yield is attractive to income investors.

Fluctuating dividend yields instruct investors when to buy and sell. They let the investor know, with very little doubt, when a share price is genuinely high, low or is trading somewhere in between

report this

leave a comment

Please sign in here or register here to comment. It is free to register and only takes a minute or two.

Sponsored By:

More about this:

Look up the shares

  • Royal Dutch Shell PLC (RDSb.L)
    Register or Sign in to receive email alerts for items in your favourites whenever we write about them
  • GlaxoSmithKline PLC (GSK.L)
    Register or Sign in to receive email alerts for items in your favourites whenever we write about them
  • Vodafone Group PLC (VOD.L)
    Register or Sign in to receive email alerts for items in your favourites whenever we write about them

More from us

Archive

Weekly email from The Lolly

Get simple, easy ways to make more from your money. Just enter your email address below

An error occured while subscribing your email. Please try again later.

Thank you for registering for your weekly newsletter from The Lolly.

Keep an eye out for us in your inbox, and please add noreply@emails.citywire.co.uk to your safe senders list so we don't get junked.

Latest from The Lolly

Sorry, this link is not
quite ready yet