Low interest rates look set to continue for the foreseeable future. Whilst this is great for borrowers, but disastrous for investors and people retiring on annuities.
Earning just over 1% on an ISA account is not even keeping up with inflation, let alone giving you a good investment return.
Even gross yields on buy-to-let properties in major cities have fallen below 4% and in London or sometimes around 2%. That’s ‘gross’ yield by the way, before costs such as letting charges.
What should you the investor do to improve the yield or income you receive on your money, particularly if you are relying on this to provide retirement income?
You can shop around for the highest rate available on savings accounts, but this is not going to improve your overall return by that much.
You could consider high yielding shares as an alternative to deposit-based investments.
Yes, there is the risk that the value of your capital can go down as well as up, but many of these are blue-chip companies listed on the London Stock Exchange.
Examples of these FTSE100 index listed companies include the insurer Aviva PLC, currently paying a dividend yield of 8%.
Aviva has over 30 million customers, a market capitalisation of £14.2 billion and trades on a P/E ratio of 9.53.
Aviva is listed as a “buy” by most brokers, but could also be affected by Brexit.
Shares can be held within the tax-free wrapper of an ISA, which means that you would not pay tax on the income or growth.
Mining company, Rio Tinto has a market cap of £70 billion and paying a dividend of 5.5%, trading on a P/E of 10.16.
Rio dates back to 1873 and earnings have gone up by 32% each year for the past five years. Its share price is being threatened by unpredictable weather and a weakened outlook for minerals such as iron ore.
House builders Redrow PLC and Persimmon PLC have both done well in the last few years with the push for more new homes and the government Help-to-Buy scheme for first time buyers.
Redrow has a market capitalisation of just over £2 billion, trades on a P/E ratio of 6.46 and currently has a dividend yield of 5.26%.
The company recently reported a jump in annual profits to £406 million for the year ended to 30th of June 2019, up 7% of the previous year, with annual revenue rising by 10% to £2 billion. Revenue was driven by a 13% increase in legal completions to 6443 homes. There was a 2% drop in the average selling price.
Persimmon pays a dividend of 12% or a 1200% than most ISA accounts pay. The company has a market capitalisation of over £6 billion, and reported a profit of £1 billion on revenues of £3 billion, yet trades on a P/E ratio of just 6.75.
Around 200,000 new homes have been built each year for the past few years in the UK. There is still demand for property for various reasons, but builders could be dependent on schemes like the government help to buy.
The price of shares can go down as well as up and dividends and the value of your capital are not guaranteed.
The companies are expected to grow over the longer term, which means you can enjoy dividends and capital growth on your investment.
These are just a few examples of shares offering dividends (a share in the profits) of over 5% of the share price.
Do your own research online. Google high yielding dividend shares, or look at finance sites.
See your financial advisor, but the best way to invest in shares is to learn more about it yourself.
Word of the Day
P/E Ratio see:
http://www.moneytipsdaily.com/how-to-earn-higher-yields-on-your-investments/
Are Russian Sanctions Hurting Everyone And Driving The World Into Recession?
Commodity Prices Hit Highest Level Since 2008 Financial Crisis As Stock Markets Fall
Markets Crashing Around The World As Russia Invades Ukraine
8 tips to survive the coming recession
Time to get fixed up? This has nothing to do with Valentine’s day!
Interest Rates Double To 0.5% To Cool Soaring Cost Of Living As Energy Bills Jump By £800
US Economy Bounces Back And Stock Markets Rally, But Crash Is Coming
UK Inflation rises again to the highest level for 30 years
Interest Rates Will Rise In 2022 – Time To Fix Your Mortgage Rate?
Interview With Stocks, Commodities And Futures Trader Of 40 Years KD Angle
Property And Share Prices At Record Levels Despite Poor Economic Outlook As 2021 Draws To A Close
What Does 2022 Hold In Store For You And How Can You Make Your Dreams Come True?
Bank Of England Increase Interest Rates As Inflation Soars At Fastest Pace For 10 Years
UK House Price Growth Highest For 15 Years
Is Retail On The High Street Dead? NO! Here’s Why
Stock Markets Fall Sharply On New Covid Variant Shock
UK And US Down On World Prosperity Index, As Inflation Reaches Highest Level In A Decade
More Than 1,000 Migrants Trafficked Across The English Channel To Seek Asylum In The UK In A Single Day As Government Says 'British Public Have Had Enough'
Interest Rates Held At 0.1% But Will Rise In Coming Months
Eight Ways Rishi Sunak's Budget Could Impact You
Create your
podcast in
minutes
It is Free
The emPOWERed Half Hour
Pharmacy Podcast Network
Aktörspodden
The Power of Storytelling
The Ramsey Show
Planet Money