Earn higher yields on your investments and increase returns by 500%

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/