Good old-fashioned dividends are coming back into
vogue. Nearly three years after previously soaring stocks
came crashing down, investors are starting to show more
interest in getting a steady income stream from equity
investments.
Merrill Lynch Investment Managers is one fund manager that is
making a push for high-yielding stocks, rejecting the idea that
they are lower-growth investments simply because income is gained
at the expense of capital growth
Michael Jones, head of UK third-party retail at MLIM,
explains: "In the late 1990s, people weren't worried about
dividends and were just chasing the stock price [gains]." He adds:
"For example, if capital gain was 20% every year with a 2% to 3%
yield then dividends were a secondary concern. Now, if capital gain
is 5% to 6% and yield is 3% to 4% the dividend has more
value."
To illustrate how high-yield stocks in the UK, on average,
deliver higher growth than low-yield shares, MLIM compares FTSE 350
high-yield performance and low-yield indices between January 1986
and August 2002.
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