Exactly one year ago (8th December 08) I wrote an article called “Going back into equities”. It pointed out that with interest rates on bank deposits as low as 2% – they subsequently went and stayed lower – it made sense to invest in what I regarded as safe equities with high yields, that is, dividend income. To avoid the trap of high yields due to risk such as Yell, Lloyds/TSB and Taylor Wimpey, and that got cut or dumped altogether, I suggested four utilities, namely:-
National Grid, Scottish & Southern, Centrica and Severn Trent.
These four companies were yielding an average of 6% and so any capital growth was a bonus. It is now time to see if any such growth occurred. The mid-market price has changed over the year as follows:-
National Grid +5.7%
Scottish & Southern Energy +5.4%
Severn Trent – 1.6%
The average capital growth is 8.4% over an equal investment in each.
I did stress that the idea was not investment advice. That is a pity really since with an average yield of 6% (after the 10% tax credit) and an average capital gain of 8.4% on top, that normally can be avoided for tax purposes, an investment would have turned out a bit better than a bank or building society deposit.