John D Rockefeller would have liked the UK stock market Story by Simon English
The richest man in history was probably John D Rockefeller, founder of Standard Oil, later broken up into seven smaller companies, one of which is now Exxon Mobil.
At his death, he was worth $700 billion in today’s money.
Elon Musk or Jeff Bezos might top him, but neither plans to die so we may never get a final score.
Both have vainglorious plans for the future – Musk intends to save humanity from itself, Bezos just himself, it seems.
Rockefeller might have been less fun than today’s tycoons. Certainly by the end he was bored, and heard to say: “Do you know the only thing that gives me pleasure? It’s to see my dividends coming in.”
Rockefeller bought shares that paid dividends and sold the losers to offset capital gains tax. It worked.
That plan, enacted in the UK lately, might even have made Rockefeller break a smile. In the three months to March, London listed shares paid out £12 billion in hard cash to investors, the best for several years, and not bad for a period when the stock market itself was in the doldrums.
Elsewhere in Europe, dividend payments fell.
The flip side of big companies being cautious is that they have had cash they have rightly returned to investors in the form of higher divis and share buy backs
You don’t have to be an investor solely looking for income to find, as Rockefeller did, something awfully reassuring about the clunk of cash from shares into your bank account.
Now the market for flotations seems to be improving, finally, perhaps we can stop worrying about London’s status as a global financial centre.
Even when the stock market was gloomy, most of the rest of the City functioned fine, and the dividend payouts were a symbol of the inherent sturdiness of most of our big firms.
As someone once said about America, there is nothing much wrong with the City that can’t be fixed by what is right with it.
Don’t miss out on the possible resurgence of the domestic market, experts warn.
By Matteo Anelli
Senior reporter, Trustnet.
Momentum is gathering for UK stocks, which surged through record highs last month, and the upcoming elections are drawing even more attention to the domestic market.
Indeed the FTSE 100 peaked at 8,445.8 in May, almost 600 points ahead of its pre-Covid levels, although it remains some way below the likes of the US’ S&P 500 index (11.2% return year-to-date), with the UK large-cap index up 9% in 2024 so far.
Whether this resurgence will be enough for investors to reconsider their preference for global investments and return to the unloved UK market remains to be seen, but experts are becoming more vocal about the opportunities cropping up domestically.
Trustnet has recently asked whether it’s time for a patriotic punt on the UK stock market and many commentators pointed out the favourable entry point due to cheap valuations, increased international merger and acquisition (M&A) activity, improvement in economic data, imminent rate cuts and “voracious” share buybacks.
On top of that, many UK stocks have surged past most of the magnificent seven, with very few people noticing.
Hal Cook, senior investment analyst at Hargreaves Lansdown, said there is a lot to like about the UK stock market.
“With mature industries such as banks, oil and gas and tobacco, the UK has been known as a good place to look for dividend income, but there are plenty of growth opportunities too – from big consumer goods companies selling their products globally to smaller businesses looking to grow into the giants of tomorrow,” he said.
“We think this combination and the discount on offer compared to other regions make the UK an attractive place to invest right now.”
The main way – and the cheapest – to invest in the UK are exchange-traded funds (ETFs), according to Cook, whose preference was for two iShares and one Vanguard solutions.
For investors who want to get exposure to the largest UK companies, he recommended the iShares Core FTSE 100 ETF, which tracks the performance of the FTSE 100 index.
Performance of fund against sector and index over 1yr Source: FE Analytics
“It does this by investing in every company and in proportion with each company’s index weight. This is known as full replication, which can help the ETF track the index closely,” he said.
The £2.2bn fund is passively managed by Blackrock, has achieved an FE fundinfo passive fund Crown-rating of five, and only charges 0.07%.
ETFs also offer access to income-paying stocks and Cook’s pick was iShares UK Dividend ETF, a low-cost option for tracking the performance of the FTSE Dividend UK+ index with a price tag of just 0.40%.
Performance of fund against sector and index over 1yr Source: FE Analytics
This £848m vehicle offers exposure to 50 of the highest dividend-paying stocks listed in the UK, while still making sure it’s diversified across multiple sectors. The trailing 12-month yield is currently 5.45%.
Finally, medium-sized companies enthusiasts should consider the Vanguard FTSE 250 ETF, which aims to track the performance of medium-sized companies in the UK as measured by the FTSE 250 index.
Performance of fund against sector and index over 1yr Source: FE Analytics
FE Investments analysts highlighted this fund for its simple method of replicating the performance of the index by direct ownership of all the underlying securities as well as its usage of stock lending, a practice by which a select third party borrows a limited amount of the passive fund’s holdings in exchange for a fee.
This supplements fund returns and compensates for the trading costs involved with direct ownership of the securities.
Among the investment management houses, Hawksmoor has been betting big on a UK recovery. Chief investment officer Ben Conway said that a FTSE 250 tracker would be a good option to capture a broad spectrum of opportunities in the mid-cap space, but fans of active management can also consider Aberforth Smaller Companies and Odyssean.
Not everything will be smooth sailing for the UK, however, and work remains to be done in a number of areas. The finance industry has been advocating for a number of changes to get Britain back on track.
A Dividend Hero Trust where to GRS, u just need to re-invest the dividends, whilst in the Accumulation stage and then switch into a higher yielder before u start De-accumulation.
A belt and braces strategy would be to pair trade the Trust with a higher yielder and hold thru thick and thin. When markets are weak your dividends will be buying u more Trusts at a higher yield. A strategy to GRS in great markets but even a better strategy in falling markets.
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Sorry, can’t help, unless anyone else can answer the question.
Dividend stocks are possibly the only investment where you have the opportunity for capital growth as well as income.
It’s truly empowering once you see the impact that dividend stocks can make on any account size.
Imagine the peace of mind that could give you, knowing that your nest egg could be growing without having to make massive annual contributions.
Or slaving away at the computer screens trying to pick some miracle stock.
The key ingredient is DIVIDENDS.
And when you look at it over the scope of time, the difference dividends make is truly mind boggling.
Just visualize a $10k investment in the S&P 500 since 1960 with me.
That means dividends were the ONLY difference between not having enough to make it through retirement.
Or retiring in the TOP 1% of all U.S. Households!
And the best part is, there’s no extra legwork on your end to collect these dividends – just sit back and watch.
As long as a company doesn’t cut its dividend, you’re guaranteed cash!
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Sadly I will not be able to show you how to become a multi-millionaire but I can post some building blocks for a better retirement by earning passive income every day, even when markets are closed, of £25 a day gently increasing as dividends are re-invested.
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Some observations, I believe they are now called bullet points.
MUT pays a ‘safe’ modest dividend. From 2003 thru 2009 if u were a long term holder u hadn’t made a bean. Although there was an opportunity to book some profit and to re-invest lower down. Even without the dividends the Trust has provided enough capital to re-invest in a higher yielder.
With the dividends simply re-invested, remembering it only pays a modest dividend. No skill required apart from being a bump on a log.
Like the weather, I just ignore the weather. I just try to invest whatever capital I have as best I can and take the results as they fall. I just seize whatever opportunities I can and I hope I get my share.
The blog gets its share by investing in Trusts that pay a dividend to buy more Trusts that pay a dividend. U only need to check one thing when the Trust announces news:
Is the dividend ‘safe.’
Flatlining is good.
Increasing even better.
Or has it been cut or just trimmed. The outcome determines if the Trust stays in the portfolio or is sold.
