Friday Email: 17 May 2013
Every Friday morning our lead analyst Mark Riding sends out his weekly run-down and upcoming events in the investor calendar, like this one:
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We have reacted to advice from some top website designers, have increased the length of the free trial and changed the functionality of the Optimizer to make it more intuitive. Plug over. read on......
The stock market has continued to defy our expectations of a correction and keeps on rising. We were always expecting a strong year for equities as we expected the search for income to intensify in the face of very low interest rates. That said, it is not often that you see the market go up in what has been virtually a straight line over the past year from June 2012 to date. (There were a couple of sharp drops in April) The FTSE 100 has risen from 5250 to 6700, almost 28%, in under a year; And the FTSE 250 has risen from 10346 to 14377 during the same period, a rise of 38.96%. That really is just about as bullish as it gets. Across 250 stocks, the average rise is almost 40% in under a year. Stunning and definitely not a sustainable rate of growth.
In the face of this, in recent times we have seen quite a lot of disappointing numbers and even some profit warnings, but the market is shrugging all of this off. Recent dividend declarations are detailed below:
British Land - Dividend Increase 1.1%, ICAP - Dividend flat, Babcock - Dividend increase 16%, Diploma - Dividend increase 19% (due to a rebase), BT - Dividend increase 14%, Tui dividend increase 10%, British Assets trust - Dividend increase 3%, 3i Infrastructure - Dividend increase 9%, Experian - Dividend increase 9%, Sainsbury - Dividend increase 3.7%, Sage - Dividend increase 6%, HSBC - Dividend increase 11%. Euromoney, Stobart, 3i and Shanks group all held their dividends. TalkTalk increased by 15.6 and Grainger 5.5%; invensys by 5% and Vedanta by 6%, Marston's by 4.5% and National Grid by 4%
So, the income opportunity still remains excellent against low interest rates, but the squeeze is most definitely on. No 38.96% dividend increases in the list above from the past week as dividend increases struggle to keep up with stock prices. Even the best performer of the past 7 days, TalkTalk, could only manage a 15.6% increase. That is not to say that stock prices cannot increase from here. We are just pointing out that the income return has dropped due to dramatic rises in share prices and dividend increases are a long way off keeping pace with stock prices.
There is no way that we are going to try and predict what will happen in the markets over the next few months, but we would urge DividendMax users to be very careful. The markets are hooked on QE and Western governments are hooked on debt. When QE is removed and the debts become unsustainable, it could be very interesting. Meanwhile, enjoy the ride.
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The Friday email is delivered to over 20,000 subscriber’s every week, and remains a widely read run-down of recent events and what investors can expect in the week ahead written by our chief analyst Mark Riding.
It’s included as part of the free DividendMax trial.
Read next: 10 May 2013
The markets have continued their strength this past week and we continue to look for a correction. Our dividend of the week was deliberately defensive reflecting our caution. Sage Group was the star of the week posting yet another dividend increase and also announcing a special dividend amounting to about 5% of their market capitalisation, details of which will follow later and you can be sure that we will highlight this to DividendMax users as soon as they emerge.
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