Another week, another billion-pound bonanza from the Chancellor of the Exchequer. Even if no other Brits are spending at the moment, Rishi Sunak certainly is.
The Government’s decisive action to help get the UK economy back up on its feet is to be applauded, but I can’t help wondering whether attention is being given to the right areas.
Stamp duty, for example, has been scrapped on properties worth up to £500,000. It’s undoubtedly a popular move (unless you completed on a house purchase last week) – stamp duty is surely only second in line to inheritance tax in the list of UK’s most hated taxes. But is it necessary?
As our columnist Rodney Hobson points out this week, housebuilders are actually in pretty good shape. Property prices haven’t fallen off a cliff edge; in some areas they have even increased. The latest Halifax House Price index this week showed that property prices are actually up 2.5% on a year ago.
And a £10 voucher to encourage people to eat out through the month of August is a nice gesture, but is it really enough to entice fearful folk out of their houses and into bars and restaurants?
The stock market reaction to Wednesday’s Summer Statement has been muted at best. Fears of a second wave of the virus persist and questions are starting to be asked about how all of this rampant spending is one day going to be paid for. How about a voucher to invest in the stock market instead, Rishi?
Sustainable Income is What Matters
My most regular correspondent during lockdown has been my bank. It keeps sending me letters; each one telling me the rate on my savings account has been cut again. At some point it'll probably send me a bill, charging me for the pleasure of holding my money. No wonder so many investors are desperate to find some income.
With that in mind, our popular monthly table of top dividend-paying FTSE firms has had a revamp. We want to help you identify those businesses paying the best income but only when it’s sustainable for the long-term.
We’ve seen time and again that when the dividend yield on a stock starts to move into double-digits a dividend cut inevitably follows, and that’s no good if you were banking on that income to pay the bills. Our new screening process focuses even more closely on dividend cover so you determine whether these firms can actually afford their pay out.
Income investing may feel like an impossible task at the moment. The fact we have a stock yielding a little over 1% among our top 20 is certainly an indication of just how difficult dividends are to come by. But reliability is the watchword here, and I'd prefer a 1% dividend I know is going to be paid, than the promise of a 10% pay out where the only thing likely to be delivered is disappointment.
The Problem with Property
A review of open-ended property funds is well overdue. How many times are investors going to be locked into these vehicles before we accept the inevitable: that daily dealing fund and illiquid assets simply do not match up.
There’s talk of coming up with an entirely new structure that would address this problem. Funds that only allow you to buy and sell units within a certain window, for example, or a new fund category that flags in big bold letters that you’re investing in illiquid assets.
One of the main goals of the investment industry must surely be to simplify products and make investing more palatable and easy to understand. Doing so means more individuals will engage with investing (maybe even enjoy it!) and feel in control of their own financial future.
Coming up with new fund categories with acronym-laden names feels like a move in the opposite direction. Our British obsession with property ownership means our finances are already over-exposed to this asset class; I question how much time should be given to coming up with new ways to help people tie up more of their wealth in it.
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