(^62) Wealth^ The Mail on Sunday^ September 1^ •^2019
MIDAS
Our shares
guru with
the gOlden
tOuch
Joanne
hart
BUILDING RETURNS: Housebuilding firms such as Persimmon and Taylor Wimpey helped lift our portfolio’s dividend yield to an average around 10 per cent
TEN TIMES
better than
savings, our

tips yield... 10

A FULL YEAR has passed since
Midas reviewed the Dogs of the
Footsie portfolio, assessing the per-
formance of the ten highest-yield-
ing shares in the FTSE 100 index.
Back then, the yields seemed
little short of extraordinary, espe-
cially compared to the desultory
1-2 per cent savings rates on offer
from banks and building societies.
As the summer of 2018 drew to a
close, our Dogs were yielding an
average of more than 8 per cent
per annum, while the top two,
housebuilder Persimmon and steel
producer Evraz, offered income of
more than 9 per cent.
This year, the situation is even
more remarkable. The average
yield has shot up to almost 10 per
cent, while Persimmon and fel-
low builder Taylor Wimpey are
delivering income of more than
12 per cent.
At the same time, savings rates
remain depressingly low. Even
the broader FTSE 100 index, com-
prising Britain’s largest listed
companies, is yielding less than
5 per cent.
So what does it all mean? Nor-
mally, exceptionally high yields
suggest that change is afoot. A
company’s shares could be under-
valued by the market – and about to
increase in price.
The shares could have fallen,
pushing the yield higher (because
yields rise as stock prices fall). Or
brokers believe that prevailing
dividend policies are unsustainable
and payouts are going to be cut.
There have been several exam-
ples of this in recent months. And
our portfolio is no exception. In
2018, our ten Dogs were house-
builders Barratt Developments,
Taylor Wimpey and Persimmon,
insurer Direct Line, tobacco group
Imperial Brands, fund manager
Standard Life Aberdeen, energy
provider SSE, Evraz, mobile opera-
tor Vodafone and British Gas owner
Centrica.
Vodafone was yielding more than
7 per cent and Centrica almost 8.5
per cent. Vodafone new boss Nick
Read duly slashed the dividend by
40 per cent in May of this
year, while Centrica more than
halved its dividend earlier this
summer, announcing the departure
of chief executive Iain Conn in
the process.
Centrica remains in our portfo-
lio – just – but Vodafone has now
been turfed out of the Dogs, along
with SSE and Barratt.
SSE has not yet cut its dividend
but it intends to, confirming in May
that next year’s payout will fall
from 97.5p to 80p. SSE has been hit
by falling customer numbers and
the Government’s price cap on gas
and electricity charges.
The group is trying to offload its
household energy business but
attempts have failed so far.
Barratt is the only company to
have left the Dogs for positive
reasons. Britain’s largest house-
builder delivers results for the
year to June 30 later this week and
analysts are expecting the annual
dividend will rise from 43.8p to
around 46p, including a special

payout that will be made later

this year.

The share price has risen more

than 19 per cent to £6.32 over the

past 12 months, boosted by an

upbeat trading statement in July,

when chief executive David Tho-

mas said the group would deliver

better than expected results this

year, after building nearly 18,000

homes, improving profit margins

and securing top marks for cus-

tomer satisfaction.

Barratt’s robust performance is in

stark contrast to Persimmon’s

woes. The shares have fallen almost

23 per cent since last year to £19.03,

as the company faced complaints

from customers about the quality

of its homes and fought with inves-

tors over a two-year £84 million pay

package awarded to boss Jeff Fair-

burn, now departed.

Like its fellow housebuilders,

Persimmon has been energetically

returning cash to shareholders in

recent years. This year, £2.35 has

been paid out per share and the

same again is expected in 2020,

hence the group’s remarkable 12.5

per cent dividend yield. Looking

ahead, however, analysts forecast

little or no growth in sales and

profits, so future dividend

increases may be hard for new

boss Dave Jenkinson to justify.

Taylor Wimpey has suffered

fewer blows than Persimmon in

How we

pick Top

Ten Tips

THE Midas Dogs of the Footsie

portfolio tracks the ten highest-

yielding stocks in the FTSE 100

index. It looks at prospective

yields, which are calculated by

dividing the next forecast annual

dividend by the share price and

turning that number into a

percentage.

Midas reassesses the portfolio

regularly, removing stocks that

are no longer top yielders and

replacing them with those that

are, to the same value. Our

calculations based purely on the

share price do not include the

dividends received by investors.

Adding them in clearly boosts the

overall returns.

recent months but profits slipped

at the half year and the share price

has fallen more than 8 per cent

over the past 12 months to £1.46.

With an 18.3p dividend pencilled in

for this year, rising to 18.5p in 2020,

that puts the yield on a par with

Persimmon, suggesting that the

market believes these payments

cannot be sustained indefinitely.

Our third-highest payer is Evraz,

the Moscow-based steel producer,

whose largest shareholder is

Roman Abramovich, owner of

Chelsea FC. Steel companies tend

to do best when economic condi-

tions are robust and growing fears

about the global outlook have sent

Evraz shares from £7.09 in June to

£4.96 today. Nonetheless, the

company is expected to pay a divi-

dend of 65 cents this year (report-

ing in US dollars because that is the

main trading currency for steel)

and sterling weakness means

shareholders should end up with a

sterling payment of around 53p,

putting the stock on a yield of more

than 10.5 per cent.

As three Dogs have left the port-

folio since last year, we have three

new joiners – insurers Aviva and

Legal & General, and BT.

The phone company’s shares have

tumbled almost 25 per cent over

the past year to £1.66, including a

heavy lurch downwards since chief

executive Philip Jansen unveiled

lacklustre results in May and big

ambitions for the future. Jansen

said back then that he would keep

next year’s dividend at 15.4p, which

puts the stock on a yield of more

than 9 per cent. Brokers believe,

however, that a cut is on the cards,

as BT ups investment in superfast

broadband.

Our Dogs seem more vulnerable

today than they have been for a

while. Share prices have generally

fallen and dividend cuts may be on

the cards. In August 2018, our port-

folio was worth £17,797. Today, that

figure has slipped by 17.5 per cent

to £14,675. A sorry result but still

better than the FTSE 100 index.

A nominal £10,000 invested in the

Footsie in March 2012 was worth

£12,769 in August last year. By Fri-

day, that had fallen to £12,143.

Our portfolio has been buffeted

by economic and political head-

winds, while some firms have suf-

fered from problems of their own

making. Even so, investors have

benefited from exceptional yields,

and the Dogs have still managed to

beat the index.

Yield    Price

12.4 £19.03

12 .5 £1.46

10 .7 £4.96

9. 8 £21.25


10. 5 £2.83


11. 0 £1.66


12. 8 £2.49


13. 8 £3.54


14. 2 £2.20


15. 5 70p

oUR Ten sTocks wiTH THe HigHesT yields