the times | Saturday June 11 2022 61Money
remain cheap, despite being up 40 per
cent so far this year.
The war in Ukraine will boost
profits, Cumming said. Oil
prices will remain high
(and could even rise
further) for as long as
the war continues,
while countries are
increasing their
defence spending
because of the
conflict.
Cumming also
highlighted the
engineering firm
Smiths Group,
which has exposure
to both industries
through John Crane,
which provides
equipment to oil
and gas firms, and
Smiths Detect-
ion, which makes
defence systems
for governments.
The share
prices of house-
builders have fallen
this year because
they may have to foot
the bill for the clad-
ding scandal after
the Grenfell Tower
fire in 2017. But
Cumming thinks
this has now been
priced in and
that Bellway and
Taylor Wimpey
shares are cheap.
Dunelm, the
home furnishings
seller, will probably
have a slowdown in sales
as the consumer gets squeezed
by the rising cost of living, but James de
Uphaugh, manager of the Edinburgh
Investment Trust, said that it was a con-
servative, family-run firm that had the
potential for a special dividend to sup-
plement its 4 per cent yield.how to bump up those profits
Shares in Inditex, the Spanish owner
of the Zara and Massimo Dutti fashion
brands, are back to the same level they
were at the height of the coronavirus
pandemic in March 2020. That was a
time when all of the firm’s shops were
closed and it had a poor internet shop-
ping offering, said Nick Clay from the
fund house Redwheel. Now the firm
has an excellent online presence and
sales are near pre-pandemic levels.
Newmont is a goldminer and its
shares are up 11 per cent so far this year.
De Uphaugh thinks that shareholders
in the firm could be rewarded with a
special dividend.
Some companies have consistently
figured in the list of the world’s ten larg-
est dividend payers every year since
2015, so could be worth looking at.
These include Microsoft, Apple,
AT&T and Exxon Mobil.
Fund managers that look for compa-
nies they believe are high quality and
can generate good returns on capital
could be interesting in a time of high
inflation because it is hoped that their
underlying holdings can increase their
prices without sales falling.
Caspar Rock from the wealth manag-
er Cazenove Capital likes Fidelity
Global Dividend fund, which yields
2.5 per cent and holds the German
stock exchange firm Deutsche Boerse,
the consumer goods firm Unilever and
the Swiss drugmaker Roche.
Jason Hollands from the platform
Bestinvest suggested the TB Evenlode
Global Income fund, which yields
2.4 per cent and holds shares in the
information provider Wolters Kluwer,
the medical device firm Medtronic and
the software provider Microsoft.
Alan Brierley from the research com-
pany Investec thinks that Finsbury
Growth & Income Investment Trust,
which yields 2.2 per cent and
is run by Nick Train, could
be worth buying. Shares
are down 12 per cent
over the past 12
months and, at
792p, are much
lower than the
value of its under-
lying holdings at
841p.
For funds invest-
ing in cheap UK
stocks, Brierley likes
Edinburgh Invest-
ment Trust and Temple
Bar Investment Trust,
while Shavar Halber-
stadt from Winter-
flood suggested
Merchants Trust.
Investment
trusts, which are
similar to funds
but are traded on
the London Stock
Exchange as compa-
nies in their own right,
can be a good place to
look for income. Stifel,
the research firm,
highlights 24 trusts
that invest in
stocks and shares
that yield more
than 4 per cent.
Some have been
popular with retail
investors, accord-
ing to Interactive In-
vestor. These include
City of London, Black-
Rock World Mining, Hen-
derson Far East Income and
Murray International.
Elsewhere, the iShares UK Dividend
ETF, which yields 5.3 per cent and holds
the cigarette makers British American
Tobacco and Imperial Brands as well as
the insurer Legal & General, has beenpopular with investors on Freetrade.0 What to be wary of?
It might be tempting to look for the
highest yield, but the yield is simply a
mathematical equation (dividend per
share minus share price divided by 100).
The yield rises if the dividend per share
goes up but also when the share price
goes down. The miner Ferrexpo yields
17.5 per cent but that is because shares
have fallen 60 per cent over the past 12
months. “Don’t be surprised if Ferrexpo
chops the dividend eventually,” Dan
Lane from Freetrade warned.Dividend cover is a key metric used to
figure out whether a company can con-
tinue to pay its current level of divi-
dend. Work it out by dividing the earn-
ings per share figure found on its bal-
ance sheet by its dividend per share.
Be wary of a dividend cover of one or
lower because “the company is usingmost if not all of its profits to fund the
dividend,” said Caldwell. Ideally, you
want a ratio of 2 or above.
Look for companies with a strong
balance sheet. These are more likely to
be able to afford to pay dividends.
Return on capital employed (ROCE) is
possibly the best measure of this and
can be worked out by dividing the com-
pany’s profits by the assets of the busi-
ness. “There’s no golden rule that dic-
tates what a good or bad figure is. Inves-
tors should look at whether the ROCE
is rising or falling versus its historical
value for that company,” said Caldwell.n high
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I buy extra shares in companies around the world this yearthe firms that have
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Shares up
5% in 2022
Inditex
down 16%
Shell
up 46%
Matt Roberts
holds tracker
funds but also
looks for high-
dividend stocks