INVESTMENT NOTES
By CUSTOS
THE post-Budget markets were featured by a recovery in gilt-edged and a sharp fall in equity shares. The fall was worse in steel shares in anticipation of the coming issue of Richard Thomas and Baldwins. Industrial reports, such as PRESSED STEEL, SEARS HOLDINGS, etc., were satis- factory, but did nothing to arrest the decline in investors' enthusiasm in this three weeks' account.
While uncertainty over the Treasury's coming action remains, the market will continue dull.
Shell al- 5 per cent.
Most investment advisers will tell you not to miss SHELL TRANSPORT shares selling at a price to yield over 5 per cent. gross. This has un- doubtedly been right over the years and in favour of the present moment is the fact that the directors have at last decided to distribute a larger propor- tion of the company's share of the group profits, namely 33.2 per cent. against 29+ per cent. The SHELL dividend. has gone up from 18+ per cent. to 231 per cent, tax free, while the ROYAL DUTCH have only added 25 cents to FI.5.25 and distributed a 2 per cent, stock dividend. But there is still a world surplus of oil, competition is fierce and applying the same basis of depreciation it will be found that after a 10 per cent. rise in net profits the equity earnings of Shell were only slightly higher—at 73 per cent. against 701 per cent. Still, this is a good cover for the dividend of 231 per cent, tax free, and I would not dissuade buyers. BRMSH PETROLEUM did not help the oil share mar- ket, for its gross profits were down by 51 per cent., and although sales were increased in the last half of the year profit margins were lower. The BP dividend. was raised from Is. 9d. to 2s. 2d. tax free and at the present price of 56s. 6d. the gross yield is 6.4 per cent. against the current yield on Shell of 5.1 per cent. gross.
Industrial Holding Companies It would not be true to say that industrial hold- ing companies are popular with investors because it is rare to find a group where all the subsidiaries can do well at the same time, but THOMAS TILLING 4s. shares at 23s. to yield only 3.2 per cent. show that the market has great confidence in the quality of this management. Here the dividend has been raised to 17 per cent. (against the equivalent 12.05 per cent.) from earnings of 37 per cent., and it is hoped to maintain this rate on the capital increased by a one-for-ten scrip issue. Mr. Clore's SEARS HOLDINGS has also had a very good year, profits being 23 per cent. higher. The prosperous shoe business accounted for half the total and the shipbuilding business has a full order book up to 1962. The dividend is maintained at 25 per cent, on a capital increased by a one-for-four scrip issue. Another scrip issue is proposed—one- for-five—in 'A' shares and the same dividend of 25 per cent, is forecast. At 33s. the 'A' shares yield 4.7 per cent., indicating that the market has not the same confidence in its future as in that of Tilling, whose profits last year rose 40 per cent.
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