INVESTMENT NOTES
THE equity share index has now recovered a third of its fall and if the IMPERIAL (11.EMR AL dividend turns out to have been fully °R'scounted it will not do much more before the °het. (An unexpectedly high dividend would, of course, put the index sharply up.) The bad ews of the balance of payments was a restrain- 1,4 influence, for it suggests a tougher Budget tr'au had been anticipated. Investors will be Cuttin- tr'au had been anticipated. Investors will be Cuttin-
g down on those shares likely to be affected
bY a disinflationary Budget, such as bank shares ao.d hire-purchase finance. (Motor shares are discussed in a separate note.) Perhaps the least vulnerable are brewery shares. The brewing in- dustry does not affect the balance of payments aiod the Inland Revenue gains more, not less, a reduction in the beer duty. I stand by my °rkewery recommendations of last week. Those wo? are happily buying SHELL TRANSPORT in a‘thIlcipation of good 1959 results and of a rise in loe dividend from 18+ per cent. to, say, 20 per e_ent. tax free should take their profits if they dre successful, for the Budget might contain some Uflpleasant surprise.
After their long rise of 70 per cent. over the Past fifteen months motor shares seem vulner- able to a harsh Budget. FORD MOTOR has just Presented a fine 1959 report with trading income L) 30 Per cent. and the dividend raised from '4 Per cent. to 171 per cent. nearly 41 times c9vered. The current year should be good in view of the popular new models, but a dividend Yield of 3.4 per cent. and an earnings yield of nearly 15 per cent. at the current price of 101s. seem no more than adequate for an equity in an UP-and-down industry. BMC at 21s. 6d. yield 4.2 per cent, on the 18+ per cent. dividend and k°111Y 6+ per cent. on earnings, but last year was uadlY affected by the introduction of new models and labour disputes. In the current year the optimists look for an improvement in profit- Margins and a rise in earnings from 274 per cent. to 60 per cent. The dividend could well be raised to 22: per cent. which would give a yield °f 51 per cent. This again is no more than adequate. No adverse tax on commercial motor vehicles is expected and the prospect is for in- creased sales at home and abroad. LEYLANDS had a very encouraging statement recently about future prospects and the dividend was raised fr°o) 12; per cent. to 15 per cent. At 80s. 6d. the shares yield 3.7 per cent. on dividends and just Over 10 per cent. on earnings. Again, this is not Fxciting. I cannot find any motor share which 's Particularly attractive (except possibly JAGUAR on its high earnings yield) and many seem vul- nerable.
International Shares At Budget time there is often a turn among investors towards international shares which are free of domestic problems. The year's report of 011ILIPS LAMPS just issued was excellent. Sales increased by 16 per cent. and thanks to the im-
provement in profit margins the trading profits were up by no less than 44 per cent. .ind net profits by 40 per cent. For the current year a rise of about 12 per cent. in sales is expected. In spite of larger capital spending no fresh issues of capital are foreshadowed this year or next. The dividend has been increased from 131 per cent. to 16f per cent. and a 5 per cent. scrip bonus has been given. At 157s. 6d. the dividend yield is only 2 per cent. and earnings yield 6 per cent. It usually pays to buy Philips when they have been temporarily sold down by a bearish Wall Street.
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