INVESTMENT NOTES
By CUSTOS WHY is it that equity shares do not fall more in the face of shockingly bad international news? Well, would you buy Government bonds in the face of the Treasury's fanatically dear money policy? Apart from lending your money to a local authority at 54 per cent. on seven days' call, there is not much alternative to holding equity shares. Besides, companies are still report- ing higher profits every week. Witness the GUS results this week—with net profits up 16 per cent. In the first half of the year the 1,400 companies publishing their reports in the Financial Times recorded an increase of 124 per cent. in trading profits and of 30 per cent. in dividends. Company results should go on improving in the second half of the year, although the increase in divi- dends may slow down. In the exceptional case where a fall in profits is anticipated share prices have already discounted it, just as they have generally discounted in other cases the coming rise. I find, therefore, most industrial equities unexciting and vulnerable.
Finance Equities This week's notes will therefore be devoted to a survey of the leading equities in the financial as opposed to the industrial and commercial world. Hire-purchase finance shares are not now popular, but UNITED DOMINIONS TRUST is con- cerned chiefly with capital goods, not consumer goods. It has just reported a 20 per cent. in- crease in profits before tax and of 50 per cent. in the income still to be collected. It has raised its dividend by 14 per cent. to 264 per cent. and the shares have fallen to 163s. against a high of 197s. 6d. At this price they yield nearly 3.3 per cent. Insurance shares are generally preferable to hire-purchase shares, for insurance income accounts flourish on dear money and rising equity dividends. Of the composite companies I like COMMERCIAL UNION, whose new shares can be bought free of stamp at 56s. 9d. to yield 31 per cent. 1 favour also ROYAL at 142s. 6d. to yield 3.3 per cent. and EAGLE ST AR at 75s. to yield 3 per cent.-the last because of a rapidly developing life fund. Above all 1 favour bank shares which benefit most of all from a dear money regime. Most of the joint stock bankers will again in- crease their dividends this year.
Investment 1 rusts
The larger distribution of profits made by Industrial companies over the past eighteen months has a delayed action on the income of the investment trusts, which is only just beginning to feel the full effect. Thus CABLES AND WIRELESS reports for the three months ending last June earnings which.are 40 per cent. higher than in the corresponding months of 1959. The same second interim dividend has been paid on the capital increased by the- one-for-five scrip issue, and it looks as if more than 10 per cent. will be paid for the year. At 16s. 3d. the 5s. shares yield 3 per cent, on 10 per cent. CITY OF LONDON BREWERY AND INVESTMENT TRUST is an orthodox invest- ment trust but with 18 per cent. of its portfolio in brewery shares (which may be an advantage today), and for the year to June 30 has just raised its total distribution from 27 per cent. to 36 per cent. Earnings have no yet been published, but in view of its proposed three-for-one scrip issue they should be good. Perhaps a more liberal distribution policy will be followed in future. The 5s. shares have risen sharply to 63s. 9d. and at this price yield 2.8 per cent., but are still reason- ably priced seeing that the break-up value must now be well in excess of 70s.
Propeity Shares
After a quiet spell property shares are begin- ning to attract more attention. CENTRAL AND DISTRICT, which I have previously recommended, has raised its total distribution for the year to March 31 to 131 per cent. This is in excess of its estimate and compares with the equivalent dis- tribution of 9 per cent. for the previous year. At 36s. 6d. the 10s. shares yield 3.8 per cent. CAPITAL AND COUNTIES, which have the backing of the Norwich Union, can still be bought in letter form and at 24s. the 5s. shares yield 3.2 per cent. This company is developing the valuable Knightsbridge-Brompton Road area.
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