Investing with William Mills
Shares 20 May 2017
My investing policy has of late been to sell any small holdings in low dividend paying companies and concentrate on three or four large companies with a 5% dividend payout.
However when I read Glaxo’s accounts it seemed as if the dividend was under pressure and in the longer term would be hard to maintain.
On the other hand in the West there is an aging population riven with obesity. If middle aged, fat voters keep getting sick then their governments will be under pressure to pay for treatments.
Next on my list is Shell. It has a 5% dividend and I once believed that the Dutch government, if necessary, would find ways to prop up Shell given its popularity in Holland.
However if the US Shale revolution continues and Russia and Saudi return to a price war then the oil price could settle around the $40 mark. Whether Shell has sufficient ‘downstream’ activities of refining and retailing to stay profitable remains to be seen.
Looking for new opportunities I’m wondering if the tobacco majors will continue in business and prosper. After all, for the last twenty years and more successive governments have tried to crush their product and yet cigarettes keep bouncing back.
Another thought for share buyers is lifestyle changes. People like going into town. Usually to shop, or window shop, it’s an outdoor social activity.
However with more and more shopping going online people are looking for other town centre activities.
Such as drinking coffee and watching the world go by. Are there any share buying opportunities such as Costa Coffee and and the like?
Property. Shares in Barratts have shot up over the short term. Their dividends are still growing and the government is under pressure to find ever more housing.
The part immigration plays in the economic cycle shouldn’t be under estimated.
Initially it boosted a rise in the buy to let market which the authorities have been at pains to dampen down.
The problem is the language barrier makes it difficult for immigrants to get salaried positions and boost their credit ratings. Brexit was over emphasized.
Young immigrants are working all hours and struggling to make ends meet.
With no prospect of getting on the property ladder and obtaining a better standard of living, many are giving up the unequal struggle and heading for richer pastures where countries have a lower owner occupier ratio such as Germany, Italy and Sweden.
If the British want to attract them back it requires a fundamental shift in housing towards state owned rental accommodation.
It would mean releasing huge tracts of countryside for new town developments. Whether this happens lies far into the future.
In the meantime the builders are under pressure from government for operating as a cartel, and could be forced to lose market share. Alternatively if planning restrictions are eased there might be a flood of new building projects.
London property prices are cooling. Markets look to the immediate future. If new starts slow then continuing dividend increases will be hard to justify and nervous investors happy to take a profit, will sell.
Shares 20 May 2017 are the author’s own view and should not be construed as a recommendation to trade. If investors are uncertain they should take the appropriate professional advice.