INVESTMENT NOTES
By CUSTOS
THE three-week account closed on Tuesday on a very firm note and it seems pretty certain that equity shares will move into still higher ground. The Financial Times index at a new high level■of 233f is still giving an average yield of 5.1 per cent., but as the index includes shares in the tobacco and a few other unpopular trades it is not a very reliable guide for the investor who knows well enough that it is extremely difficult to obtain yields of 4 per cent. on the leaders ICI at 34s. 3d. to yield 4.65 per cent. is an excep- tion, but the chairman was by no means optimistic about the current year's prospects. I have already called attention to DUNLOP, which can now be bought at 29s. 6d. ex dividend and cum 25 per cent. scrip bonus. Hitherto-this has not been a very popular share as it is felt that the management should have secured a higher rate of return on the vast capital employed, but I am told that better results are now being obtained and I do not think it unreasonable to go for the maintenance of the new dividend of 16 per cent. on the increased capi• tal, which would allow a potential return of over 6.9 per cent
Paper Shares
The search for yield brings investors intc industries such as paper, which are still suffering from over-capacity. The surplus of newsprint and paper-making capacity still persists and may take another year to clear up. The directors of,BowATEF are still very cautious. They have cut back new• print production and turned some plants over to making other types of paper which are more profitable. They 'merely express the hope that results for the current year 'will approximate to those of 1958.' At 48s. 6d. to yield 5.1 per cent these highly-geared shares are not exactly chea and the cautious investor may prefer the 54 pc cent. convertible loan stock at 1081 whic gives a flat yield of 51 per cent. WIGGINS TEAr is not concerned in newsprint, its business br ing centred on paper for commercial office and photographic use, and, significantly, the fall in its profits was arrested in the second half of the year ending December. 1958. The net profits after taxa tion were slightly higher and the 171 per cent dividend is now covered 14 times. These shares1 at 58s. to yield 6 per cent. are not an unreasonable speculative purchase. I prefer them to A. E. REED
p
(∎\ hich has surplus newsprint capacity) at 52s. to yield 5.35 per cent.
A Convertible Debenture Another convertible debenture at an attractive price is HAWKER SIDDELEY 51 per cent. issued at par and quoted at 61 per cent. premium (£50 paid) giving a flat yield of 5.45 per cent. It is convertible on January 31 and on July 31 in each of the five years 1960 to 1964 on the basis of 68 ordinary shares for every £100. At the present price of 64 premium this is equivalent to 31s. per ordinary share against the present market price of 28s. 3d. The company has been diversifying its interests and 70 per cent. of its business is now derived from non-aviation companies. Some of its recent acquisitions were not too. happy—A. V. Roe Canada has now disposed of its Algoma Steel shares—but in five years' time the situation may be very different and the convertibility option valuable.
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