Investment Notes
By CUSTOS
MR. LLOYD'S unexpected warning that he may introduce a capital gains tax (on short- term profits on Stock Exchange or property) before the Budget caused quite a flurry of sales. But there was some recovery later. It is said that some equity shares are nearing a resistance level. So they may be, because selling usually dries up when the dividend yield becomes ab- normally high. For example, 9.9 per cent. can now be obtained on ASSOCIATED ELECTRICAL, 7.7 per cent. on PRESSED STEEL, 7.3 per cent. on A. E. REED, 7.5 per cent. from BRITISH MOTOR, 7.2 per cent. from DORMAN LONG and 7 per cent. from BRITISH ELECTRONIC INDUSTRIES. But it is not yet time to get back into equities. In- dustrial disputes are getting worse and so are company reports. The high yields on AEI and Pressed Steel, for example, are pointing to the fact that dividends will probably be reduced. A dividend shock came for holders of shipping shares last week. CUNARD face a heavy trading loss and can only pay a dividend, if any, out of reserves. P AND 0, so long the favourite of Sunday tipsters, warns its shareholders that re- sults have been adversely affected by bad trade and rising costs and leaves a doubt whether the final dividend will not be cut. The appearance of these high yields presents an opportunity not of buying but of switching. For example, it is possible to switch from ROW ES into British Motor and gain per cent. in yield. and from Pressed Steel and lose only less than a point in yield. I would have thought that BMC management and prospects are superior to the companies mentioned. Incidentally, P AND 0 yield less than several leading steel shares whose prospects I examined last week.
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