THE INDEPENDENT (UK): Private Investor: I'm holding out for a psychological breakthrough: “…I also note that Shell is up again, now at 440p or so, and thus actually delivering some decent returns for me. The markets seem to have taken to the restructuring plan quite well, and next year Shell will pay out, if this makes any sense, five-quarters-worth of dividends in the nine months between March and December. Not quite as dodgy as it sounds, I hope.” (ShellNews.net) 20 Nov 04

By Sean O'Grady

20 November 2004

To my surprise, the old portfolio is looking remarkably healthy, with lots of blue upward-pointing arrows swamping the few downwards red arrows on my computer screen.

Much of this is to do with the very gradual return of confidence that seems to be happening in the equity markets, and I would not be startled if the FTSE 100 index didn't end the year above 5,000 after all.

Not such a daring prediction, given that we are only about 4 per cent away from that benchmark, but expect a good deal of coverage and excitement when it does eventually drag itself past that "psychological barrier". The fact that it will still be about 12 per cent below where it was four years ago also deserves to be remembered.

Still, the headlines and fuss about the recovery in profitability might even create a little bit of momentum of its own, as it has before, without things going full-blown bullish.

Nowhere, perhaps, is the revival in prospects seemingly more pronounced than in the benighted telecoms sector. So it is that the last tranche of shares I bought in mmO2 are up more than 100 per cent and those in Vodafone up 48 per cent. Those were bought in at fire sale prices when the market virtually collapsed in the autumn of 2002.

A much increased dividend from Vodafone and the promise of one at mmO2 obviously has helped matters. The only bum note is that mmO2 wants to get its army of small shareholders to sell their holdings in the company, by offering a free dealing service for holders of fewer than 500 shares. After all, mmO2 was demerged from BT, so such an administrative difficulty has been in the offing for some time.

I do appreciate that the cost of mailing and processing dividend cheques can be burdensome, but these smaller shareholders are exactly the people who need to be encouraged into the world of investment. I can't help feeling that it's a rather unfriendly sort of gesture, especially given that dividends can be paid electronically and annual reports and other mailings can be sent over the internet rather than through the post.

I've transferred mine to a nominee account anyway and bought some more in paperless form, but if I did still have my old mmO2 certificates I wouldn't sell them just because the dealing fees had been paid.

They should be a decent long- term bet. There is the perennial prospect of this outfit getting taken over, in which case you will receive a return in some form (the bidder's shares, cash, or a mix) without any admin fees in any case. Wouldn't it be funny if BT decided to buy it back? Just a thought.

In the case of Vodafone, at any rate, the commentators seem to be united in the view that this rise to a yield of about 3 per cent is a sign of a strong and maturing business. That's one way of putting it. I think there's plenty of growth left in the sector yet, and plenty of competitive challenges too, especially for a market leader such as Vodafone. Mature, perhaps, then, but not that stable and not that secure. We should relish the chance to make the best of these improved shareholder returns. They may not be quite as secure as we would like to think. Talking of mature businesses, I also note that Shell is up again, now at 440p or so, and thus actually delivering some decent returns for me.

The markets seem to have taken to the restructuring plan quite well, and next year Shell will pay out, if this makes any sense, five-quarters-worth of dividends in the nine months between March and December. Not quite as dodgy as it sounds, I hope.

Which leaves me to update you with the three bits of spice floating in my winter equity warmer; Urban Dining, Falkland Oil and Gas and Matrix Communications, all recently bought with varying degrees of speculative hope. And all up on the week, again. What could possibly go wrong?

s.o'grady@independent.co.uk

http://money.independent.co.uk/personal_finance/invest_save/story.jsp?story=584696