The Case for Dividend Investing

With gold at record levels and interest rates on savings still derisory, there is no better investment at this stage than shares in companies that pay dividends. While gold may rise further if there is a further flight from currencies, I think that most of the bad news on sovereign debt is priced in and there could be a fallback over the next few weeks. U.K. interest rates will certainly not be rising in the near future, so savings will remain a very poor option, one that is certain to lose money in real terms.

The Bank of England has been consistently overoptimistic about inflation falling back to the 2% target. Now it admits that inflation will peak ‘a little higher’ and sooner than the monetary policy committee had expected. Higher, yes, although the word ‘little’ may prove to be an understatement. There is still a hint of overoptimism in the implication that inflation will start to fall back soon. Perhaps that is why the committee is still voting overwhelmingly to keep interest rates on hold. For as long as they do so, shares remain the best investment.

Source: Morningstar

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