Every month for the last seven years, the Bank of Englands monetary policy committee (MPC) has dutifully assembled to discuss whether it should hikeinterest rates and every month the press has dutifully reported exactlythe same decision: not this month, chaps.
Low rates forever
The whole thing is a charade. You wonder howeverybody summons upthe energy. There has been the odd flashof excitement as more hawkish MPC members such as Andrew Sentence, Martin Weale andIan McCafferty briefly vote for a hike, but it never lasts. Around 18 months ago I suggestedthat interest rates will stay low forever and history seems determined to prove me right. Nobody is talking about a rate hike now. In fact, negative rates seem more likely. All of which is poisonfor savers, endless poison.
Right now, if you want more than 1% on your savings, you have to lock your money away for several years with a challenger bank youve probably never heard of. If you find that tempting you had better act fast because rates are forecast to fall againas markets accept that theMPC wont lift ratesuntil 2020 at the earliest.
Reap this reward
Enough moaning about dreary old savings, because theres a happier story to tell. Dividend-paying stocks offer an antidote to todays savings poison, and can spare savers another lost decade. Right now, the FTSE 100 offers an average dividend yield of 4.2%, crushing the returns on cash. Better still, most companies remain wedded to progressive dividend policies, which means that dividends should rise with inflation or better over the years.
That doesnt meanall is sunshine and party hats in the world of dividends. Last year,Antofagasta,Centrica,Glencore,WM Morrison,J Sainsbury,Standard CharteredandTescoall cut or cancelled their dividends. Rolls-Royce Holding brandished a knife last week. Mining giant Rio Tinto paid its full-year dividend but investors can no longer bank on progression. The BHP Billiton dividend could be next for the chop.
Low prices, high income
Happily, there are still plenty of electric dividendsout there, as the share price rout forces up yields.British Gas owner Centrica, for example, cut its dividendbut is still forecast to yield 5.9% by December. Asia-focused bankHSBC Holdings yields a mighty 7.45%. Pharmaceutical giant GlaxoSmithKline yields 5.87%. Legal & General Group yields 5.68%.Vodafone Group yields5.50%. Royal Mail Group yields 4.98%. Most seemlikelyto survive the current cull.
You need a little courage to go shopping for stocks amid the current market disarray, but brave investors should be handsomely rewarded in the long run. Many FTSE 100 companies were arguably overvalued but the recent correction has brought them back into line. Buy today and you can wait patiently for the recovery while reinvesting those dividends for yet moregrowth. That should be far more rewarding than watching your money die a slow death in the bank.
If you’re looking for an exciting dividend stock then you can’tafford to miss our BRAND NEW report A Top Income Share from The Motley Fool.
While someleading UK companies are slashing their dividendsthis FTSE 250 star accelerated its payout at astonishing speed in 2015.
The Fool’s crack team of analysts is so impressed by this company’s ambitious growth plans they’re happy to call it one of the best income stocks on the market today.
Click here to enjoy this FREE, no-obligation wealth report. It will be yours in moments and won’t cost you a penny.
Harvey Jones has no position in any shares mentioned. The Motley Fool UK has recommended Centrica, GlaxoSmithKline, HSBC Holdings, and Rio Tinto. We Fools don’t all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.