High yields still to be found

HUNTING for income is no easy task these days. Bank interest rates have been tweaked up twice in three months, but the 'best buys' on savings accounts still rarely top 4.5%.

To get 5% or better you have to tie up cash for years, or catch one of those fleeting building society bond offers.

That adds to the attractions of shares that carry a juicy dividend yield. Though the market's rise has thinned out the high yielders somewhat, it is still worth looking.

Of course, shares are riskier than a bank account. The first risk is that the dividend may be cut. Even payouts on blue-chip stocks such as the Pru, Marks & Spencer and ICI have been slashed in recent years.

The second risk is that the shares may fall, eroding your capital. Some smaller companies offer a chunky payout that can be maintained and even grown. The risk with these is their shares will stagnate as their charms are ignored by big fund managers who will not get out of bed for anything less than £1bn.

William Sinclair Holdings' value is just £12m. The Lincolnshire group is emerging from a period of change, in which it sold off its pets division and slimmed down to its main business selling Bowers peat to gardeners.

What has not changed is the 6p dividend, which puts the shares at 77p on a hefty 8% yield.

The payment is only just covered by earnings, which broker Arbuthnot puts at 7.8p for the year to next June, but it looks attractive. If the price is marked up on Monday, don't rush.

Low & Bonar, the flooring group, was tipped here last May at 62p, having 'rebased' its dividend from 6p to 4p. (When using a knife, take care not to rebase your finger).

Now the dividend has crept up again to 4.25p. The shares are 99 1/2p, still only nine times likely earnings, and yielding 4.3%, which could rise to 4.8% a year ahead.

Housebuilders, tipped frequently here in 200 1/2, have shown good capital gains as they cash in on the long housing boom. Now they are passing on some bumper dividend rises.

Wilson Bowden this week lifted its payout 23% to 33p. With the shares at 1090p, the yield is just 3%, but the payout is covered five times by earnings, and has plenty of room to keep growing.

Wimpey was first tipped here at 121p, when it was selling at four times earnings. Chief executive Peter Johnson hiked the dividend 35% this week to 12.25p, after profits climbed 30% to £378m. The yield is only 3.2%, but the payout is covered 5.5 times.

Experts keep warning that profits will crash when house prices fall. Yet Wimpey, now 386p, is still selling at barely five times likely earnings. Amazing.

Now, it is time to eat some humble pie, having tripped up last week on Marconi's complex double share restructuring. You need five warrants at 41p each, not one, to have the right to buy Marconi shares at 750p up to 2007. The shares, now 713 1/2p, must rise to 955p (750p plus 205p) for the warrants to pay off.

Though the shares have quadrupled in a year, this is a high hurdle for the warrants, making them less attractive than I thought. My apologies.

Shareholders in old Marconi, who were all but wiped out in the restructuring, are understandably angry that they got so little of the upside while the executive team got so much.