High-yield havens

IS it safe?,' demanded Laurence Olivier's Nazi dentist in the 1970s classic film Marathon Man. Investors looking for decent dividend yields are tempted to ask the same thing.

They could do worse than buy a stock market tracker in a tax-free Isa. The market's yield of 3.5% matches the base rate and beats most savings accounts.

'We think the current dividend level is sustainable, but we expect very little growth over the next few years,' says Robert Parkes, UK strategist at HSBC.

Risk is highest among banks, life assurers, manufacturing and media companies and lowest among defensives such as tobacco and beverages.

British American Tobacco offers a yield of 5.7%, but is exposed to litigationconscious America. Rival Gallaher yields 5.1%, and Imperial Tobacco 4%.

Among utilities, United yields 8.4%, though cover is thin, Scottish & Southern 5.9% and Kelda 6%, but regulatory reviews might squeeze them in future.

Others offer sustainable yields over 4%, including Boots, Dixons, Shell, Land Securities and British Airports Authority.

Invest in these through a broad-based investment trust. Michael Bellamy, analyst at Teather & Greenwood, recommends Murray Income (421p, yielding 4.3% net) and Schroders Income Growth (151p, 3.9%).