Sunday, 22 March 2009

Laughing all the way to the...SITS company?

(By Richard Holway 4.00pm 22nd March 09) Last week, in my article about Oracle’s results, I ended with “In an interesting new twist, Oracle is to pay its first dividend since its 1986 IPO. Now there was a time when only boring old institutions like Banks paid dividends. Their place has been taken by 'boring' old software companies. Indeed, even our very own Boring Award holder, Sage now pays a dividend.”

I’ve been banging the “IT is now in its Maturity Stage” drum since 2002. Paying a dividend is the epitome of ‘maturity’ in my books. When IT was in its development stage dividends were unknown – you invested for capital growth. Many thought that concept went out of the window post 2000 and, after that, one-by-one SITS companies started to pay dividends. Now dividends are the rule – not the exception. Sage was one the last converts and now yields 4.3%. Logica is on 4.3% and Microgen on 4.8%. Of course, there are some much higher yields but they tend to be from companies where one suspects the dividend is not long for this world! The average SITS yield is currently 2.14%

A few years back, it was the banks that paid the dividends. Not any more!

The other thing that has changed is that actually SITS has been a very good place to put your money. A darned sight safer than the banks – as shares or deposits, one might add! Over the last 12 months, you would have lost 2/3rd of the value of your banking shares whereas your SITS shares would have lost just 8%.

Currently, it’s looking even better. In 2009 YTD, the FTSE SITS Index is UP 9.9% compared to the FTSE100 which is DOWN 13.3% but the FTSE Banks Index is down 33%.

Laughing all the way to the SITS company still doesn’t quite have the ring though, does it!

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