Big share dividends 'due to currency changes'

Moving too much money into high-yielding stocks might not be an effective strategy, new analysis from a financial website showed today.

The Motley Fool said that seven of the nine FTSE 100 firms thought to be planning a dividend hike of 20 per cent for 2009 were doing so due to the weak pound, rather than through any underlying corporate strength.

In particular, dollar earning firms are finding it much easier to pay sterling dividends at the moment, with the pound recently plumbing a 25-year low of $1.35.

Moreover, sterling is still languishing at well below $1.50.

David Kuo, director at The Motley Fool, explained: ’When interest rates are abnormally low, it is understandable for consumers to seek higher returns for their money elsewhere. But investing in shares for this purpose should only be considered if you can afford to put the money away for at least five years.’

He added: ’Currently, there are inconsistencies in the market, which can be misleading for investors looking for income. Often the anomalies may not be readily apparent. So, it pays to check around before we leap if we are to avoid the pitfalls.’ADNFCR-2318-ID-19150493-ADNFCR