the richest man in atherstone

I felt that Lloyds offered the best investment because of the stability of the company (dividend has not fallen like United Utilities and the Chief Exec has not resigned like DSG International) plus, of course, it has the highest yield of the FTSE 100.

I also feel that by selling their registrars business, Lloyds TSB are focusing on the core financial services that they've laid out in their annual report and maybe some of the profits made from the sale could be be put in the shareholders pockets. I also think it is likely that Lloyds TSB shares will appreciate in value over the next few years.

Calculations
In total the shares cost me £985.47 (171 shares at £5.763 each).

Added to that are my broker's commission at £7 (per trade) and Stamp Duty at 0.05% of the purchase cost, which equated to £4.93. In all, the transaction cost £997.40 which, divided between the 171 shares, equals an actual cost of a fraction over £5.83 per share.

Assuming a dividend payment of 34.2p per share (as it has been for the previous 5 years), I should earn £58.48 gross per year from these shares. Dividend income is taxed at 10%, so that will actually be £52.63 net. That means a net yield of:

£52.63 / £997.40 x 100 = 5.28%

If I didn't take the commission and stamp duty into account, the net yield is:

£52.63 / £985.47 x 100 = 5.34%

Compared to a good savings account, the shares I have bought will have a better return. To earn 5.28% net from a savings account would require an interest rate of around 6.6% gross. Additionally, with savings, there is no chance that the capital will appreciate in value. By the same token, there is no risk that savings account funds will depreciate in value but I think investing in a large corporation like Lloyds TSB is a safe bet.

After one year, I would have earned around £47.88 had I put the £997.40 in my high interest IceSave savings account, compared to the £52.63 I will recieve from my Lloyds TSB shares in dividend yield. Over the long-term, reinvested dividends and capital growth should make the shares out-perform the savings account by a lot more.