Dividends are a welcome addition to investor’s returns on their shares. they represent the portion of profits that companies distribute to shareholders.

However, it’s not widely known that reinvesting them can greatly increase returns on share investment. Growth in dividends from Footsie 100 shares in the UK has outpaced inflation over the last 20 years, according to M&G. Indeed, they have grown by 31 percent over the past three years.

Ben Willis, Head of Research at Whitechurch Securities said, “Volatility in the market can benefit the long-term investor. If you reinvest dividends you get more units for your money, which puts you in a stronger position when markets rebound.”

Reinvesting rising dividends often bring handsome returns. Anyone who invested in, for example, the M&G Extra Income fund 20 years ago will have doubled their capital and would have received total net income payments of 176 percent of their original investment. Those who reinvested those same dividends would have seen their investment increase fivefold in the same period.

The UK population now has debts of £1.3trillion ($2.5tn) — more than £28,000 ($55,000) for every adult in the country.

In a new survey, most of Britons say they would need at least £100,000 ($200,000) to make a real difference to their lifestyle. They would use it simply to get their finances back on track.

In the survey, of more than 2,000 savers and spenders by National Savings and Investments, more than 60 percent estimated £100,000 as the very least they would need to improve their lifestyle.

At the other end of the scale, only 6 percent would be satisfied with a £1,000 ($2000) windfall. Commentators say a culture of “keeping up with the Joneses” is to blame, with many of people “going large” on holidays and expensive restaurants.

Higher earners too are not content. One in ten said a windfall of £2million ($4m) would be needed before they would really notice the difference.

John Prout, sales director at NS&I, said the figures reflected a change in national spending habits with more of us treating ourselves to everyday luxuries.

‘When Premium Bonds were launched in 1957, £1,000 was a life-changing amount and for many it meant security and a comfortable future. But foreign holidays and eating out, which used to be considered a luxury, are now a part of normal life. It is not surprising that the amount needed to have the same effect has shot up over the last 50 years.

“However, for a significant number, a windfall is now less about looking forward and more about a way to get back on track financially, and pay off past indulgences.”

More financial journalists have been giving their top tips for shares on the London Stock Exchange during 2007. Here’s a list of their suggested buys :

Lucy Farndon : Royal Bank of Scotland.
Brian O’Connor : Ark Therapeutics.
Alex Brummer : Prudential.
James Ashdon : Vodafone.
Geoff Foster : Redstone.
Ian Lyall : Oakdene Homes.
Tamsin Brown : Rank.
Manfreda Cavazza : Tesco.
Karl West : ICI
Sam Fleming : Geiger Counter.

All of the above are from the Mail Group of newspapers.

The UK Mail on Sunday has five top share tips for British investors.

Pointing out that 2006 was a much better year than predicted, the runes say that the coming 12 months will be “rocky”. However, we’re assured that the following stocks will perform well whatever the state of the markets :

1. Barclays : This is one of the world’s top banks with a strong High Street network of retail branches, as well a top flight investment bank. It also boasts a very successful fund management division with fast-growing international business interests. Its shares are rising because it has become the subject of a number of takeover attempts in recent times.

2. Biffa : This company collects, treats and recycles rubbish (garbage) for 80,000 customers worldwide. Biffa has been quoted on the London Stock Exchange since October 2006. Prior to its IPO it was part of Severn Trent Water company. The sector is a buoyant one and, it’s believed, Biffa’s management team will make the most of it.

3. Halfords : While the retail sector is expected to be flaky for most businesses, Halfords may well be the exception. It’s the largest seller of car and bycycle parts in the UK and has benefited from a raft of safety legislation in recent years. Analysts expect it to perform well in 2007.

4. CONCATENO : This company is involved in testing for drugs and alcohol — a growing service across the board — advising companies from building to shipping. It works with a number of public sector bodies. It is expected to come into its own this year and trades on the AIM (Alternative Investment Market).

5. Afren : Afren is an oil and gas exploration company run by a former head of OPEC. Its mission is in Africa and is seen as helping rather than exploiting local resources. Many experts think its time has come and it should rise well above its 57p share price in the year ahead.