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.

If you’re wondering what all the fuss is about concerning Private-Equity takeovers of blue-chip companies, here is an excellent explanatory article by Irwin Stelzer in the British Sunday Times. He takes a broadly favourable view of the venture capitalists and what he sees as their contribution to the economy. [Private Equity]

The nub of the problem?

The controversy began, in part, because company executives, unconstrained by the dispersed and therefore relatively powerless company owners (also known as shareholders), persuaded many supine boards of directors to award compensation bearing little relationship to performance.

So, all is forgiven, then?

Scott Adams, who wrote the Dilbert books in the U.S., once concocted a 9-point plan for sorting out your money, which he called, The Unified Theory of Everything Financial.

Here it is adapted for the UK market :

1. Make sure you have a will.

2. Pay off all your credit cards.

3. If you have a family to support, get term life insurance.

4. Ensure you fund your company pension to the maximum.

5. Buy a house.

6. Put £3000 in a tax-free Isa savings account each year. (£3000 is the current maximum).

7. Any money left over, invest 70 percent in a stock index tracking fund, and 30 percent in a bond fund through any discount broker/fund supermarket. Don’t touch it until retirement.

8. For special cases, or lack of expertise, hire a fee-based financial planner, not one who charges a percentage of your portfolio.

Good advice, so pass it on to anyone you think may need it.

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.