The investment smorgasbord

Tuesday 9 November 2004

Garry Sheeran looks at the alternatives to finance company debenture stocks.

By The Landlord

As everyone from the Reserve Bank governor down cries caution over the creditworthiness of some companies issuing debentures, is it time to start looking elsewhere for reliable income flows?

Such as dividends from shares, for example.

Listed companies are subject to numerous disclosure requirements. An investor can therefore know a lot more about the financial health or otherwise of a business issuing shares than about a finance company issuing debentures.

When it comes to perceived risk, the gap between shares (and the dividends they often bring) and debentures may have narrowed for now.

But the fact remains shares and, hence, dividends are inherently more volatile.

Debentures still offer a better chance investors will get back their original capital, even if there is no prospect of getting more, the hope of those who buy shares.

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