Long term studies of returns from the stock market consistently demonstrate that the bulk of the returns, about 90% according to the Barclays Equity Gilt study, come from dividends and reinvested dividends. On this basis it makes sense to seek out the highest dividend payers and focus portfolios on the strongest cash generators.

It might be logical to think that companies that generate the most cash would be modern, high margin technology businesses. After all, these are the ones politicians and commentators are saying will provide the jobs and the income for the future and offer the most potential for growth. This argument reaches its apogee when it comes to green technology. According to its advocates this sector can provide us with industrial nirvana with an endless demand for workers and throwing off prodigious amounts of cash. The reality is rather different.

If we look at exactly where the cash comes from in today’s economy we see a very different picture; and one that is more low-tech than high-tech. Taking the FTSE 350 as a broad measure of the UK economy (although it isn’t but it has the data we need) the massive amount of cash generated by resource exploitation is immediately apparent. Oil extraction and mining together account for over a quarter, 27.5% to be exact, of the cash that analysts forecast will be paid out as dividends this year. Anyone who has worked in or understands these industries will know that they are in fact anything but “basic”. The geophysics and geochemistry needed to find new deposits is highly developed and the engineering required to build and operate an oil rig, a mine, a refinery or a processing plant is immense and is only possible through the extensive use of technology.

Finance is the next biggest source of cash flow for the market with a contribution estimated at 18.3%. Although it is less than the 25% it used to provide in 2007 before several large banks collapsed it is still a sizeable chunk. Although aided enormously by computers the business of lending money is as old as human civilisation.

It isn’t until we get to the third largest sector, telecoms, that we come across an industry that can rightly be called new and high tech. Mobile and fixed communications together supply 9.0% of the cash, and the…

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