Look before you leap into high-yielding shares

Income-strapped investors will have their work cut out for them next year. Analysis by financial website The Motley Fool - Fool.co.uk reveals that as many as nine FTSE 100 companies are pencilled in to lift dividend payouts by 20% in 2009. But in most cases this is not due to the strength of their businesses but favourable exchange rates instead.

Figures shows that of the nine blue chip companies forecast to significantly hike payouts, only two will do so without the help of a weak pound. They are cigarette maker Imperial Tobacco and supermarket giant Morrisons, both of which report accounts in sterling.

The rest are primarily dollar earners and pay dividends in the US currency. They include a brace of financial companies, a hedge fund, a brewer and two from the oil industry. A pair of miners tops the payout table despite the recent plunge in commodity prices.

It seems that the weak pound will be a boon for yield-seeking investors. But investors should also bear in mind that any strengthening of the pound could easily wipe out much of these expected gains.

David Kuo, Director at The Motley Fool, says: "When interest rates are abnormally low, it is understandable for consumers to seek higher returns for their money elsewhere. But investing in shares for this purpose should only be considered if you can afford to put the money away for at least five years.

"Currently, there are inconsistencies in the market, which can be misleading for investors looking for income. Often the anomalies may not be readily apparent. So, it pays to check around before we leap if we are to avoid the pitfalls."