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MARKET COMMENT
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With the success of many high yield portfolios over the past year or two, every man and his dog are now searching for shares with juicy dividends. But beware. Successful stock picking is never straightforward and traps await the unwary. Many shares exhibit illusory high yields. Abbey National (LSE: ANL) is a good example. At around the 625p mark, the bank's shares were offering an 8% dividend yield. Up until last week that is, when Abbey admitted that its present troubles would lead to a dividend cut. Going on the latest City forecasts, a 4-5% yield is now more likely. Within the FTSE 100, probably Lloyds TSB (LSE: LLOY) is as good a 'high yield danger' candidate as any. With its shares (at 514p) offering a prospective yield of 6.9%, a good few investors must feel the payout is in question. More uncertainty was created this week when the bank failed to mention its dividend in a downbeat trading statement. Turn to smaller companies, and there's plenty of scope for picking an income howler. For starters, watch out for WS Atkins (LSE: ATK), the PFI outsourcing firm. Brokers currently expect the company to maintain its 11.3p dividend, giving the shares (at 98p) a yield of 11%. However, a catastrophic profit warning in October has led the same brokers to forecast earnings per share dropping 60% to 10p. With Atkins also admitting to net debt more than doubling to £120m in just six months, believing the payout will remain steady looks very optimistic. Mayflower Corporation (LSE: MFW) is another with generous brokers. The automotive engineer has endured a tough a year or two, which has involved a £67m rights issue to help shore up its balance sheet. Although earnings per share are expected to fall 74% to 3.6p for 2002, analysts believe the 2.9p dividend will remain unaffected. Net debt of £145m and the wafer thin dividend cover suggest the share's 12% yield (at 23.5p) is more than dubious. Finally, what about British Energy (LSE: BGY)? Although the energy firm is presently staving off bankruptcy, that's not stopped one brave broker predicting a 2p dividend in 2004. With the shares at just 7p, a possible 29% yield is on the cards... don't you believe it!