The Financial Times Guide to Using the Financial Pages
Romesh Vaitilingam · 2006 · 314 pages
A literacy manual for reading the Financial Times circa 2006, not a trading method. It teaches the formulas behind yield, P/E and dividend cover well, but its central conceit, walking you through printed share tables column by column, describes a product that mostly stopped existing.
The one idea
The book's real idea is that every number in the financial pages is a ratio, and ratios only mean something in comparison. A share price alone tells you nothing; the same price next to its 52-week high, its dividend yield and its price/earnings ratio tells you whether the market is optimistic or worried about that company. Vaitilingam walks through the London Share Service table column by column: price, price change, 52-week high and low, dividend yield, P/E ratio, and volume, then shows what each one is actually measuring and why yield and P/E move in opposite directions when a share price rises.
Chapter 18, written by Ken Langdon, extends this into four ratios you pull from a company's annual report rather than the daily paper: gearing, income gearing, return on capital employed (ROCE), and pre-tax profit margin. Combined with the three newspaper ratios (yield, P/E, dividend cover), that gives seven numbers Langdon argues a private investor can realistically track without becoming a full-time analyst. He then runs a hypothetical telecom company, Phoneco, through four life stages from flotation to blue-chip maturity, showing how all seven ratios shift as a company ages: high gearing and a low yield early on, settling into moderate gearing and a high yield by year 30.
The book is not selling a system for picking winners. It is explicit that these ratios are for comparison, between companies, between a company and its sector average, or against the same company's own history, not for timing a trade. Anyone looking for a signal or a buy rule will not find one here.
What it actually teaches
The book's approach is not sequential trading steps, it is a stack of ratios you build up from cheapest and most available to hardest to pull, each one sharpening the picture:
READ THE DAILY QUOTE BLOCK
Start with what the paper prints every day: closing price, the day's price change, and the 52-week high and low. A price far below its 12-month high while the sector is flat signals the market expects trouble; a price pushing to new highs against a flat sector signals strength. The spread between the high and low is a rough measure of the stock's volatility.
CALCULATE DIVIDEND YIELD
Dividend yield (per cent) = (dividend per share x 100) / share price. A low yield relative to the sector usually means the market expects the company to grow, and it is retaining cash rather than paying it out. A high yield usually flags a mature or higher-risk business.
CALCULATE THE P/E RATIO
Price/earnings ratio = share price / earnings per share. This is the number of years, at current profits, it would take the company to earn back its market value. Yield and P/E move in opposite directions: as price rises with earnings and dividend held constant, yield falls and P/E rises. The book calls P/E the most commonly used tool in stock market analysis, and a better indicator than yield because it isn't dependent on a company's arbitrary decision to pay or withhold a dividend.
CHECK DIVIDEND COVER (WEEKLY)
Dividend cover = earnings per share / dividend per share. This runs in the Monday London Share Service only, not daily. It tells you how many times over the company could pay its declared dividend out of current profits. Low cover (near 1) means a dividend cut is one bad year away; the book flags dividend cover as the single most useful number in the weekly table.
PULL THE FOUR ANNUAL-REPORT RATIOS
From the company's annual report, not the newspaper: gearing (total debt liabilities / shareholders' funds x 100, rule of thumb: under 100% low, 100-200% medium, over 200% high); income gearing (interest payable / profit before interest and tax x 100, under 25% low, 26-75% medium, over 75% high); ROCE (pre-tax profit / capital employed x 100, under 10% low, 10-20% medium, over 20% high); and pre-tax profit margin (pre-tax profit / sales turnover x 100, under 2% low, 2-8% medium, over 8% high). Do the calculation yourself rather than trust the company's own 'five-year record' box, since companies pick the version of each ratio that flatters them.
COMPARE AGAINST THE LIFE-CYCLE PATTERN
The book's Phoneco example shows how all seven numbers should shift as a company matures: at flotation, gearing 500%, income gearing 95%, ROCE 1%, margin 1%, yield 0.3%, P/E 35, dividend cover 13; by year 30-plus, gearing 60%, income gearing 20%, ROCE 25%, margin 10%, yield 5.9%, P/E 13.8, dividend cover 1.5. Use this as a rough benchmark for where a company should sit given its age and sector, not as a prediction.
What it looks like Monday morning
A reader picks a stock they own or are watching and pulls the same seven numbers the book walks through: the day's price against its 52-week high and low, dividend yield, P/E, dividend cover from the annual report or a data provider, then gearing, income gearing, ROCE and pre-tax margin from the last two years of annual reports. They compare those numbers to the company's own history and to its sector average rather than treating any single figure as a verdict.
What changes is not a trading rule but a reading habit: instead of reacting to a headline price move, they check whether yield and P/E moved in the direction the book predicts, and whether gearing or dividend cover has drifted toward the danger end of the book's rule-of-thumb bands. None of this produces a buy or sell signal. It produces a more literate read of numbers most investors skim past.
| Stage | Gearing | Income gearing | ROCE | Pre-tax margin | Yield | P/E | Dividend cover |
|---|---|---|---|---|---|---|---|
| 1: 0-10 yrs | 500% | 95% | 1% | 1% | 0.3 | 35 | 13 |
| 2: 10-20 yrs | 200% | 75% | 10% | 4% | 1.6 | 25 | 3.5 |
| 3: 20-30 yrs | 100% | 30% | 20% | 8% | 4.0 | 18 | 1.9 |
| 4: 30+ yrs | 60% | 20% | 25% | 10% | 5.9 | 13.8 | 1.5 |
Phoneco is an invented illustrative company, not a real one; treat these as directional benchmarks, not targets.
High price/earnings ratios are usually associated with low yields, and certainly they move in opposite directions.Romesh Vaitilingam, The Financial Times Guide to Using the Financial Pages
Where it fails
- The core teaching device no longer exists in print. Chapter 5's entire method is a column-by-column walkthrough of the FT's daily London Share Service table (Figures 5.1 to 5.8 in the 5th edition, 2006), covering roughly 3,000 stocks with price, yield, P/E and volume. UK newspapers, including the FT, sharply cut or eliminated these detailed daily share-price listings as online brokerage and data sites took over, so a reader following along with a current print paper will not find the table the book is teaching them to read.
- It quotes a dead phone service as a live feature. The book directs readers to FT Cityline, a 0906 premium-rate phone line for real-time share prices by four-digit code, as a normal part of using the financial pages. That service belongs to an era before smartphones and free real-time quotes online, and the book gives it no caveat about being time-limited.
- The worked example is a hypothetical, not a case study. Phoneco, the telecom company whose ratios move through four life stages (flotation to blue-chip maturity), is explicitly invented by chapter author Ken Langdon to illustrate a pattern, not a real company's audited history. The specific numbers (500% gearing at flotation, 5.9% yield at maturity) are a teaching device dressed as data, and the book doesn't stress-test the pattern against a company that broke it, such as one that never survived to Stage 4.
- It is UK-print-centric and thin outside London equities. The depth is almost entirely in Chapter 5's London Share Service and Chapter 6's FTSE indices. US equities (Chapter 7), European equities (Chapter 8) and emerging markets (Chapter 9) get a fraction of the page count and none of the table-reading detail, so a reader focused on US markets gets far less than the title promises.
- No claim to an edge, by design, which some buyers will miss. The book states plainly that its ratios are for comparison between companies or against sector averages, not for timing trades or picking winners. That's an honest position, but a reader hoping this is a stock-picking or trading manual, which the FT branding and the ratio talk can suggest, will find only reference material.
Who it is for
Buy it if
You want a plain-English explanation of what dividend yield, P/E, dividend cover, gearing and ROCE actually measure and how they move together, and you're comfortable treating the newspaper-table chapters as historical description of how this data used to be published rather than a live how-to.
Skip it if
You're looking for a trading system, a US-market-focused guide, or a way to read today's financial media specifically. The ratio definitions are sound but you can get the same formulas from a current source that doesn't spend chapters on a defunct table format and a phone service that no longer exists.
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