Derek Pain: Abstaining from beer seems to be doing Whitbread no harm

A brewer and a company that gave up its ancient heritage to produce beer have provided varying degrees of excitement for the No Pain, No Gain portfolio.

Marston's is still a brewer and pub owner; Whitbread, once a powerful force in the beerage, now concentrates on its Premier Inn budget hotels, Costa coffee parlours and, in some recognition of its former heady beer days, a chain of pubs/restaurants. Both are long-time constituents: Whitbread arrived in 2008 and Marston's a year later. The two have been profitable investments although the former brewer has proved the more rewarding.

I enlisted Whitbread at 1,105p. Last week the price touched 5,143p. As I write, the shares are still near the 5,000p mark and, according to some City analysts, there is still plenty to go. Mind you, the bulls do not have the field to themselves; there are some advocating that the current price is too rich.

Last month Whitbread, which gave up its 250-year-old brewing role around the turn of the century, met analysts to show off a new hotel concept – Hub by Premier Inn, small and compact City hotels. The first is in central London and another 13 are planned. Analyst Wynn Ellis at stockbroker Numis was among those impressed, saying it could be "another winning formula". He has a target price of 5,600p.

Since the start of the year a number of leading investment houses have proclaimed Whitbread's merits. Among them are Nomura, the Japanese group, and the investment arm of Barclays. But the bank contingent has not been so kind to Marston's, in effect calling time on the shares with an "underweight" rating.

Yet the group seems to be doing well, outperforming many of its rivals. Trading over the festive season was good and chairman Ralph Findlay is encouraged by progress made in the current year. The shares, bought at 95p, are around 145p, although they have been higher. The stockbroker Canaccord Genuity draw attention to the 4.8 per cent dividend yield, a rate that should, if nothing else, underpin the share price.

The portfolio, of course, is not enamoured by dividends as they do not feature in my profit and loss sums. I rely on capital appreciation when calculating the quarterly performances. In fact some constituents are dividendless, reflecting my devotion to what I hope are up-and-coming companies.

But the payout segment is likely to be reinforced as Lloyds Banking Group is thought to be preparing to reintroduce dividends for its 3 million shareholders. Payments were halted by the financial crisis that engulfed the country. Its ability to carry on distributing cash to shareholders was shattered by its rescue takeover, at the Government's request, of HB)S, the Halifax group that ran into deep money trouble. Previously it had enjoyed a reputation as a generous benefactor to its shareholders.

Since Lloyds arrived in the portfolio, the shares have failed to sparkle. But dividend payments – which are, at least initially, likely to be modest – could help the price. A return to the dividend list could also assist the Government in unloading more of its remaining but still substantial shareholding. It has already sharply cut its stake, which is a residue of Lloyds' bailout during the financial crisis.

I descended on the shares at 74.8p. On occasions they have advanced beyond that, but they are now a little below my buying price.

yourmoney@independent.co.uk