The calendar may say 2009, but in investment circles it is already being dubbed “year zero” – the era in which base rates are steadily nudged towards nought.

That soubriquet is not entirely serious: few economists expect the Bank of England to go as far as the Federal Reserve in slicing its key rate to a quarter of 1 per cent in the near future. But it neatly encapsulates the anxiety of savers who have seen the returns on their cash tumble to historic lows.

It will not become clear until Thursday lunchtime whether the Monetary Policy Committee will cut for the third month in a row – consensus forecasts point towards a half-point reduction to 1.5 per cent – but banks have wasted no time factoring a further fall into their own savings rates. Figures from Moneyfacts.co.uk show that the average return on instant access accounts has fallen to 1.66 per cent. Even at that level – it is set to slide further in the coming months – anyone reliant on bank returns would need a lump sum of £300,000 on deposit to generate an income equivalent to the basic state pension.

Steve Clayton, an analyst at Mirabaud Securities, the stockbroker, dubs such savers “the new poor” and says that they face a stark choice: “You can either have security of capital and the certainty of poverty now, or the prospect of a reasonable level of income in return for taking a degree of risk.”

For most, that risk means buying equities, where last year’s collapse in world stock markets and the accompanying flight to risk-free assets has pushed the dividend yield on shares above the return on government bonds for the first time in decades: a crossover that occurred on the collapse of Lehman Brothers last September and has persisted in the four months since. As the bottom line on the chart shows, even when the yield on UK government bonds is subtracted from the dividend yield on the FTSE all-share, the result is still positive.

Mirabaud points out that no fewer than 40 constituents of the FTSE 100 now have consensus dividend yields of 5 per cent or more (a list topped by Old Mutual at 11.6 per cent), producing a median yield of 4.4 per cent, against the 3.1 per cent currently on offer from ten-year government bonds.

Of course, not all the dividends on those 40 stocks will be paid – a lesson of which investors in other nominal high-yielders (the likes of DSG International, Inchcape, Lonmin, Persimmon or, most recently, Yule Catto, which announced the suspension of its payout last week) will need no reminder.

But Mr Clayton contends that yield increasingly will drive equity performance: profit warnings will come thick and fast this year, but companies that can keep paying dividends will bounce back from the knocks delivered by near-term pressures on earnings. Equally, there are many blue-chip stocks where a dividend cut has already been priced in: were Marks & Spencer to halve its forecast payout, for example, it would still provide a yield of 4.9 per cent. On present forecasts, the UK stock market is predicted to pay out a record £65 billion in dividends in 2009, which seems anomalous given the absence of four big bank dividends, an expected fall in company profits of about 25 per cent and the fact that dividends are, above all, a discretionary use of a company’s cash.

However, based on the experience of the last recession – when the proportion of profits that companies collectively paid out in dividends surged to 84 per cent – Citigroup thinks it reasonable to assume that about £55 billion of cash will be handed back to shareholders this year. The bind is that about half of that is accounted for by only seven companies – AstraZeneca, BAT, BP, GlaxoSmithKline, HSBC, Royal Dutch Shell, and Vodafone – more than one third is denominated in US dollars and a roughly a quarter comes from the oil majors. This means that the dollar/sterling exchange rate and the strength of the oil price – Citigroup thinks crude below $40 a barrel would put dividends under pressure – is critical to the outcome.

The greater comfort is that investors’ search for yield is likely to pull money back into risk assets in general – and not only equities. In property, the rental yield on CBRE’s all-property index stood at 6.5 per cent at September 30 and will have risen since. Anecdotal evidence suggests that, in some corners of commercial property, rental yields of 11 per cent and more are being achieved. Elsewhere, demand for coupon-bearing paper should enable investment-grade corporate borrowers to bypass the banking system altogether and secure the capital that they require from the debt markets. When corporate debt issuance picks up, the issuance of fresh equity – with dividends attached – is usually not too far behind.

For now, the above table of a dozen stocks deemed to provide a high but reasonably secure yield, will have to suffice.

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