Take a risk: buy beer and fags

Put £10,000 into a building society and you will be lucky to get 5.5 per cent interest, after basic-rate tax is deducted. Put the same amount into the shares of household names such as British American Tobacco, Thames Water or Abbey National and you could get annual income, or yields, of 7 per cent or more, plus the prospect of a growing investment.

The generous yields are a side-effect of the City's obsession with technology, telecom and media stocks. Anything without an Internet connection is being ditched as investors queue to buy into the growth stories of the new. The result is that some of the old-fashioned stocks now offer outstanding value. When the obsession with growth ends, that value will be appreciated once again.

But it is essential to choose your investments carefully. Often a high yield is a danger sign. It may mean that the company is about to cut its dividend - or, worse, get into financial difficulty. Thus Somerfield, the food retailer, seems to offer a 21.5 per cent yield. But that is based on last year's 12.9p dividend payment: it has already warned it will be slashed to 4.5p - and some analysts wonder whether that is sustainable.

Likewise, some water companies appear to offer generous levels of income. But they are struggling under increasingly severe regulation, which has already led two companies to cut dividends.

Elsewhere, a high yield is the compensation investors demand for the risk that shares will fall. Royal & Sun Alliance has a yield of 8 per cent because the City dislikes its reliance on car and household insurance.

That said, a number of companies seem to offer the prospect of increases in both dividend and share price - although, for the latter, you may have to wait for technology fever to die down. Most are in old-fashioned sectors such as brewing, food, or housebuilding.

Abbey National shares plunged on fears that it will lose market share to Internet banks and nimbler rivals. But the shares, on a yield of nearly 8 per cent, are now discounting too much disaster.

Thames Water, which offers a 7 per cent yield, is one of the few utilities expected to survive the regulatory crackdown relatively unscathed and its shares are due for a re-rating. Builders such as George Wimpey and brewers such as Scottish & Newcastle, all on yields of 6 per cent or more, should eventually be back in favour.

Food companies such as Northern and Unigate are shunned because their businesses, supplying supermarkets with ready meals, milk and yoghurt, are seen as mature and susceptible to margin pressure. But both now look too cheap, and it is worth buying shares before their sell-by date passes. The final recommendation offers the highest yield but also the greatest risk. British American Tobacco has nearly halved from 650p on fears over US litigation. But to date the industry has fought off every challenge. For those willing to take a risk, a 10 per cent yield is attractive.