United Kingdom Dividend Achievers

Published Thu, 24 Jan 2012 10:00 CET by TopYields.nl

Last year, dividend investors flocked to UK dividend-paying stocks, as UK dividend payouts swelled and the number of companies raising dividends increased from the year earlier. This year, following an estimated 15.6% increase in 2012, aggregate dividends paid by UK companies are expected to rise 3% to a new record of £81 billion ($128 billion), according to Capita Registrars (for comparison, see chart below, courtesy of Capita). While investors have plenty of options to find attractive yields and dividend growth in the UK, one of the best sources of ideas about stable and sustainable dividends in the UK is Mergent’s United Kingdom Dividend Achievers™ Index.

UK Dividends Chart
The United Kingdom Dividend Achievers™ Index consists of 113 constituents, representing companies incorporated in the United Kingdom that have raised dividends for at least 5 consecutive years. All Index companies are well-established firms whose stocks have qualities of liquidity and investibility. They are generally constituents of the FTSE 100 index, the index representing the 100 largest UK companies by market capitalization.

The quality of the United Kingdom Dividend Achievers™ Index is that it focuses on consistent dividend growth. That growth for the Index as a whole has been especially robust over the past five years, averaging 11.7%, well exceeding the rate of inflation. In fact, according to JPMorgan’s citing of Société Générale research, dividend growth alone has accounted for 56% of total nominal returns in the UK market between 1970 and 2011, above the 47% contribution in the United States. The chart and table below provide an international comparison of decomposition of nominal equity market returns for the noted period.

Nominal Equity Market Returns By Country
Based on the relevance of dividend growth in total returns over the long run, investors should consider the combination of attractive yield and sustainable dividend growth for best returns. Even though there are no exchange-traded products that track the United Kingdom Dividend Achievers™ Index, investors can focus their attention on specific Index members with consistent earnings power, attractive yield, and dividend growth sustainability. Many of the Index constituents trade as American Depository Receipts on the U.S. exchanges. Attention should also be paid to the companies’ valuations. Below is a closer look at the top 10 Index constituents by market capitalization.

Top 10 Dividend Achievers Table
Furthermore, as higher earnings growth has a potential to translate into higher dividend growth, two UK-domiciled dividend payers that trade on the U.S. exchanges stand out based on the robustness of their long-term forecasted EPS growth. The two companies are Carnival (NYSE: CUK)(LSE: CCL) and InterContinental Hotels Group (NYSE: IHG)(LSE: IHG).

Carnival, a cruise company, is expected to grow its EPS at a robust 13.4% annualized rate for the next five years. The company’s dividend currently yields 2.5%, its payout ratio is 60%, and its annualized five-year dividend growth is about 2%. The stock has a trailing P/E of 24.3x. However, Carnival has a relatively low ROE of 5.4% and ROE of 4.0%. Its dividend payout ratio is elevated, but robust EPS growth could translate into higher dividend growth in the future.

InterContinental Hotels Group, a hotels and resorts company, is forecasted to expand its EPS at an annualized rate of 13.5% for the next five years. The stock currently yields 2.2% and has a payout ratio of 21%. Last year, it paid an interim dividend of 13.5p (21 cent per ADR) and a special interim dividend of 108.4p ($1.72 per ADR). Its trailing-twelve-month dividend is nearly 17% higher than the 2011 payout. The stock has a trailing P/E of 14.0x. InterContinental’s ROE is superb at 85.4% and its ROI is 25.8%. Given the company’s robust forecasted EPS growth and low payout ratio, additional boosts to regular dividends can be expected in the future.

Stock name Dividend Yield
Intercontinental Hotels Group 32.18
Astrazeneca 6.22
Bhp Billiton 5.26
Vodafone Group 5.12
Glaxosmithkline 5.08
Glaxosmithkline 4.84
British American Tobacco 4.63
Astrazeneca 4.20
Vodafone Group 3.44
British American Tobacco 3.19
Carnival Plc 3.01
Diageo 2.75
Carnival 2.73
Bhp Billiton Plc 2.57
Diageo 2.31
Intercontinental Hotels 1.97
Sabmiller 1.92
Standard Chartered 1.45
Tesco 0.00
Tesco 0.00

Articles featuring Intercontinental Hotels Group (IHG):

Even More Dividend Growth Stocks From The United Kingdom

Recently, I discussed a few dividend growth stocks from the United Kingdom. In the first article, I found Admiral Insurance, BAE Systems (OTCPK: BAESY) and BSkyB (OTCPK: BSYBF) worthy of due diligence while in the second article, I found Ensco (ESV) and Imperial Tobacco (OTCPK: ITYBF) worthy of a dividend focused portfolio. In this article, I use the same dividend-focused screen to identify seven more stocks from the UK that would interest value-focused dividend growth investor. Note that the... Read more

3 FTSE 100 Dividends Lifted This Week

LONDON -- The FTSE 100 (FTSEINDICES: ^FTSE) has slipped 101 points to 6,294 today following downbeat economic news from Europe suggesting that we could see shrinkage of 0.3% in the first quarter. There are also fears that the U.S. stimulus package could be coming to an end. What's the best way to deal with volatile times? Investing in companies that provide steady dividend income is one way. Here are three that have raised their payments this week. InterContinental Hotels (LSE:... Read more

The Best Dividends On August 22, 2012

Here is a current overview of the best yielding stocks with a market capitalization of over $2 billion that have their ex-dividend date on the next trading day. So if your broker settles your trade today, you will receive the next dividend. A full list of all stocks with ex-dividend date can be found here: Ex-Dividend Stocks on August 22, 2012. In total, 33 stocks and preferred shares go ex-dividend - of which 14 yield more than 3 percent. The average yield amounts to 4.16%. The ex-dividend... Read more

InterContinental Hotels to Return $1 Billion to Shareholders

LONDON -- InterContinental Hotels Group (LSE: IHG.L) (NYSE: IHG), which counts Crowne Plaza and Holiday Inn among its nine hotel brands, reported a 6% increase in half-year profits this morning, up to $286 million from $269 million in 2011. The group saw double-digit revenue growth in both its European and Greater China operations, with its franchise business driving a 9% increase in operating profits within the Americas division. Since its demerger from Six Continents during 2003,... Read more

Revisiting Top Paying Dividend Stocks - Size Matters

I recently wrote an article listing the top paying dividend stocks from a range of industries. The purpose of the article was to provide readers with a list of stocks to investigate as potential additions to their portfolios. One of the comments suggested that I track their performance to see how dividend yield might correlate to future performance. While I can start tracking this most recent list, I can also review the performance of the previous set of top paying dividend stocks from my July... Read more