United Kingdom Dividend Achievers    Bookmark and Share

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                      ISIN Last trade   P/E EPS Div PS Ex Div Date Payout Ratio Div Yield  
P/E ratio of VODAFONE GROUP on Google Finance
US92857W2098 34.09   4.8 7.0 2.35 Jun 11 2014 34 6.89
P/E ratio of TESCO on Google Finance
US8815753020 12.39   10.4 118.0 0.74 Apr 30 2014 1 5.95
P/E ratio of TESCO on Google Finance
GB0008847096 248.00   10.4 23.7 14.76 Apr 30 2014 62 5.95
P/E ratio of GLAXOSMITHKLINE on Google Finance
GB0009252882 1429.50   14.8 97.2 80.00 Aug 06 2014 82 5.60
P/E ratio of GLAXOSMITHKLINE on Google Finance
US37733W1053 47.68   14.8 3.2 2.65 Aug 06 2014 82 5.56
P/E ratio of VODAFONE GROUP on Google Finance
GB00B16GWD56 205.85   4.8 41.8 11.09 Jun 11 2014 27 5.39
P/E ratio of STANDARD CHARTERED on Google Finance
GB0004082847 1216.00   11.9 102.0 51.11 Aug 13 2014 50 4.20
P/E ratio of BRITISH AMERICAN TOBACCO on Google Finance
GB0002875804 3498.50   18.4 192.0 144.90 Aug 20 2014 75 4.14
P/E ratio of ASTRAZENECA on Google Finance
GB0009895292 4418.00   45.6 96.8 169.90 Aug 13 2014 175 3.85
P/E ratio of ASTRAZENECA on Google Finance
US0463531089 73.05   44.8 1.6 2.80 Aug 13 2014 172 3.83
P/E ratio of BHP BILLITON PLC on Google Finance
US05545E2090 64.62   11.8 5.6 2.42 Mar 05 2014 43 3.74
P/E ratio of BHP BILLITON on Google Finance
GB0000566504 1944.00   11.7 168.0 71.56 Mar 05 2014 43 3.68
P/E ratio of DIAGEO on Google Finance
GB0002374006 1755.00   19.0 92.8 51.70 Aug 13 2014 56 2.95
P/E ratio of DIAGEO on Google Finance
US25243Q2057 118.14   17.0 7.0 3.46 Feb 26 2014 50 2.93
P/E ratio of BRITISH AMERICAN TOBACCO on Google Finance
US1104481072 115.92   18.4 6.4 3.21 Aug 20 2014 51 2.77
P/E ratio of CARNIVAL PLC on Google Finance
US14365C1036 38.13   27.1 1.4 1.00 Aug 20 2014 71 2.62
P/E ratio of CARNIVAL on Google Finance
GB0031215220 2291.00   27.1 84.7 59.64 Aug 20 2014 70 2.60
P/E ratio of INTERCONTINENTAL HOTELS on Google Finance
GB00B1WQCS47 2282.00   25.1 90.5 45.24 Aug 20 2014 50 1.98
P/E ratio of SABMILLER on Google Finance
GB0004835483 3289.50   26.2 126.0 62.30 Aug 06 2014 49 1.89
US45857P3010 38.04   0.0 0.0 0.50 Aug 20 2014 1.31

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