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.
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.
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.
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).
Stock symbol(s): AZN,AZN.L,BATS.L,BBL,BLT.L,BTI,CCL.L,CUK,DEO,DGE.L,GSK,GSK.L,ICHGF,IHG,IHG.L,SAB.L,SBMRY,SCBFF,STAN.L,TSCDY,TSCO.L,VOD,...
|Stock name||ISIN||Last trade||P/E||EPS||Div PS||Ex Div Date||Payout Ratio||Div Yield|
|TESCO||US8815753020||10.17||21.6||0.5||0.80||Oct 30 2014||168||7.88|
|STANDARD CHARTERED||GB0004082847||887.70||7.9||113.0||51.11||Aug 13 2014||45||5.76|
|BHP BILLITON PLC||US05545E2090||43.69||8.3||5.2||2.48||Sep 03 2014||48||5.68|
|GLAXOSMITHKLINE||US37733W1053||44.00||17.5||2.6||2.45||Nov 05 2014||95||5.57|
|GLAXOSMITHKLINE||GB0009252882||1467.00||17.4||85.8||80.00||Nov 06 2014||93||5.45|
|VODAFONE GROUP||US92857W2098||35.13||67.8||0.5||1.82||Nov 20 2014||343||5.18|
|BHP BILLITON||GB0000566504||1443.00||8.2||172.0||73.23||Sep 03 2014||43||5.07|
|TESCO||GB0008847096||224.75||21.5||10.6||11.29||Oct 30 2014||107||5.02|
|VODAFONE GROUP||GB00B16GWD56||234.50||67.4||3.5||11.07||Nov 20 2014||314||4.72|
|BRITISH AMERICAN TOBACCO||US1104481072||112.65||19.9||5.8||4.90||Aug 20 2014||85||4.35|
|ASTRAZENECA||US0463531089||71.04||88.5||0.8||2.80||Aug 13 2014||345||3.94|
|BRITISH AMERICAN TOBACCO||GB0002875804||3752.00||19.8||192.0||144.90||Aug 20 2014||75||3.86|
|ASTRAZENECA||GB0009895292||4743.00||88.7||53.9||169.90||Aug 13 2014||315||3.58|
|DIAGEO||US25243Q2057||118.13||21.8||5.6||4.13||Sep 19 2014||74||3.50|
|DIAGEO||GB0002374006||1970.00||26.1||77.5||51.70||Aug 13 2014||67||2.62|
|CARNIVAL||GB0031215220||2997.00||28.6||105.0||67.25||Nov 20 2014||64||2.24|
|CARNIVAL PLC||US14365C1036||44.56||28.6||1.6||1.00||Nov 19 2014||63||2.24|
|SABMILLER||GB0004835483||3625.50||24.3||149.0||67.36||Nov 27 2014||45||1.86|
|INTERCONTINENTAL HOTELS||GB00B1WQCS47||2662.00||35.7||74.8||45.24||Aug 20 2014||61||1.70|
|INTERCONTINENTAL HOTELS GROUP||US45857P3010||39.76||0.0||0.0||0.50||Aug 20 2014||1.26|
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