These 20 ‘dividend kings’ have easily beaten inflation over the past decade

We reveal the FSTE 350 companies that have delivered inflation-beating dividend increases over the past 10 years.

High-profile dividend cuts in recent months from Vodafone and Centrica highlight the importance of delving into a dividend rather than taking the yield or management promises at face value.

At Money Observer, we regularly stress the four warning signs that a company’s dividend may be in danger: a high dividend yield, low dividend cover score (of less than 1), rising debt levels and declining profits, as measured by the  “return on capital employed” (Roce) valuation measure.

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When it comes to positive things to look for, fund managers consider a number of factors in their hunt for the most reliable dividend-paying companies – those that should in theory keep the dividend cheques arriving for many years. One characteristic they look for is a reputation for consistent dividend payments.

Number-crunching by AJ Bell, though, helps to ensure investors do not have to dig through a firm’s reports and accounts. The broker has identified 20 companies in the FTSE 350 index that have delivered inflation-beating dividend increases every year for the past decade. Those firms that have increased their dividends for 10 years or more are dubbed dividend kings.

Top of the pile is Ashtead Group, the equipment rental company, which has produced average annual dividend growth of 34% over the past decade. Specialist banking company Paragon is in second place, followed by Intertek Group, a product testing and certification company, in third. 

The FSTE 350 companies that have delivered inflation-beating dividend increases over the past 10 years

Company 10-year average annual dividend increase
Ashtead Group 34.3%
Paragon Banking Group 22.0%
Intertek Group 17.6%
Croda International 17.3%
WH Smith 14.5%
Dechra Pharmaceuticals 14.1%
Diploma 13.6%
Hill & Smith Holdings 12.6%
Spirax-Sarco Engineering 11.2%
Spectris 10.4%
Genus 10.4%
Hilton Food Group 10.3%
Cranswick 10.1%
Informa 9.5%
Bunzl 9.3%
Fisher (James) & Sons 9.3%
Associated British Foods 8.5%
Sage Group 8.3%
Ultra Electronics Holdings 7.3%
Halma 7.1%
Consumer Price Index* 2.1%

Source: Sharepad/AJ Bell *10-year average.

Laura Suter, personal finance analyst at AJ Bell, says: “Over the past decade, the CPI measure of inflation has averaged 2.1%, which doesn’t sound like much, but it means over that 10 years the value of your money has reduced by 21%. For example, something purchased for £1,000 10 years ago would cost you £1,300 today.

“There are 20 FTSE 350 companies that have managed to increase their dividend by more than inflation every year for the past 10 years, and they span a range of sectors. The 10-year average annual increases range from an impressive 34% to a very respectable 7%.”

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Suter adds as a note of caution that investors should bear in mind these figures take you back to 2009, just after the financial crisis. She adds: “Many of these companies were coming from a low starting point and then enjoying a sizeable rally in investment markets.”

Also bear in mind that these so-called dividend kings are far from bulletproof; Pearson, for example, boasted a 10-year plus dividend track record before moving to cut its dividend in 2017. Vodafone’s dividend cut a couple of months ago also ended a two-decade streak of rising payouts.

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Comments

10 years pointless

Take it back longer , like the aristocrat etf

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