The good news, as far as investors are concerned, is that dividends are on course to hit a record high in 2017, according to the latest UK Dividend Monitor from Capita Asset Services.
Income investors should not necessarily be rushing to celebrate, however, as it’s not clear how sustainable this is likely to be. Dividends have been given a substantial boost from weakened sterling. In addition, there’s been a large haul of special dividends, and investors should bear in mind that these payments usually only occur during the good times.
One useful tactic to help investors focuses their sights on the most reliable payers, is to consider shares that have raised their dividends through both the good times and the bad.
Number-crunching by AJ Bell, the broker, has produced a list of 15 FTSE 100 shares that have increased their dividends for at least 15 years. When dropping the time period to 10 years, a total of 27 firms have achieved the feat.
But 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 earlier this year.
As the table below shows, investment trust Scottish Mortgage leads the pack, having raised dividends for 34 years on the spin. In 1909 the trust was established on a simple premise - to buy global shares. Today it is still following its original brief - although North American railways are no longer the trust's dominant theme. Instead the trust buys businesses that are built on cutting-edge technology, including Alphabet (Google), Facebook and Alibaba, China's biggest online retailer.
The rest of the 14 names are a mixed bag in terms of sectors, but as Russ Mould, investment director at AJ Bell, points out, it is noticeable that none of them necessarily does anything that is seen as exciting or provides dramatic growth.
He adds: ‘For example SSE is a utility, British American Tobacco is a tobacco giant, Sage provides accounting and payroll software and Bunzl distributes essential items to other companies, ranging from mops to syringes to coffee cups.
'Yet all of them have a strong competitive position, a debt pile which is suitable for their type of business and good profit margins, which mean they can throw out plenty of cash flow – and good cash flow can mean good and growing dividends.’
|Company||Number of years|
|British American Tobacco||20|
|Associated British Foods||18|
|Paddy Power Betfair||17|
Source: Thomson Reuters Datastream and AJ Bell.
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