5 checks to help track down reliable FTSE 100 dividend shares

Thursday, May 23 2019 by
9
5 checks to help track down reliable FTSE 100 dividend shares

It’s fair to say that the dividends on offer from some of Britain’s biggest companies have been eye-catching in recent years. With payouts forecast to break the £100 billion barrier in 2019, it’s no surprise that high yielding blue chips have been in demand. But it’s not all good news...

Last week, the telecoms giant Vodafone said it was cutting its dividend this year by 40 percent. That takes the payout per share down from an expected 15 euro cents per share to nine euro cents. That kind of cut was once close to unthinkable from one of the biggest and best dividend payers in the FTSE 100.

But Vodafone’s dividend cut wasn’t unexpected. It’s no secret that the demands on its squeezed cash flow have been on the rise in recent years. Its obligations to invest in new 5G infrastructure, reduce debt and cover acquisition costs are just a few of the reasons why its shareholders will be lighter in the pocket this year.

Indeed, Vodafone isn’t alone. Another high profile FTSE 100 dividend cut came from Marks & Spencer earlier this year. It also set out plans to lop 40 percent off its payout - and the news this week from M&S seems to be getting worse.

Then there are those companies that look like they’re teetering on the edge of slicing their dividends. For the most part the City seems to be expecting cuts from the telecoms giant BT and utilities group Centrica. There are also rumblings that the very high yields at housebuilders such as Persimmon are cause for concern.

Name

Yield %

Yield % (forecast next year)

Dividend Cover

DPS Cuts (past 10 years)

DPS Gwth % (current year)

DPS Gwth % (forecast next year)

Vodafone

4.2

8.6

-0.75

4

-67.4

150.6

Centrica

11.4

9.1

1.2

2

-

-26.4

Persimmon

11.2

11.2

1.2

1

-

0.43

M&S

6.3

5.0

1.6

1

-

-17.5

BT

7.6

7.4

1.8

-

-

-1.88

As this table shows, Vodafone and M&S have already issued their dividend cuts, so their current yields are now slightly lower - at 4.2 and 6.3 percent respectively. In the case of Vodafone, forecasts are optimistic that the payout will start to be clawed back over the next couple of years - hence a higher forecast yield for next year. But Vodafone has issued four separate dividend cuts over the past 10 years. Together with negative dividend cover, that means there could be quite a lot of hope baked into those forecasts.

For the other…

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Disclaimer:  

As per our Terms of Use, Stockopedia is a financial news & data site, discussion forum and content aggregator. Our site should be used for educational & informational purposes only. We do not provide investment advice, recommendations or views as to whether an investment or strategy is suited to the investment needs of a specific individual. You should make your own decisions and seek independent professional advice before doing so. Remember: Shares can go down as well as up. Past performance is not a guide to future performance & investors may not get back the amount invested. ?>


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3 Comments on this Article show/hide all

Nick Ray 23rd May 1 of 3

Surprised Rio Tinto (LON:RIO) is not in the list.

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herbie47 24th May 2 of 3

Surprised BHP (LON:BHP) is not included. How about J Sainsbury (LON:SBRY) ? No mention of oil giants such as BP (LON:BP.) and Royal Dutch Shell (LON:RDSB) ?

I don't think Carnival (LON:CCL) is a reliable dividend payer if you look at it's history and you are right to have concerns about housebuilders. It depends how long term you are looking to invest, income investors tend to be long term hlders.

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andrea34l 24th May 3 of 3
2

My own view is that 8% is too high a cut off for scanning for reliable dividends.

I'd also say that I believe that the dividend from GlaxoSmithKline (LON:GSK) this year is not forecast to grow.

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