The stocks that haven’t cut divis for decades
For long-term investors, the dividends paid by listed companies have a huge effect on returns. If you missed these regular payments the effect would be stark. If you had invested £1,000 in the FTSE All Share index 20 years ago, it would be worth £1,682 today based purely on the capital growth of the constituent shares. But with dividends reinvested, the total return is nearly double that, at £3,268.
It is for this reason that investment experts and financial advisers recommend using dividends to buy more shares and to use the “accumulation” versions of funds, which reinvest the dividends, rather than “income”, which pay out cash.
The question then is what to buy. The Association of Investment Companies compiles a list of “dividend heroes”, which are quoted funds that have increased dividends every year for at least two decades.
However, nothing similar exists for conventional shares. Telegraph Money commissioned Hargreaves Lansdown, the stockbroker, to rank the listed British firms that have the best records of maintaining or increasing payouts to shareholders.
The analysis converts all dividends paid in foreign currencies into sterling, which explains the surprising omission of Royal Dutch Shell. It is often claimed that the oil giant hasn’t cut its dividend since the Second World War, but this is only in dollar terms.
Hargreaves Lansdown’s Laith Khalaf said: “Companies that have a long record of growing or at least maintaining their dividend throughout a number of market cycles have clearly demonstrated
INCOME KINGS: BEST DIVIDEND PAYERS Company
Halma PZ Cussons Schroders Spirax-Sarco Engineering Greene King IMI Reckitt Benckiser Meggitt AG Barr Cranswick Years of divis 39 39 38 38 37 35 35 33 31 31 a commitment to preserving the payment, as well as an ability to do so.”
He added: “One thing often overlooked when it comes to income investing is the potential for dividends to rise. This isn’t always in a straight line upwards and there can be setbacks, but if you need income and are in it for the long term you should expect the payments from an income portfolio of shares to grow.”
Hargreaves’ research identifies the top 10 stocks from the FTSE 350, based on the number of years for which dividends have been held or increased since 1980.
Top of the list are a £5.4bn specialist manufacturer of safety equipment, and £1bn which owns a large range of consumer brands including Imperial Leather and
Halma, PZ Cussons,
St Tropez fake tan. Both firms have kept payouts steady or raised them for at least 39 years (it may even be longer but comparable data was not available before 1980).
Helal Miah, an analyst at The Share Centre, another broker, said: “There has been a growing need, in developed and emerging nations, for improved health and safety standards in many walks of life, from both regulators and consumers. has experienced good organic growth. It has also been an acquisitive company and in the last financial year group revenues breached £1bn for the first time. Dividends have followed the same trajectory.” The firm entered
the FTSE 100 index at the end of last year.
Mr Miah was less optimistic about PZ Cussons, which he said was going through a “wobbly patch” because of increased competition among consumer goods and cost inflation.
“It is also very heavily exposed to Nigeria, where disposable incomes are under pressure and political uncertainty ahead of a general election in January could add further stress,” he said.
Pub chain fifth on the list, has defied expectations in the face of decades of rising alcohol duty and daily pub closures. The £1.6bn firm runs nearly 3,000 pubs and hotels, and also owns the Loch Fyne chain of seafood restaurants.
Despite a boost from England’s successful run during the World Cup this summer, a yield of 6.5pc suggests that investors think the
Dividends are the life blood of investing, but the best payers are not who you’d expect, finds Sam Brodbeck
dividend is under pressure, said Mr Khalaf. “The squeeze on real wages hit demand last year, while an explosion in new casual dining venues means competition for a share of the public’s purse has rarely been higher. Add a whole raft of cost pressures and a sizeable debt pile, and things aren’t looking quite as secure as they once did.” He was more positive about
the £800m producer of Scotland’s favourite soft drink, IrnBru. Consistent family ownership means the board makes sensible, sustainable decisions and should thrive despite new entrants such as Fever-Tree, Mr Khalaf said.
third on the list, has transformed from “bluest of blueblood investment banks” to a truly global asset manager, said Mr Miah. It has a market value of £7.3bn.
“It must be credited for growing the size of its funds under management,” he added. “There is no doubt that rising stock markets and ultra-low interest rates have been a key contributor to its success.”
AG Barr, Greene King,
‘Investors often overlook the potential for dividends to rise’
PZ Cussons, producer of St Tropez fake tan, has raised its dividend for 39 years