United Kingdom Dividend Achievers

Published Thu, 24 Jan 2012 10:00 CET by DividendYields.org

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.

UK Dividends Chart
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.

Nominal Equity Market Returns By Country
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.

Top 10 Dividend Achievers Table
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).

Carnival, a cruise company, is expected to grow its EPS at a robust 13.4% annualized rate for the next five years. The company’s dividend currently yields 2.5%, its payout ratio is 60%, and its annualized five-year dividend growth is about 2%. The stock has a trailing P/E of 24.3x. However, Carnival has a relatively low ROE of 5.4% and ROE of 4.0%. Its dividend payout ratio is elevated, but robust EPS growth could translate into higher dividend growth in the future.

InterContinental Hotels Group, a hotels and resorts company, is forecasted to expand its EPS at an annualized rate of 13.5% for the next five years. The stock currently yields 2.2% and has a payout ratio of 21%. Last year, it paid an interim dividend of 13.5p (21 cent per ADR) and a special interim dividend of 108.4p ($1.72 per ADR). Its trailing-twelve-month dividend is nearly 17% higher than the 2011 payout. The stock has a trailing P/E of 14.0x. InterContinental’s ROE is superb at 85.4% and its ROI is 25.8%. Given the company’s robust forecasted EPS growth and low payout ratio, additional boosts to regular dividends can be expected in the future.

Stock name Dividend Yield
Bhp Billiton Plc 7.08
British American Tobacco 6.64
British American Tobacco 6.60
Vodafone Group 5.93
Bhp Billiton 5.45
Vodafone Group 4.68
Glaxosmithkline 4.47
Carnival Plc 4.20
Glaxosmithkline 4.13
Tesco 4.01
Diageo 2.57
Diageo 2.50
Astrazeneca 2.32
Astrazeneca 2.03
Standard Chartered 1.57
Intercontinental Hotels Group 1.25
Intercontinental Hotels 0.85
Carnival 0.00
Tesco 0.00

Articles featuring Bhp Billiton Plc (BBL):

Lanny's January Dividend Income Summary

SummaryTwo large dividend income checks came in.We received a total of $131.70; 15% from retirement accounts and the other 85% was from the individual taxable portfolio.Dividend income year over year is higher by $35.08 (including my wife's dividend income of $37.85 last year with mine).Currently it's ice raining here in Cleveland. However, for the most part, winter has been warm and even sunny on a few days. One thing though is certain. Dividend income arrives - rain, snow or... Read more

My 4% Dividend Yield Portfolio: Pulling Out 60% Back To Cash

It has been exactly five years ago, back in November 2014, that I initiated the dividend growth portfolio and reported every change here in SA ever since. The goal was to prove to myself that dividend-growth investing does work and that it can deliver an ever-growing dividend stream that can serve as an income solution during retirement or as a constant source of cash for reinvestment. The portfolio included 25 holdings: BHP Group (NYSE: BBL) Cracker Barrel Old Country Store, Inc.... Read more

Lanny's March Dividend Income Summary

We know what time it is. This is one of the best months to be a dividend investor, as we wrap up a quarter-end. The market finished off on an impressive note, closing up 13% for the year thus far. The weather is finally warming up, as I believe we even received a 60 degree day or two in the month. This was a fantastic month of investing and earning dividends, which truly shows the power of time and consistency pushes you forward. Dividend Income I received a total of $2,259.89 of dividend... Read more

My 4% Dividend Yield Portfolio: Q1'19 Summary And Plans For The Coming Months

Another quarter has passed and it is time to summarize the status of my portfolio. Market overview: The summary of the fourth quarter took place around Christmas day, hence it was at the peak of the December selloff. This summary is coming after a massive correction in the markets, and it was not only a rally in the Equity markets but also in the long-term Bonds market. Here is a chart of the iShares 20+ Year Treasury Bond ETF (TLT) which gained a massive momentum since December as the... Read more

Lanny's January Dividend Income Summary

I'll say it. I am ready for winter to be over. However, I'll have to say something else. Collecting dividends never gets old! This is what is keeping the warmth during January going, as we know how hard it is to step foot outside. Cannot wait for the sun to shine a little brighter as we reflect on our dividend income from the first month of 2019! Did we all start the year off with a bang? Let's see how I did and check out my January 2019 dividend income. Dividend Income I received a total... Read more