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What This Top Dividend Portfolio Is Holding Now: Royal Dutch Shell Plc, BAE Systems plc And SSE PLC

Merchants Trust (LSE: MRCH) has delivered 30 straight years of dividend increases, and is expected to extend the record for the year ending 31 January 2014.

The trust has already paid a first-quarter dividend of 5.9p (up 1.7% on the same period last year); and the trailing 12-month payout gives a yield of 4.7% at a recent share price of 496p.

Picking great dividend shares has helped Merchants outperform the FTSE All-Share Index over the past three, five and 10 years.

Let’s take a look at three of the trust’s current heavyweight holdings: Royal Dutch Shell (LSE: RDSB) (NYSE: RDS-B.US), BAE Systems (LSE: BA) and SSE (LSE: SSE).

Royal Dutch Shell

Oil giant Royal Dutch Shell paid a dividend of $1.68 a share for 2009, 2010 and 2011. The board increased the payout by a modest 2.4% to $1.72 for 2012, but growth is set to accelerate this year.

Shell has paid two quarterly dividends of $0.45 to date, putting the company on track for a $1.80 full-year payout — an increase of 4.7% on last year. Translating the dollar dividend into sterling gives a high-octane yield of 5.4% at a recent share price of 2,161p.

BAE Systems

Aerospace and defence group BAE Systems has increased its dividend ahead of inflation every year since 2004. Last year’s 3.7% rise to 19.5p a share was below the company’s average, but still gave shareholders an inflation-beating income boost.

For this year’s first half, the board declared a modest 2.6% increase in the interim dividend. However, with management anticipating double-digit earnings growth, analysts are confident the increase in the total dividend for 2013 will be nearer to last year’s 3.7%. At a recent share price of 448p, the City experts’ forecasts of a 20.2p full-year payout give a yield of 4.5% — over a percentage point higher than the market average.

SSE

Electricity group SSE has an even more impressive dividend record than BAE. In announcing an 84.2p dividend for the year ended March 2013, SSE was posting a 5.1% rise on 2012, and a fourteenth consecutive year of above-inflation dividend increases.

Management is aiming to continue delivering increases ahead of inflation well into the future. Analysts are looking for a 4.5% rise to around 88p for the company’s current fiscal year. An 88p dividend would represent a super-charged 5.6% yield at a recent share price of 1,566p.

Happy retirement!

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> G A Chester does not own any shares mentioned in this article.