Can these five dividends continue to beat the wider market?
In an outcome that's tough on investors, the FTSE 100 (UKX) has failed to deliver a rising dividend payout over the last few years.
Just look at the iShares FTSE 100 ETF (LSE: ISF), for example. This is an exchange-traded fund that tracks the benchmark index, and we can see the aggregate payment from Britain's top 100 companies has yet to regain its pre-recession peak:
|Dividend per share||19.1p||20.2p||17.1p||16.2p||18.1p|
That's disappointing. But some companies within London's premier index have performed well on dividends, despite these austere times, and this series aims to seek them out (you can see all of the companies I've covered so far on this page).
Over the last few weeks, I've looked at Pearson (LSE: PSON), BAE Systems (LSE: BA), Imperial Tobacco Group (LSE: IMT), SABMiller (LSE: SAB) and Schroders (LSE: SDR). Let's see how each scored against my dividend growth and valuation criteria (each score in the chart is out of a maximum possible five):
|Net cash or debt||4||4||1||2||5|
|Outlook and recent trading||4||3||5||4||4|
|Total (out of 20)||15||12||13||14||17|
Schroders is the highest scorer in this collection of dividend-raising stars. That said, there's plenty of sector diversification offered by these companies and each is worthy of further research, I reckon.
Pearson derives most of its revenue from its Education Sector, which supplies curriculum materials, multimedia learning tools and testing programs across the educational spectrum and which delivers around 75% of overall sales. Within Education, the company's most important market is the US, accounting for around 44% of overall company sales. A management statement delivered on 29 October revealed that US sales were 4% up year-on-year with a perky looking 13% improvement in sales in its International Education sector, which although smaller, includes fast-growing markets like China, India, South Africa and Brazil. That's encouraging and bodes well for further growth in earnings.
Aerospace and defence
BAE Systems is putting its failed merger attempt with Franco-German EADS behind it now, causing many investors to sigh with relief. However, the firm's largest markets are the US and UK, and recent economic turmoil isn't helping to loosen governmental purse strings in either of those areas. However, the firm is a global defence, aerospace and security company employing around 93,500 people worldwide and operates in other areas, too. Depressingly, in the wider sense, there seems every chance that demand for its fighter planes, radar, attack missiles, warships and munitions will hold up going forward. Whether that leads to further earnings growth is unclear.
Imperial Tobacco's brands include Embassy, Regal, John Player Specials, Lambert & Butler and Castella cigars. The firm sees significant growth opportunities in Eastern Europe, Africa and the Middle East and Asia-Pacific. Last year, around 33% of revenue came from those regions with the rest of Europe delivering 23%, the UK, 13%, Germany, 13%, the Americas and Spain, 7%. Overall, Imperial is active in around 160 countries. The cash seems to keep flowing and that makes me optimistic on the prospects for the dividend.
SABMiller owns over 200 beer brands, like Miller Lite and Grolsch, and operates in more than 75 countries. The directors see potential for growth in the emerging markets that the company serves. Last year, around 23% of revenue came from Latin America, 20% from South Africa, 17% from Europe, 17% from North America, 12% from Africa and 11% from the Asia Pacific. With growth still on the agenda and a product with great repeat-purchase credentials, I feel positive about the prospects of the dividend.
Schroders manages around £203 billion of funds from which it generates 84% of its revenue in management fees. Performance fees are slim these days but could boost the firm's income if market conditions become easier for investing going forward. Despite the harsh conditions, Schroders has flourished and employs 3000 people who work from 33 offices in 26 countries across Europe, the Americas, Asia and the Middle East, all helping the firm to invest in equities, fixed income, multi-asset and alternatives. If the company is trading well now, it's difficult to see it faltering when world economic conditions improve. That makes me optimistic about the dividend's prospects.
Further ideas for dividend growth
Those five shares are among the several dividend out performers currently trading on the London stock exchange. And there's one man who's as keen as I am to find -- and invest -- in them.
I suggest you read all about dividend legend Neil Woodford and his best investment ideas today in this free, time-limited report, while you have the chance: "8 Top Income Plays Held By Britain's Super Investor".
The free report analyses the £20 billion portfolio and FTSE-thrashing history of the high-yield expert. Click here now to discover Mr Woodford's favourite dividend opportunities with good growth potential.
> Kevin does not own shares in any of the companies mentioned.