The FTSE 100’s recent declines have been troublesome for some. However, for dividend investors they have been a wish come true.
In particular, these declines have pushed the share prices of some dividend stalwarts down to levels not seen since 2011 and now there are some great deals to be had.
International oil
International oil & gas companies have not had a good year, as the rising cost of finding and producing oil, takes its toll on cash flows, putting profits under pressure.
Royal Dutch Shell (LSE: RDSB) (NYSE: RDS-B.US) is no different and the company’s shares have underperformed this year as profits have largely missed City expectations.
However, these declines have pushed Shell’s shares down to a level where they offer a 5% dividend yield, which is set to rise to 5.2% next year. This payout is covered at least twice by earnings, so for the time being, it looks safe. What’s more, Shell has been paying and increasing its dividend payout for nearly six decades, so I have confidence in the payout.
In addition, Shell has several new projects coming online during the next few years which should boost earnings. The company’s balance sheet is also clean with little debt.
International banking
The worlds local bank, HSBC (LSE: HSBA) (NYSE: HSBC.US) has also seen its share price fall during the second half of this year as investors express concern about the banks’ ability to sustain its dividend payout.
That said, the only apparent threat to the company’s payout appears to be the threat of tougher regulation, which would force the bank to hold more capital. Although with a Tier 1 capital ratio of 13.3%, it looks as if HSBC is well capitalised for the time being.
Apart from the threat of regulation, HSBC’s payout looks to be secure. Indeed, the cumulative dividend payout was covered nearly four times by free cash flow during 2012.
With a current dividend yield of 4.1%, which is expected to rise to 5.2% within the next two years, HSBC looks like a solid dividend play.
National utilities
Of course, no article on dividends would be complete without mentioning a utility company and for this article SSE (LSE: SSE) fits the bill nicely.
Like the majority of British utility companies, SSE is facing pressure over customer bills and profits. These concerns have hit the company’s share price hard and they now offer a 6.3% dividend yield.
However, I would appear that the company is unlikely to reduce its payout soon. Indeed, the current dividend payout is covered 1.3 times by earnings and the company is committed to dividend payout increase of at, or above inflation for the foreseeable future. This indicates that the company will offer a dividend yield of 6.9% within two years.
