What This Top Dividend Portfolio Is Holding Now: Royal Dutch Shell Plc, GlaxoSmithKline plc and HSBC Holdings plc

Royal Dutch Shell Plc (LON:RDSB), GlaxoSmithKline plc (LON:GSK) and HSBC Holdings plc (LON:HSBA) are the heavyweight holdings of Merchants Trust (LON:MRCH).

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Merchants Trust (LSE: MRCH) is on track to deliver 31 straight years of dividend increases.  The prospective yield is 4.6% at a recent share price of 516p. 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 the trust’s current top three holdings: Royal Dutch Shell (LSE: RDSB), GlaxoSmithKline (LSE: GSK) (NYSE: GSK.US) and HSBC (LSE: HSBA).

Royal Dutch Shell

The shares of oil titan Royal Dutch Shell are trading close to a 52-week high, having put on a bit of a spurt since the company announced its annual results on 30 January.

New boss Ben van Beurden, said that after Shell’s heavy investment for growth in recent years, “2014 will be a year where we are changing emphasis, to improve our returns and cash flow performance”. The new focus is good news for shareholders’ dividends.

The board raised the 2013 payout (declared in US dollars) by 4.7%, and early indications suggest a rise of 4.4% for 2014. The consensus forecast for the sterling dividend is 114p, giving a prospective income of 4.8% at a recent share price of 2,365p — well ahead of the market average yield of 3.1%.


Pharmaceuticals group GlaxoSmithKline (GSK) is another global giant currently offering a dividend yield well above the market average.

GSK reported core earnings-per-share (EPS) growth of 4% on turnover growth of 1% when announcing its annual results earlier this month. The board guided for accelerating growth in 2014, saying it expects turnover to rise by 2% and EPS by 4%-8%.

The company increased the 2013 dividend by 5.4%, and analysts are forecasting a 5.1% rise to 82p this year. That represents a prospective yield of 4.9% at a recent share price of 1,680p.


Concerns about slowing growth in many emerging markets have weighed on companies with high exposure to these economies. The shares of HSBC (originally the Hong Kong and Shanghai Banking Company), with its big presence in Asia, are currently trading close to a 52-week low.

The company posted a 9% rise in profits for 2013 in results announced this week, but that fell a bit short of market expectations. However, chief executive Stuart Gulliver said three years of restructuring and cost-cutting had made the group “leaner and simpler … with strong potential for growth”. The board upped the dividend (declared in US dollars) by 8.9%, with the chief exec saying: “Strong capital generation continues to support our progressive dividend policy”.

HSBC has said it intends to maintain the first three quarterly dividends for this year at the same level as 2013. Even a de minimis increase in the final dividend, to maintain the progressive dividend policy, would see a $0.50 payout for the year — about 31p at current exchange rates, giving a prospective income of around 5% at a recent share price of 628p

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

> G A Chester does not own any shares mentioned in this article. The Motley Fool has recommended shares in GlaxoSmithKline.

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