What This Top Dividend Portfolio Is Holding Now: GlaxoSmithKline plc, Inmarsat Plc And UBM Plc

GlaxoSmithKline plc (LON:GSK), Inmarsat Plc (LON:ISAT) and UBM Plc (LON:UBM) are among the top holdings of Merchants Trust plc (LON:MRCH).

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

Merchants Trust (LSE: MRCH) has delivered 32 consecutive years of dividend increases, and carries a trailing yield of 5.1% at a current share price of 463p.

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

The trust holds many high-yield ‘usual suspects’, including Royal Dutch Shell, HSBC and current heavyweight top-yielder GlaxoSmithKline (LSE: GSK) (NYSE: GSK.US).

But Merchants also has a couple of interesting mid-caps within its top 10 holdings: namely, mobile satellite communications firm Inmarsat (LSE: ISAT) and media group UBM (LSE: UBM).

GlaxoSmithKline

GSK has said shareholders can expect a total dividend of 80p for 2014, and the same payout for 2015 — giving a juicy annual yield of 5.7% at a current share price of 1,410p.

Some analysts have questioned whether GSK can afford to maintain the dividend during a phase of weaker sales, but chief executive Andrew Witty said recently: “I don’t think people should be concerned about that”.

In addition to the 80p dividend, shareholders can expect a £4bn capital return (82p a share) during 2015. The payment will be funded from net cash the company will receive as a result of a deal with Swiss group Novartis (expected to complete in the first half of the year) to swap some assets and create a consumer healthcare joint venture.

Inmarsat

Inmarsat was set up in 1979 by the International Maritime Organization to enable ships to stay in constant touch with shore or to call for help in an emergency. The company was floated on the stock market in 2005, and its operations now extend across air, land and sea.

At a current share price of 809p, Inmarsat has a market value of £3.5bn and sits just outside the FTSE 100. Annual dividend growth is running at 5% and analyst forecasts for 2015 give an above-market-average yield of 4%.

Earnings forecasts don’t fully cover the projected dividend (around $40m short), but at the last reckoning Inmarsat had cash on the balance sheet of $138m and available but undrawn borrowing facilities of $891m. Furthermore, management is “very confident of the medium-term growth opportunities for the company”.

UBM

Media group UBM operates internationally in three main business segments: Events, Marketing Services and PR Newswire. The company has a market value of £2.1bn at a current share price of 473p, and offers a 4.8% yield based on 2015 dividend forecasts.

During 2014, with the aid of a rights issue, UBM made a substantial acquisition in the shape of US trade show firm Advanstar. The deal makes UBM the biggest events organiser in America. Management says it also has “the opportunity to establish UBM firmly as the leading B2B events business globally”.

At the same time, the Board committed to continuing its progressive dividend policy.

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 has no position in any shares mentioned. The Motley Fool UK has recommended GlaxoSmithKline and UBM. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Investing Articles

These were the FTSE 100’s dogs and stars in February

The FTSE 100 limped along last month, but some Footsie shares soared while others slumped. Here are February's winners and…

Read more »

Passive income text with pin graph chart on business table
Investing Articles

This £43bn of passive income is up for grabs today!

As a lover of passive income, I'm always on the lookout for extra cash. The good news is that these…

Read more »

Man writing 'now' having crossed out 'later', 'tomorrow' and 'next week'
Investing Articles

Is this my once-in-a-decade chance to buy these 2 beaten-down UK shares before they rocket?

The FTSE 100 has had a bumpy ride but these two UK shares have had it bumpier. Could now be…

Read more »

Young black man looking at phone while on the London Overground
Investing Articles

£6k bought me 3,093 shares in this overlooked FTSE passive income stock yielding 9.1% a year

This FTSE 100 dividend stock pays one of the most generous levels of passive income on the index, yet often…

Read more »

Smart young brown businesswoman working from home on a laptop
Investing Articles

With a 5.35% yield does it matter if the National Grid share price never rises again?

The National Grid share price will never fly to the stars, but given the regular supply of dividends it offers,…

Read more »

Risk reward ratio / risk management concept
Investing Articles

Here’s why I think the Lloyds share price is undervalued but still not worth me buying

Oliver Rodzianko reckons the Lloyds share price is not appealing enough for him to make a long-term value investment in…

Read more »

Young female business analyst looking at a graph chart while working from home
Investing Articles

Insiders are buying Rolls-Royce shares! Should I do the same

Two directors have been buying Rolls-Royce shares since the start of the year. Does that mean the rally has further…

Read more »

Senior woman potting plant in garden at home
Investing Articles

How I’d invest a £100K SIPP to target £8K in dividends annually

Christopher Ruane sets out some principles he adopts when investing his SIPP and explains how he would aim for a…

Read more »