What this top dividend trust has been buying: Lloyds Banking Group plc, Centrica plc and Hostelworld Group plc

Dividend expert Merchants Trust plc (LON:MRCH) has been buying Lloyds Banking Group plc (LON:LLOY), Centrica plc (LON:CNA) and Hostelworld Group plc (LON:HSW).

| 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.

Merchants Trust (LSE: MRCH) is partial to dividend shares, a focus that has enabled it to increase its own dividend for 34 consecutive years. Three of the trust’s latest buys look particularly interesting.


Merchants bought back into Lloyds (LSE: LLOY) last summer, following the bank’s first dividend payment in six years. The trust said: “We see scope for a continued revaluation as confidence builds in the bank’s ability to grow, which should also support strong dividend growth”.

5 Stocks For Trying To Build Wealth After 50

One notable billionaire made 99% of his current wealth after his 50th birthday. And here at The Motley Fool, we believe it is NEVER too late to start trying to build your fortune in the stock market. Our expert Motley Fool analyst team have shortlisted 5 companies that they believe could be a great fit for investors aged 50+ trying to build long-term, diversified portfolios.

Click here to claim your free copy now!

Merchants bought more Lloyds shares in March, and in its latest update this week highlighted big banks and oil & gas producers as areas of the market that “trade at depressed levels and offer good value”.

Trading on a current-year forecast price-to-earnings (P/E) ratio of less than 10, Lloyds does indeed appear to offer good value, having considerable scope to rerate higher. For example, the long-term historical forward P/E of the FTSE 100 is around 14, and if Lloyds were to be rated on such a P/E, its shares would trade at 106p.

And then there’s the dividend. Analyst consensus forecasts give a 6.1% yield for the current year, rising to 7.1% for 2017, which looks a very generous offer for investors today. I can see why Merchants is so keen on the stock.


In this week’s update, the trust told its shareholders that during April: “Within the portfolio, the biggest change was to take profits on part of the holding in National Grid, after substantial share price appreciation, switching the proceeds into a bigger position in Centrica (LSE: CNA) which offers better long-term value”.

British Gas owner Centrica has been a disappointing investment in recent years, its share price having halved since 2013 and its dividend having been ‘rebased’ earlier this year.

Recent history may not inspire confidence, but Centrica is reducing its upstream exposure under new management and focusing on its consumer-facing businesses. With this strategic shift, and bolstered by a recent £700m fundraising, the company should perform more as we expect a utility to perform in future.

Despite the rebasing of the dividend, Centrica still offers an attractive prospective yield of 6%, and I can understand Merchants seeing long-term value in the ‘new’ company.


Hostelworld (LSE: HSW) only floated on the stock market last autumn, and many dividend-focused private investors may not have seen such an unproven newcomer as an attractive proposition. However, Merchants isn’t alone in being keen on the company; equity income master Neil Woodford is also a big backer.

Hostelworld is the leading online booking platform for budget accommodation. Asset-light and highly cash-generative, the company is committed to paying out 70%-80% of profits in dividends.

The company announced a maiden dividend in its results last month, which represents an annualised yield of 5.3%. Merchants said: “We added to the initial investment, after the results, on growing confidence in the prospects for future growth”.

Hostelworld certainly appears worthy of consideration by private investors looking for dividend stars of the future.

Is this little-known company the next ‘Monster’ IPO?

Right now, this ‘screaming BUY’ stock is trading at a steep discount from its IPO price, but it looks like the sky is the limit in the years ahead.

Because this North American company is the clear leader in its field which is estimated to be worth US$261 BILLION by 2025.

The Motley Fool UK analyst team has just published a comprehensive report that shows you exactly why we believe it has so much upside potential.

But I warn you, you’ll need to act quickly, given how fast this ‘Monster IPO’ is already moving.

Click here to see how you can get a copy of this report for yourself today

G A Chester has no position in any shares mentioned. The Motley Fool UK has recommended Centrica. 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

A beach at sunset where there is an inscription on the sand "Breathe Deeeply".
Investing Articles

Stock market crash: here’s why falling prices is good news

Over in the US, a stock market crash is battering high-priced stocks. But I see falling shares as an opportunity…

Read more »

Hand flipping wooden cubes for change wording" Panic " to " Calm".
Investing Articles

These 5 FTSE 100 shares crashed in 2022. I’d buy 1 today

Although the FTSE 100 index is flat in 2022, some Footsie shares have crashed hard this year. But I see…

Read more »

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

How investors can boost their passive income when the FTSE is falling

Stock markets are plagued with fears right now. Here's why I firmly believe those fears improve our passive income prospects.

Read more »

Image of person checking their shares portfolio on mobile phone and computer
Investing Articles

2 cheap UK shares to buy right now!

Recent market volatility means many top stocks now trade at rock-bottom prices. Here are two cheap UK shares I'm thinking…

Read more »

Rolls-Royce's business aviation engine, the Pearl 700
Investing Articles

The Rolls-Royce share price is just pennies. Am I missing something?

As the Rolls-Royce share price lingers in penny stock territory, our writer revisits the investment case that has attracted him…

Read more »

Compass pointing towards 'best price'
Investing Articles

How to put a valuation on the Woodbois share price

The Woodbois share price has fallen from its recent spike, so should I buy now? And how can I work…

Read more »

Inflation in newspapers
Investing Articles

I’d fight inflation with these 2 FTSE 100 dividend shares

With inflation hitting a 9%, I'm boosting my passive income and turning to these two FTSE 100 dividend stocks.

Read more »

New Ways of Investing - Hands Only Using Smart Phone
Investing Articles

2 cheap Footsie stocks to buy for BIG dividends!

The recent stock market sell-off leaves plenty of top stocks looking too cheap to miss. Here are two great Footsie…

Read more »