According to the latest figures, British companies cut payouts to shareholders by £22bn last quarter. This included many FTSE 100 firms, which rushed to shore up their finances in the face of the coronavirus pandemic.
Some companies have started to restore their dividends over the past few weeks. However, it could be some time before overall payouts return to 2019 levels.
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Luckily for income investors, some FTSE 100 stocks have stood by their dividends. Stocks, like the two listed below, have maintained their payouts as they’ve navigated the pandemic. As such, they could be great additions to any income investors’ portfolio.
FTSE 100 dividend stocks
Defence giant BAE Systems (LSE: BA) put its dividend on hold when the coronavirus crisis started earlier this year. The group has since restored its payout as trading has been better than expected.
As an income investment, BAE has some desirable qualities. The FTSE 100 company relies on government contracts for its income. These contracts are usually fixed for several years. In some cases, they can be set for decades, which gives the corporation a very predictable income stream.
What’s more, as one of the largest defence groups in the world, the business has access to intellectual property and skills that aren’t available to competitors. This gives it a definite competitive advantage. The nature of the company’s contracts also ensures there’s a steady stream of income, even in tough economic circumstances. As management’s recent decision to restore the stock’s dividend shows.
Therefore, if you’re looking for an FTSE 100 income stock that can provide a steady stream of income for your portfolio, it could be worth taking a closer look at BAE. At current levels, the stock supports a dividend yield of 4.2%. The distribution is covered twice by earnings per share.
Phoenix Group Holdings
Life insurance firm Phoenix Group Holdings (LSE: PHNX) is another FTSE 100 company that stuck to its payout plans throughout the pandemic.
Despite being asked by regulators to curtail the payout, Phoenix maintained its distribution. Management believed the company’s stable cash flows would provide enough funding to meet all of its obligations. So far, this has been correct.
The company is planning to make the most of the crisis by expanding its book of life insurance policies. It believes other businesses will want to offload these policies to free up cash. Phoenix will then be able to snap up these books of business at a discounted price.
If the company can follow this path, the stock may be able to produce high total returns for investors in the years ahead.
Right now the FTSE 100 stock support a dividend yield of 6.6%. That’s significantly more than the FTSE 100 average of 4.3%.
As well as this elevated level of income, shares in Phoenix also appear cheap. The stock is dealing as a forward price-to-earnings (P/E) multiple of 10.8, compared to the market average of 14.5.
These numbers suggest Phoenix may be a great addition to any income portfolio.