I am a believer in long-term investing. The reason for this is straightforward. If I buy a tiny stake in a great business, hopefully over the years the firm’s commercial success can help boost its share price.
In many cases I also aim to benefit from a stream of attractive dividends. Here is a trio of dividend-paying British shares I own in my portfolio and hope to keep for years.
M&G
Asset manager M&G operates in a sector I expect to benefit from resilient customer demand over the long term. Within that sector it has certain strengths I think can help it do well in the long term, such as its well-respected brand and long trading experience.
At the moment, M&G has what I see as a very attractive dividend yield, at 9.5%. The company’s policy is to maintain or increase its dividend annually. If the company manages to deliver on that, I think owning these income shares in my portfolio for years to come could be lucrative. However, dividends are never guaranteed.
British American Tobacco
Another high yielder among the UK shares I own is British American Tobacco (LSE: BATS). At 6.7%, the dividend yield is smaller than the one offered by M&G. However, the company has an impressive track record, having raised the payout annually for over two decades.
Can this last? One risk I see is a decline in the popularity of cigarettes, which currently form the bulk of the company’s business. That is a threat to both revenues and profits for the manufacturer.
However, I also see reasons to be optimistic about the outlook for the company. Cigarettes remain a massive cash flow generator. The business has also been growing its non-cigarette business at speed. For now, it remains a drag on profits. However, British American Tobacco estimates it will break even a couple of years from now.
Dunelm
The third in this trio of income-producing British shares in my portfolio is homewares retailer Dunelm (LSE: DNLM).
I reckon that while a housing market downturn could hurt sales and profits in the short term, over the course of the coming decade demand should remain robust. Dunelm has a proven business model that has been consistently profitable.
It benefits from a well-known brand, large store network and unique product ranges. All of those elements help to give the retailer a competitive advantage I think could help it keep making profits.
The dividend yield is 4%, even excluding the special dividends that the company has sometimes paid in recent years. After falling 24% in the past 12 months, Dunelm now trades on a price-to-earnings ratio of 12. I see that as attractive and would consider adding more of the shares to my portfolio if I had the spare cash to invest.
