Passive income from shareholder dividends works best when it gets a bit bigger every year. But not every well-known FTSE business increases its payment.
However, IG Group (LSE: IGG) has a strong multi-year record. The trading platform provider didn’t cut the payment through the pandemic and has been growing it since.
Looking ahead, City analysts expect the dividend to increase by almost 3% for the trading year to May 2025. Meanwhile, recent outlook statements from the company have been positive.
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Business cycles with market volatility
We’ll find out more with the full-year earnings release due 18 July. But we do know the firm has been busy buying back its own shares. That suggests positive cash flowing into the business.
IG has been expanding its international reach and diversifying the product range. But generally, the firm’s fortunes tend to cycle with volatility in the financial markets. If there’s plenty of it, people want to trade more and the business does well.
So there’s some cyclical risk for shareholders here. On top of that, the company isn’t the only operator in the sector. Therefore, competition from other providers could eat into the company’s market share at some point.
Nevertheless, the balance sheet looks strong with a net cash position rather than net debt. And with the share price near 784p, the forward-looking dividend yield is a tasty 6% for the trading year to May 2025 – perfect for passive income!
Steady and rising dividends
I also like the look of Supermarket Income REIT (LSE: SUPR). It does what it says on the tin and invests in high-quality supermarket property.
However, the commercial property sector has been in some turmoil for a while, and the challenges show up in the company’s share price chart:
Such cyclicality shows us the risks shareholders here must take on – any investor buying the stock in the summer of 2022 will be nursing a nasty loss.
But the company’s hardly missed a beat with its shareholder dividend payments, and that’s the important thing for me now.
Since 2018, they’ve increased a bit every year, apart from a minor wobble in the trading year to June 2021 during the pandemic. The compound annual growth rate of the shareholder payment is running at more than 34% — excellent for growing passive income!
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A strong sector
In March, with the half-year results, the company said the UK grocery sector had been demonstrating strong resilience to the “challenging” macroeconomic environment. Meanwhile, with the share price near 74p, the forward-looking dividend yield is just over a whopping 8%.
With the general economy improving now, I’m optimistic that we may see a multi-year period of rising prosperity ahead. If that happens, these two companies look well placed to thrive.
Therefore, they’re worthwhile candidates for further and deeper research with a view to adding some of the shares to a diversified portfolio focused on passive income from dividends.
