These were the top 3 performing shares in my dividend portfolio last month

Price performance is not something I usually look for in dividend shares but I couldn’t help but notice the recent growth of these three UK stocks.

| More on:
Playful senior couple in aprons dancing and smiling while preparing healthy dinner at home

Image source: Getty Images

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

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.

When building a portfolio of dividend shares, price performance isn’t usually a factor. Still, it doesn’t hurt to see my income stocks act like growth stocks now and then.

This month I got a huge surprise from a dividend stock that’s delivered very little gains over the past year.

Keeping the nation connected

The nation’s leading telecoms company, BT Group (LSE:BT.), is up a huge 25% over the past month. That makes it the top-performing share on the FTSE 100 in May. Combined with a decent 6.3% dividend yield, it equates to some very nice returns.

Naturally, the price isn’t likely to increase this much every month. So what prompted the sudden jump?

A huge cloud of debt of has been hanging over BT’s head for a while now. At £18.5bn, it’s about 50% more than the company’s market cap of £12bn. A declining share price hasn’t helped the situation. But it’s close to completing its costly fibre broadband rollout and last month announced positive 2023 FY earnings results. Adjusted revenue and earnings before interest, tax, depreciation, and amortisation (EBITDA) rose slightly, along with net cash flow and earnings per share (EPS).

With dividends well-covered by earnings, there’s little chance of a pause in payments even in performance lags for a period. However, despite the good coverage, analysts predict the yield will fall to 6.1% in the coming years. This may be due to slow earnings and revenue growth, which is forecast to remain low for the next three years.  

Top British telly

ITV (LSE: ITV) is only up 11.8% this month but has a slightly higher yield than BT, at 6.5%. It also sports a similar payout ratio of just below 100%, allowing for just enough earnings coverage to support payments. Like BT, payments were paused during Covid but have returned to the same consistent reliability. But unlike BT, the yield is expected to increase to over 7% in the coming years. This speaks to analysts’ confidence in the broadcaster’s future.

But the increase is minimal compared to the 28% decline the price has suffered in the past five years. While it’s on the right track, it has a way to go before regaining the highs of 2015. Top British shows like Love Island and The Voice are boosting revenue but it still faces stiff competition from on-demand video platforms like Netflix.

An industry under fire

Major UK tobacco firm Imperial Brands (LSE: IMB) has the highest yield on this list at 7.72% but is only up 5% this month. Still, it’s higher growth than most other dividend stocks I hold.

The downside is that tobacco is a risky industry, with global regulations cracking down on the sale of cigarettes. Although it’s making some progress with its next-gen products (NGP), these are also at risk of being regulated in future. So I’m wary of how long its business model can remain profitable.

But for now, it’s a good dividend payer. It currently pays an annual dividend of £1.46 that is well-covered by EPS of £.244. The yield is also forecast to increase to 9% in the coming years. So while the industry may eventually die out, I’m hoping to enjoy the returns for a few more years at least.

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.

Mark Hartley has positions in Bt Group Plc, ITV, and Imperial Brands Plc. The Motley Fool UK has recommended ITV and Imperial Brands Plc. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Investing Articles

What kind of return could I expect by investing £100 monthly in a Stocks and Shares ISA?

Using a Stocks and Shares ISA to avoid capital gains tax could grow a £100 monthly investment into a second…

Read more »

Young woman working at modern office. Technical price graph and indicator, red and green candlestick chart and stock trading computer screen background.
Investing Articles

Can strong operational momentum keep the Informa share price rising?

FTSE 100 company Informa has been performing well, but this may be just the beginning of a multi-year trend for…

Read more »

Market Movers

What’s going on with the Britvic share price?

Jon Smith flags up why Britvic's share price is surging on Friday, but believes that the company is in a…

Read more »

Cheerful young businesspeople with laptop working in office
Dividend Shares

2 super-cheap passive income shares I’m eyeing up right now

Jon Smith discusses two of his favourite passive income shares in the banking and property sectors, both featuring yields above…

Read more »

Chalkboard representation of risk versus reward on a pair of scales
Investing Articles

Up 37.5% in just 12 months, I think this is one of the FTSE 100’s best investments

Our author says this FTSE 100 company is likely to keep on capitalising on the AI and data boom. But…

Read more »

Investor looking at stock graph on a tablet with their finger hovering over the Buy button
Investing Articles

This UK share just spiked 15% on bid news. Can we bag a quick profit?

UK share prices are having a good 2024, so far, and this one's already up 39%. Two takeover bids in…

Read more »

Young Caucasian man making doubtful face at camera
Investing Articles

I’m ‘blowing a raspberry’ at Raspberry Pi shares. Here’s why

Some early investors have made great profits from Raspberry Pi shares. But our writer's questioning whether the 'easy money' has…

Read more »

Asian man looking concerned while studying paperwork at his desk in an office
Dividend Shares

Here are brokers’ new price targets for Legal & General and National Grid shares

City analysts are generally very positive on National Grid shares. But they're not quite as bullish on the Legal &…

Read more »