The London Stock Exchange is jam-packed with generous income stocks. And in a few cases, these dividend-paying companies have been hiking shareholder payouts for very long streaks, sometimes even decades.
In fact, as of October, 23 stocks in the FTSE 350 have increased their payouts for more than 25 years in a row.
Among these lucrative passive income-generating stocks are:
- Alliance Witan (LSE:ALW)
- DCC
- Halma
- Scottish Mortgage Investment Trust
- British American Tobacco
So for income investors with a nice £5,000 lump sum, are these stocks no-brainer buys in 2025?
Digging deeper
Let’s zoom in on Alliance Witan. The UK-based investment trust uses a multi-manager strategy to target long-term diversified growth in the equity markets.
That does result in the business being highly sensitive to the fluctuations of the stock market and global economies. But despite this risk factor, the leadership’s ability to identify top-tier managers has enabled the business to navigate even the worst market crashes and corrections without compromising dividends.
As a result, the stock’s approaching 59 years of continuous dividend hikes – an impressive feat. Providing that trend continues, today’s modest 2.2% yield could expand significantly. And it’s a similar story to the other businesses on this list.
Looking at the group’s financials and portfolio positioning, most analysts remain optimistic that dividends will continue to climb. That’s because the firm operates with relatively low levels of financial leverage. And its diversity of managers and strategies means that performance is less exposed to style-specific and industry-specific risk factors.
So far, this all sounds rather promising.
There’s always risk
As impressive as Alliance Witan’s performance has been, there are a few weak spots to consider. Its diversified investing approach has resulted in relatively low exposure to the US tech sector, including the ‘Magnificent 7’.
Since these stocks have been driving the bulk of US stock market returns in recent years, the firm’s performance has actually lagged some key benchmarks, such as the MSCI All-Country World Index.
- Chart comparison
In other words, while dividends shine, capital gains have struggled to keep up, and that pattern may continue if global equities continue to lag US tech stocks. This is especially true given that combative trade policies from the US could result in further pressure on global stocks, particularly within emerging markets.
Even the pattern shifts, as previously mentioned, as an equity investment business, it remains highly exposed to macroeconomic risk factors like inflation and geopolitical developments.
The bottom line
Maintaining such a long track record of hiking dividends is no easy feat. And it certainly signals strong long-term sustainability. However, as with all investments, there are always risks and threats that can derail even the strongest-looking businesses.
- Scottish Mortgage is exposed to similar macroeconomic fluctuations as Alliance Witan
- British American Tobacco’s tackling a challenging long-term transition away from cigarettes
- Halma’s acquisition-led strategies create significant execution and integration risk
- DCC’s navigating complicated regulatory shifts within the energy sector, applying pressure to margins
So should investors blindly invest £5,000 in these income stocks? Of course not.
Given their impressive track records, I think these businesses are definitely worth investigating further. But it’s critical to always carefully examine both the risks and potential rewards of even the most promising-looking opportunities.
