City of London Investment Trust (LSE: CTY) increased its dividend by 4.1% for the year ended 30 June, extending its record to 47 years of unbroken dividend growth. At a recent share price of 379p, the trust yields 3.8%.
Picking great dividend shares has helped City of London outperform the FTSE All-Share Index over the past three, five and 10 years.
The industry currently most prominent within the trust’s heavyweight holdings is consumer goods, where we find British American Tobacco (LSE: BATS), Unilever (LSE: ULVR) (NYSE: UL.US) and Diageo (LSE: DGE).
British American Tobacco
Global tobacco titan British American Tobacco (BAT) has been a strong performer over the years. Earnings and dividend growth have been driven by the group’s key brands — Lucky Strike, Kent, Pall Mall and Dunhill — and by wide exposure to increasing consumer wealth in emerging markets.
BAT is expected to lift its dividend for 2013 by around 5% when it announces its annual results next month, and analysts predict similar growth for the year ahead. The dividend increases are supported by forecast mid-single-digit earnings growth.
At a recent share price of 3,200p, the yield on the forecast 2013 payout is a smoking 4.4%, rising to 4.7% for 2014.
Anglo-Dutch group Unilever owns a whole range of great consumer-goods brands across the food, household cleaning and personal care segments, including Ben & Jerry’s ice cream, Surf detergent and the Dove beauty range.
Rising wages in emerging markets have been driving Unilever’s growth in recent years, but core earnings are expected to be flat for 2013 when the company announces its annual results later this month. Nevertheless, the dividend — which is set in the company’s reporting currency of euros — is on track to rise 10.7%, and analysts are forecasting earnings growth to resume in the year ahead.
At a recent share price of 2,445p, the yield on the anticipated 2013 converted sterling dividend is 3.7% — half a percentage point ahead of the 3.2% Footsie average.
Drinks giant Diageo is another company with a stable of world-famous brands — Johnnie Walker whisky, Smirnoff vodka and Guinness stout to name but three — and excellent exposure to emerging markets, where premium brands are popular with the expanding middle classes.
Diageo’s earnings and dividends have been rising at a good clip, and analysts are forecasting a 7-8% uplift in the dividend for the year ending June 2014.
At a recent share price of 1,987p, the forecast yield (2.6%) isn’t the highest in the market, but there’s great momentum in the business and potential for above-average sustainable dividend growth.
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> G A Chester does not own any shares mentioned in this article.