The Motley Fool

What This Top Dividend Portfolio Is Holding Now: Vodafone Group plc, Pearson plc and Old Mutual plc

vodafoneCity of London Investment Trust
(LSE: CTY) is on track to extend its dividend record to a remarkable 48 years of unbroken growth. At a recent share price of 382p, 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.

Vodafone (LSE: VOD) (NASDAQ: VOD.US) is a top 10 holding for the trust, Pearson (LSE: PSON) has been added to recently, and Old Mutual (LSE: OML) is a brand new investment.


City of London favours large-cap companies listed in the UK with global operations. Vodafone fits the bill, despite the recent $130bn sale of its stake in US cash-cow Verizon Wireless.

The sale of Verizon has strengthened Vodafone’s balance sheet, and given it firepower to expand by acquisition in areas where it sees attractive growth potential. The surfeit of cash from the deal has also enabled Vodafone’s management to commit to annual dividend increases, “reflecting our confidence in our ability to grow cash flows in the future”.

At a share price of 224p, Vodafone offers a dividend income of 4.9%.


Media company Pearson is probably best known as the owner of the Financial Times and publishing house Penguin, but it’s the group’s education division that provides far and away the majority of sales and profits.

Pearson is currently in the midst of restructuring its education businesses to accelerate a shift towards “significant growth opportunities in digital, services and fast-growing economies”. Management believes this will be “a short, but difficult, transition”, and that we’ll see a more cash generative, faster growing business from 2015.

Despite a couple of years of declining EPS, Pearson raised its dividend 7% for 2013 — the 22nd straight year of increases above the rate of inflation — reflecting the Board’s “confidence in our prospects”. At a share price of 1,134p, Pearson offers a forward yield of 4.4%.

Old Mutual

You have to pass over a number of insurers when you run your eye down the FTSE 100 before you get to Old Mutual. The company, which also provides banking and other financial services, has its roots in South Africa, and is uniquely placed to build its business across the rest of Africa — and, indeed, is in the process of doing so, as management pursues its “goal of becoming Africa’s financial services champion”.

Old Mutual doesn’t have the illustrious dividend history of Pearson, having cut its payout during the financial crisis, in common with many of its peers. However, the dividend has been rising strongly since, and was increased 16% for 2013.

At a share price of 207p, Old Mutual offers a forward yield of 4.2%, rising to 4.8% for 2015, on the back of analyst expectations of further strong growth.

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G A Chester does not own any shares mentioned in this article.