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How Safe Are Dividends At Reckitt Benckiser Group Plc, SABMiller plc And PZ Cussons plc?

In these days when even so-called safe dividends, like Centrica‘s, are beings slashed, where do we look for a steady income? There are some that, while not offering the highest yields, have a very reliable track record, and they tend to be associated with rising share prices so the rewards can be handsome.

Reckitt Benckiser (LSE: RB)(NASDAQOTH: RBGLY.US) has been lifting its dividend regularly for years, although it did only offer a 2.7% yield last year. At full-year results time the company told us that it intends to stick with its strategy of paying “an ordinary dividend equivalent to around 50% of adjusted net income“. On a price of 5,698p, the shares look set to provide a 2.3% dividend this year.

But that’s not the only way Reckitt Benckiser returns cash to shareholders, and it intends to continue its share buyback programme through 2015 with up to an additional £500m added to existing plans. That’s helped push the share price up 17% over the past 12 months, which is comfortably ahead of the FTSE.

Cash from beer

The dividend at SABMiller (LSE: SAB)(NASDAQOTH: SBMRY.US) yields less, just touching 2.3% in 2014 and expected to yield around 1.9% for the year to March on the current price of 3,631p, but total returns have been impressive. SABMiller’s share price beat the FTSE for 12 straight years until it fell behind a little in 2013, but it’s on the up again and has climbed 29% in the past 12 months.

The interim dividend was lifted by 4% in November, and rises that beat inflation over the long term are the stuff of which handsome future payments are made. SABMiller’s dividend is more than twice covered and looks very safe, but with the shares on a forward P/E of 24 for 2015, future share price rises might not be as strong as in recent years and the past decade’s total performance might not be matched.

Healthcare, too

PZ Cussons (LSE: PZC) offers the highest yield of these three, with 2.6% on the cards for the year to May followed by 2.8% and 3% for the next two years, according to forecasts. Last year’s payment of 7.76p per share was 5% up on the previous years, and forecasts for this year and next suggest further rises of around the same level — and that’s well in excess of inflation.

Cussons’ shares are relatively modestly valued too, with a P/E of 18 this year dropping to under 15 by 2017, based on shares trading at 315p. There was a dip in December after we had a profit warning and EPS this year is now expected to slip by 3%, and over five years the price has been a bit erratic with a total gain of only 9%. So not the best total return, but the twice-covered dividend looks very safe.

If you want to achieve Buffett-style wealth, then remember it's total returns that count and even a modest dividend yield can contribute a lot if it keeps ahead of inflation.

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Alan Oscroft has no position in any shares mentioned. The Motley Fool UK owns shares of PZ Cussons. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.