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What This Top Dividend Portfolio Is Holding Now: Royal Dutch Shell Plc, HSBC Holdings plc And BHP Billiton plc

Murray Income Trust (LSE: MUT) has delivered 40 consecutive years of annual dividend increases. At a current share price of 770p, the trust yields 4.1%.

Picking great dividend shares has helped Murray Income outperform the FTSE All-Share Index over the past three, five and 10 years.

Let’s take a look at the three highest-yielding stocks in Murray’s top 10 holdings: namely, Royal Dutch Shell (LSE: RDSB), HSBC (LSE: HSBA) (NYSE: HSBC.US) and BHP Billiton (LSE: BLT).

Royal Dutch Shell

Shell has cut its dividend only twice in its history: at the outbreak of World War I and the outbreak of World War II. The current slump in the oil price is not something the company hasn’t faced before, and boss Ben van Beurden recently told Bloomberg Television: “The dividend is an iconic item at Shell and I will do everything to protect it”.

Shell has levers it can pull to keep cash flowing to shareholders in a low oil price environment, including increasing debt temporarily, cutting back capital investment and selling assets (for example, the company has just raised $0.74bn cash from the sale of an oil mining lease in Nigeria).

City analysts reckon Shell won’t disappoint on maintaining its iconic dividend record. The shares are currently trading at 2,150p, and this year’s consensus forecast gives a yield of 5.7%, rising to 5.8% next year.

HSBC

Global banking giant HSBC increased its dividend by a modest (if above inflation) 2% when announcing its annual results last month. The company restated its commitment to grow the dividend, but struck a cautionary note in stressing that increasing payouts “should be consistent with the growth of the overall profitability of the Group and is predicated on our ability to meet regulatory capital requirements in a timely manner”.

HSBC continues to face rising costs to implement regulatory change and enhance risk controls, as well as customer redress costs and regulatory penalties around past failings — all of which could directly impact profitability and regulatory capital targets, and indirectly impact the dividend.

However, as things stand, City analysts are forecasting HSBC will be able to grow its dividend. With the shares trading at 580p, this year’s consensus forecast gives a yield of 5.9%, rising to 6.2% next year.

BHP Billiton

Mining colossus BHP Billiton is preparing to de-merge part of its business. Shareholders will automatically receive one share in the spin-out company, South32, for every one Billiton share they own (although a share sale facility will be established for certain eligible shareholders who hold 10,000 or fewer BHP Billiton shares and who do not want to take their South32 shares).

Crucially, “BHP Billiton will maintain its commitment to a progressive dividend policy and does not plan to rebase its dividend following the demerger”. At a share price of 1,475p, the analyst consensus forecast gives a yield of 5.7% for the company’s fiscal year ending 30 June, rising to 5.9% next year.

On top of that, shareholders who retain their free shares in South32 can look forward to dividends from the new company, too. South32, which has a portfolio of assets producing alumina, aluminium, coal, manganese, nickel, silver, lead and zinc — and which has been cash generative over the last three years — “intends to distribute a minimum of 40% of Underlying Earnings as dividends to its shareholders following each six month reporting period”.

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G A Chester has no position in any shares mentioned. The Motley Fool UK has recommended HSBC Holdings. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.