As election uncertainty sweeps the UK and the FTSE 100 starts to wobble, one of the best ways of protecting your portfolio against a potentially stormy summer could be to focus on firms with a proven history of strong dividend growth.
In this article, I’ll take a closer look at Bellway (LSE: BWY), Unilever (LSE: ULVR), Amec Foster Wheeler (LSE: AMFW), NEXT (LSE: NXT) and Moneysupermarket.com Group (LSE: MONY) — five dividend stocks I believe could be a good buy in today’s market.
Housebuilder Bellway is continuing to reap the rewards of a booming UK housing market.
The house builder’s dividend was cut to 9p in 2009, but has rebounded by an average of 34% each year since, and reached 52p in 2014.
Bellway is expected to increase the dividend by a further 36% to 70.9p in 2015, and while the housing boom won’t last forever, with a prospective yield of 3.7% and a P/E of 8.4, Bellway could still be a profitable buy.
Consumer goods giant Unilever needs little introduction — but for me, the company’s dividend track record is its most attractive feature.
Unilever’s payout has grown by an average of 7.3% per year since 2006 — an income growth record that has given long-term shareholders an income that’s consistently stayed ahead of inflation.
Trading on a forecast P/E of 20, Unilever isn’t cheap, but the shares offer a prospective yield of 3.1%. Any further weakness in the current sell-off could be a good buying opportunity, in my view.
Amec Foster Wheeler
Energy services firm Amec acquired with US peer Foster Wheeler last year. Early indications suggest that the firm’s diversity — it works in nuclear and other sectors as well as oil and gas — is proving an effective hedge against the oil industry downturn.
The shares currently offer a trailing dividend yield of 4.8%. However, the payout is expected to remain flat in 2015, and to rise by just 3% in 2016 — suggesting that Amec’s 5-year average dividend growth rate of 10% is unlikely to be maintained.
High-street fashion titan NEXT has an outstanding record of returning cash to shareholders, either through buybacks and special dividends.
Over the last five years, NEXT’s ordinary dividend has risen by an average of 14% per year to 150p, giving a trailing yield of 2.1%. However, the firm paid a further 50p via a special dividend last year, and has so far announced two special dividends totalling 120p for the current year.
NEXT’s forward yield is uncertain, as the firm will switch back to buybacks if the share price falls below a certain level — currently 6,827p. However, NEXT’s record of dividend growth and cash generation means NEXT is still worth considering as an income choice, in my view.
The UK’s most successful price comparison website needs no introduction, and has proved a dividend goldmine for long-term shareholders, with a payout that’s risen by an average of 16% per year since 2010.
Current consensus forecasts suggest that Moneysupermarket’s strong dividend growth should continue, with inflation-busting increases of 11.2% and 6.1% forecast for 2015 and 2016, respectively.
The shares trade with a prospective yield of 3.1%, making them a reasonable buy, in my view.
Roland Head owns shares of Unilever. The Motley Fool UK has recommended Moneysupermarket.com and Unilever. The Motley Fool UK owns shares of Unilever. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.