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What This Top Dividend Portfolio Is Holding Now: Unilever plc, Prudential plc & Pearson plc

Murray Income Trust (LSE: MUT) is set to deliver a 41st consecutive annual dividend increase for its financial year ended 30 June 2015. And picking great dividend shares has helped Murray outperform the FTSE All-Share Index over the past three, five and 10 years.

The trust’s heavyweight holdings include a number of super-high-yield shares — for example, BHP Billiton (6.6%) and GlaxoSmithKline (5.5%) — but where prospects of near-term dividend growth are limited at best.

To balance these, Murray also has among its top holdings, some stocks with more modest yields, but with superior prospects of dividend growth. Chief among them are Unilever (LSE: ULVR), Prudential (LSE: PRU) and Pearson (LSE: PSON).

Unilever

Anglo-Dutch consumer goods group Unilever is one of the steadiest companies in the FTSE 100. This global giant, whose renowned brands include PG Tips, Dove and Domestos, benefits from an entrenched position in developed markets and strong growth in emerging economies.

In its recent half-year results, Unilever reported a 12% increase in turnover, and a 16% rise in core earnings, helped by favourable currency movements during the period. The company reports in euros and declares its dividends in the same currency. The exchange rate with sterling sometimes works in favour of UK investors and sometimes against. It’s a matter of swings-and-roundabouts: over the long-term Unilever’s delivery has been excellent for both euro and sterling dividend takers.

In the reporting currency, dividend growth for the last three years has been 8%, 11% and 6%. Analysts are forecasting further increases at 6% for both this year and next. Unilever’s forward yield of 3% isn’t the highest around, but investors are willing to pay a premium for such a solid company.

Prudential

Prudential is the FTSE 100’s biggest — and many would say best — insurer. The company negotiated the financial crisis far better than its rivals, and the business continues to perform strongly.

In its half-year results, released today, Prudential reported a 17% increase in operating profit, lifted the interim dividend by 10%, and said: “we are confident that our proven strategy, strong execution and the quality of our people will continue to deliver … relative outperformance to our shareholders”.

Dividend growth for the last three years has been 16%, 15% and 10%. Expectations are for further 10% rises for the current full year and next year. Prudential’s forward dividend yield is a modest 2.7%. Many of its peers have higher yields, but, with the company’s rock solid history and outlook, investors are willing to pay top dollar for this sector champion.

Pearson

Media company Pearson is another firm with a strong dividend record and above-average growth prospects. The company is going through a period of transition as it shapes its business to focus on “the sustained and growing global demand for greater access, achievement and affordability in education”.

Within the last couple of months, we’ve seen Pearson dispose of PowerSchool — an administrative system rather than a tool for learning, teaching or assessment — for $350m, agree a sale of FT Group to Nikkei Inc. for £844, and confirm the company is in discussions with The Economist Group regarding the potential sale of its 50% share in the Group.

Dividend growth for the last three years has been 7%, 7% and 6%. Analysts see increases continuing at this kind of rate for the current year (the company recently lifted the interim payout 6%) and next year. Pearson’s forward yield of 4.6% is higher than both Unilever’s and Prudential’s, with the market discounting something in Pearson’s case for the uncertainties created by a business in transition.

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G A Chester has no position in any shares mentioned. The Motley Fool UK has recommended GlaxoSmithKline. 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.