Buying shares for income has become a minefield of late. Companies of all shapes and sizes are cutting or reducing shareholder payouts as their profits sink and their balance sheets feel the strain. Even stacks of FTSE 100 stocks have decided to rebase their dividend policies in the wake of the Covid-19 crisis.
Fear not though. The UK stock market remains jam-packed with companies that should continue to lavish their investors with dividends over the short-to-medium term. And some of these FTSE 100 businesses are worthy of serious investor attention today.
London Stock Exchange Group’s (LSE: LSE) 1% dividend yield for 2020 clearly isn’t one of the biggest out there. But never mind that: the rate at which the blue-chip has lifted annual dividends over the past half decade has been truly staggering. And City analysts expect payouts to continue exploding, despite the coming economic storm.
In fact, the group stands to benefit from these conditions that are driving turbulence on financial markets. Major buying and selling activity drove London Stock Exchange’s total revenues 13% higher during the first quarter. It also drove demand for the Footsie firm’s information services, and its data services arm FTSE Russell enjoyed a 7% sales uptick between January and March.
Finally, London Stock Exchange has a rock-solid balance sheet to support its ultra-progressive dividend policy. I’d happily buy it in an ISA today.
Another FTSE 100 star
Smith & Nephew (LSE: SN) has, like London Stock Exchange, decided to persist with paying dividends despite the Covid-19 quake. Healthcare-related stocks are considered to be some of the safest out there in tough economic times. And this FTSE 100 giant’s decision to maintain its payout policy underlines this theme.
That’s not to say that the artificial limb maker hasn’t had a torrid time of late. Smith & Nephew has seen demand for its high-tech products slump in recent months as the coronavirus outbreak has caused non-essential surgeries across the globe to be kicked into the long grass. This caused underlying revenues at the Footsie firm to crumble 8% in the first quarter.
Getting back to business
However, with countries having expanded their healthcare facilities to deal with coronavirus patients and global infection rates beginning to slow, Smith & Nephew can look forward to demand for its products gradually picking up again.
Indeed, back in early May the company declared that “the recovery in China is encouraging, as is the restart of elective surgeries in many other countries, and especially within the US.” Sales in these hot growth regions rocketed 8% and 24% respectively back in 2019, underlining the exceptional long-term revenues potential of these territories.
Smith & Nephew’s near-term dividend isn’t the biggest either. In 2020, it sits at 1.4%. But like London Stock Exchange, City brokers expect steep rises in the annual payout over the medium term at least. Both have rock-solid balance sheets to support these projections and this, allied with their bright earnings outlooks, makes them brilliant buys for income-hungry investors, in my opinion.
With global markets in turmoil as the coronavirus pandemic tightens its grip, turning to shares to generate income isn’t as simple as it used to be…
As the realities of ‘life under lockdown’ begin to bite, many of the stock market’s ‘go-to’ high-yielding companies have either taken an axe to their dividend pay-outs… or worse, opted to suspended them altogether – for the near-term at least.
With so many blue-chip and mid-cap companies scrambling to hoard cash right now, where are we income investors to turn for decent yields?
Fortunately, The Motley Fool is here to help…
Our analyst has unearthed what he believes could be a very attractive option for income- seeking investors – a company that, in his view, boasts a ‘reliably defensive’ business model, combined with a current forecast dividend yield of 4.2% to boot!*
But here’s the really exciting part…
This business even has form in riding out this kind of situation, too… having previously increased sales and profits back in 2008 and 2009 when the world was gripped in the deepest economic crisis since the Great Depression.
*Please be aware that dividends are variable and not guaranteed.
Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.