Dividend investing has become a whole lot harder in recent months. As a result of the economic uncertainty associated with the coronavirus, over 40 companies in the FTSE 100 index have cancelled or suspended their dividends. Many others, including income stalwart Royal Dutch Shell, have reduced their payouts significantly.
There are, however, a number of companies that have maintained, or even increased, their dividends in 2020. With that in mind, here’s a look at 15 FTSE 100 companies that haven’t made cuts this year.
Consumer Defensive stocks
The Consumer Defensive sector (which includes consumer goods companies, alcoholic beverage companies, tobacco companies, and supermarkets) is always a good place to start when it comes to reliable dividends. That’s because they tend to generate relatively steady earnings throughout the economic cycle.
Some FTSE 100 companies in this area include consumer goods champions Unilever (trailing yield: 3.1%) and Reckitt Benckiser (2.4%), alcoholic beverage giant Diageo (2.4%), tobacco legend British American Tobacco (6.4%), and supermarket Tesco (4%).
Healthcare stocks also tend to be pretty reliable dividend payers. That’s because demand for healthcare tends to remain relatively steady. People still need medication during a recession.
The Healthcare sector hasn’t disappointed in the current crisis. As it stands, all the major healthcare stocks in the FTSE 100, including AstraZeneca (2.7%), GlaxoSmithKline (4.8%), Smith & Nephew (2%), and Hikma Pharmaceuticals (1.5%), have either maintained or increased their dividend payouts.
Financial stocks aren’t always the most reliable dividend payers. That’s because their earnings tend to fluctuate when stock markets fluctuate, or during periods of economic turbulence. This year, a number of well-known FTSE 100 financial stocks, including the likes of Lloyds Bank, Barclays, and Aviva have suspended or cancelled their dividends (the UK banks were actually forced to suspend their dividends by the Bank of England).
However, there are a handful of FTSE 100 financial companies that have maintained their payouts in the current crisis. Companies in this area of the market that haven’t cut their payouts, so far, include insurers Legal & General Group (8%) and Prudential (3.3%), and online broker Hargreaves Lansdown (2%).
Other FTSE 100 dividend payers
Finally, there are a handful of stocks in other areas of the market that haven’t cut their dividends. For example, in the Utilities sector, there’s National Grid (5%). It recently lifted its dividend by 2.6%. In the Chemicals sector, Croda is still paying its dividend (1.7%). And in the Technology sector, Sage has maintained its dividend (2.4%).
Picking the best dividend stocks
Looking at this list of stocks, a couple of takeaways spring to mind. Firstly, some sectors appear to be better than others when it comes to reliable dividends. Consumer Defensive and Healthcare, in particular, stand out when it comes to dividends.
Secondly, the majority of these dividend stocks have lower yields. Whereas many FTSE 100 companies that had yields of 6%+ have cut their dividends, many that have yields of between 2% to 4% have maintained their payouts.
If you’re looking for reliable dividends, this kind of yield bracket could be your best bet.
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.
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Edward Sheldon owns shares in Royal Dutch Shell, Unilever, Diageo, Reckitt Benckiser, Sage, GlaxoSmithKline, Lloyds Bank, Smith & Nephew, Hargreaves Lansdown, Prudential, and Legal & General. The Motley Fool UK owns shares of and has recommended GlaxoSmithKline and Unilever. The Motley Fool UK has recommended Barclays, Croda International, Diageo, Hargreaves Lansdown, Hikma Pharmaceuticals, Lloyds Banking Group, Prudential, Sage Group, and Tesco. 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.