2020 has proved to be a disaster for dividend investors. Hundreds upon hundreds of UK shares have axed, postponed, and/or reduced shareholder payouts following the Covid-19 outbreak. It hasn’t affected my own investing strategy though. There remains plenty of dividend-paying UK shares for me to get rich, and possibly even retire early, with.
Dividends from UK shares slowed their rate of decline in the third quarter as an unwinding of coronavirus lockdowns allowed corporate profits to recover. And positive news in recent days on Covid-19 vaccines offer hope for a more lucrative 2021. But stock pickers must remain vigilant when investing in UK shares for dividends. With infection rates surging and lockdowns returning all over the globe, it’s possible dividend declines could worsen again.
That said, there’s a wealth of information from experts like The Motley Fool to help them on their quest. Here’s a dividend hero I’m thinking of buying for my own Stocks and Shares ISA today.
A FTSE 100 dividend hero
There are few UK shares that can get close to Halma (LSE: HLMA) when it comes to being a dividend champion. The safety products manufacturer has raised the annual dividend for a staggering 41 years on the bounce.
Even as the Covid-19 crisis continues to worsen, Halma keeps on raising dividends too. Its balance sheet is so strong and its earnings visibility supreme enough, it’s decided to raise the interim dividend by the same percentage, it announced this week.
The UK share has a meagre net-debt-to-EBITDA ratio of 1.02 times, well within its operating norm of up to 2 times. It’s also reduced capital investment and banged its acquisition-led growth strategy on the head for the time being to preserve cash.
A UK share on my ISA watchlist
Halma’s been a reliable profits grower year after year, and this is the bedrock for its outstanding dividend record. And that bulky balance sheet should allow the FTSE 100 company to keep on raising dividends despite the economic downturn.
I’m not alone in making this prediction either. While a 7% earnings reversal is predicted for fiscal 2021, another annual payout hike is predicted by City forecasters. A 17.1p per share reward is anticipated, up from the 16.5p dividend shelled out last time.
Things get even better for the next financial year too. With annual profits anticipated to rebound 14% in fiscal 2022, Halma’s expected to supercharge the total dividend for that year to 18.8p per share.
Now there’s bigger dividend yields out there than Halma’s. For this financial year and next, the UK share’s readings sit at 0.7% and 0.8% respectively. However, this doesn’t mean the FTSE 100 firm can’t still be considered dividend royalty.
The capacity of firms like this to raise dividends year after year is what allows long-term investors to get super rich. And this is why I’d buy this income hero for my own ISA today.
Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has recommended Halma. 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.