This week I am playing safe again as I am still fearful of a correction in the markets and with the FTSE 100 trading above 6500, it looks overbought to me. So we will use DividendMax to pick out large cap stocks with a market capitalisation greater than £5 billion, a yield of over 5% and a CADI (consecutive annual dividend increases) greater than 5. This gives us seven stocks and from these seven will come our dividend of the week.
The list is SSE, Sainsburys, Morrisons, GlaxoSmithkline, Astra Zeneca, Imperial Tobacco and BAE Systems. We will eliminate Glaxo and Morrisons immediately as they have both already been very successful dividends of the week in recent times.
SSE have pretty much promised a final dividend of around 59 pence per share which should go ex towards the end of July.
Sainsbury produce their final results on Wednesday and I expect them to be steady but unspectacular. They are on a PE of about 13 so they are not particularly cheap.
I still don't like Astra Zeneca in spite of their very impressive dividend track record. I would like to see a halt to the sales slump before I would choose them.
Imperial look interesting and have traded in a narrow range this year. They are towards the bottom of their trading range and would be a very good stock to hold if the markets do go into reverse.
I am still worried about the defence business of BAE systems and I am also concerned by the large rise in the share price over the past year.
I like the look of Sainsbury and SSE but given that we are looking to be ultra defensive in the face of a large rise in the markets over the past 6 months with a P/E of about 11 and another roughly 10% increase in the full year dividend forecast, our dividend of the week is Imperial Tobacco. They have recently declared an interim dividend of 35.2 pence (up 11%) and they go ex-dividend on 17th July 2013. The full year dividend is forecast to be around 116p. The 52 week trading range is 2239p to 2595p and as I type they are 2331p.
