Recent falls in the market has led us to re-examine the large caps again to see if there is any value to be found, so we will use the DividendMax optimizer to sift out some suitable candidates. Our initial criteria is for a market cap over £1 billion and an annualised yield over the next 3 dividends of greater than 7%. This reveals 16 stocks which is too many to list, so, given the state of the markets we will err on the side of caution and look only at stocks with a CADI (consecutive annual divivdend increases) greater than 5. This reveals 5 stocks. SSE, Admiral, 3i Infrastructure, Carillion and Catlin. Admiral and Carillion have already been dividend of the week, so we will focus on the other three stocks. 3i Infrastructure go ex-dividend tomorrow which is why it sits high on the optimizer and given the proximity to the ex-dividend date, we will not recommend them today.
Catlin fell quite dramatically in the recent stock market correction falling from a high of 552p to almost 450p. They currently trade at 483p. They had a good first quarter and another dividend increase in in prospect at the interim stage. They have been increasing their dividend every year since they listed. (a 159% increase since 2004)
SSE have fallen from a recent high of 1676p to 1515p, although they are up today and trading at around 1530p. They have already declared their final dividend at 59 pence per share going ex-dividend on 31st July. As with Catlin, SSE has increased its dividend every year since it listed on the stock exchange. According to their website, it is just one of 5 FTSE 100 companies to have delivered real dividend growth each year since 1999. I presume real dividend growth refers to dividend growth over and above the rate of inflation. In any event, the impact of real dividend growth also highlights the impact of dividends on total shareholder returns, where again, according to their website they rank 10th in the FTSE 100 among continuing FTSE 100 companies. Impressive stuff.
It is a tough call between the two companies and both look like decent plays to me, but we are going to go for SSE simply because it has already declared its dividend and this gives income investors certainty on the payout. Also the fact that it is a final dividend and the next dividend from Catlin is an interim dividend. We will certainly keep an eye on Catlin.
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