Our latest research 23/03/2015
When building a strong portfolio of dividend stocks it is important to consider not only the raw yield, but to look at those stocks that can deliver sustained dividend increases over a period of time. We have looked at the end of 2014 fiscal year / first half of 2015 and picked 5 companies for your consideration.
We look particularly at dividend cover and forecast growth in profitability to make these selections. This is by no means an exhaustive list. We start with a ‘first glance’ look and then move on to whittle down our initial selection of 14 down to 5. Lets look at the fundamentals of these 14 excellent performers.
Increased its final dividend by 40%, has net cash and has started the new year extremely well. With this P/E and yield they make the last 5.
Forward P/E 11.7x
3 dividend optimizer yield 6.97%
Another fabulous year, our dividend of the week from January 2013 goes from strength to strength. They keep increasing the dividend strongly and are paying regular specials as well. We highlighted them in January 2013 as a sleeping giant and the numbers look as though they can continue to improve.
Forward P/E 16.4x
3 dividend optimizer yield 3.15%
Are Mr. 10%. They will keep on increasing by 10% for the foreseeable future with their very strong dividend cover. A good business to be in given the demographics, but the yield is a little miserly. It is possible that they could have a sudden increase in the payout ratio or even a special, but there is no evidence to suggest that they will do either. Your 10% a year looks pretty safe though.
Forward P/E 19.6X
3 dividend optimizer yield 1.53%
Rightmove’s recent track record of dividend increases is tremendous with more forecast to come. It has good cover, but the P/E is high and the yield is on the low side.
Forward P/E 26.1x
3 dividend optimizer yield 1.86%
Howden has been increasing its dividends very rapidly in recent years and has been improving in every measure. It also had net cash of £217.7mat the year end and has pledged to buy back £70m of its shares. Makes the final 5.
Forward P/E 18.3x
3 dividend optimizer yield 3.1%
Unite has also been increasing its dividend rapidly, but with the payout ratio now at 65%, the scope for very big increases has reduced a little. There is still growth in the pipeline, but with the very high PE and the cover below 2, it does not make our final 5.
Forward P/E 27.1x
3 dividend optimizer yield 3.51%
Dunelm reminds me of Next in that it is highly cash generative and is returning cash to shareholders at a rapid rate as it paid its second special dividend in the past 3 years this month. It has not gone down the share buyback route that is favoured by Next to boost EPS, but it has not needed to. EPS in the first half of 2015 was up 14.3% and it has net cash of £58.7m (most of which will be spent on the special dividend which has already gone ex via a C share scheme)
Forward P/E 17.6x
3 dividend optimizer yield 3.15%
ARM is a massive UK technology success, but for us it is looking too expensive, but there is no doubting its ability to continue growing its dividend with cover at 3.5x.
Forward P/E 38.4x
3 dividend optimizer yield 1%
Telecity has got good dividend cover and has promised to raise its dividend to 50% of EPS over the next three years. With EPS already at nearly 40p and expected to rise to nearly 47p by 2016, the dividend should rise to around 23p over the next 3 years from the current 13.5p. That is roughly 20% compound growth. Makes the final 5.
Forward P/E 21.8x
3 dividend optimizer yield 2.71%
We like Photo-me and we highlighted its attractions way back in November 2012. As it is already in our small cap picks for 2015, we will not select it here. The growth prospects and yield remain enticing.
Forward P/E 22.3x
3 dividend optimizer yield 5.23%
Big Yellow has a pretty impressive recent record and has already increased its 2015 interim dividend by 30%. The forward yield is not bad, but the cover leaves little scope for anything other than dividend increases driven purely by earning growth.
Forward P/E 23.4x
3 dividend optimizer yield 4.28%
Our views on Easyjet are well documented and we do not need to repeat them and for that reason they do not make the final cut.
Forward P/E 12.9x
3 dividend optimizer yield 3.58%
We recently researched Pace and they have not let us down since then producing a dividend increase of 32.4% in 2014. With very high cover, there should be more to come. Because we looked at them so recently, they do not make the final cut.
Forward P/E 9.5x
3 dividend optimizer yield 1.9%
Booker is an excellent company with a very good dividend track record since 2008. The forward yield is decent but the PE is high.
Forward P/E 25.1x
3 dividend optimizer yield 3.87%
We are going to immediately eliminate 3 stocks that we have recommended to members in the recent past, although we still consider them to be great dividend stocks namely Pace, Easyjet, and Photo-me.
Looking at the other companies and the selection criteria, we will eliminate, rightly or wrongly Unite for its high P/E and relatively poor dividend cover; Also Booker and Big Yellow for the same reasons. We also eliminate ARM and Rightmove for their low yields.
This leaves us with 32Red, Howden Joinery, Telecity, ITV and we are going to go for Dignity for their very predictable dividend increases and the outside possibility of a payout hike or a special dividend.
Within its Year End Results announcement on 5 March 2020 the Company proposed a final dividend for the year ending 30 December 2019 of 11 pence per share.Read more
In the current circumstances the Marks & Spencer Board does not anticipate making a final dividend payment for this financial year, resulting in an anticipated cash saving of c.£130m. They will review their policy at the interim results in November as visibility improves.Read more
The Group has continued to generate strong cash flows, deliver growth and build a balance sheet of increasing resilience. As a consequence, the Board has announced an interim dividend of 5.50p per ordinary share (2019: 5.50p). This dividend will be payable on 7 May 2020 to shareholders on the register on 17 April 2020. The ex-dividend date is 18 April 2020.Read more
In view of current uncertainty, the board has decided to cancel the interim dividend (2019: £4.2m).Read more
Due to the rapidly evolving situation and the UK Government response to the impact of COVID-19, the Travis Perkins Board expects the trading environment to change quickly and materially in the coming weeks. In response to this, the Board is taking prudent decisions in order to successfully navigate this period of turmoil. These include the suspension of the proposed full-year 2019 dividend and the pausing of the Wickes demerger process in light of current extreme stock market volatility.Read more
Due to the unprecedented uncertainty facing businesses around the world from Covid-19, Portmeirion are not recommending a final dividend at this time. They will review in three months and consider declaring an additional interim dividend in line with the final dividend for 2018 (29.50p). This will preserve approximately £3.1 million in forecast cash as part of Covid-19 contingency measures.Read more
The OneSavingsBank Board recommends a final dividend for 2019 of 11.2 pence per share. Together with the 2019 interim dividend of 4.9 pence per share and the pre-Combination CCFS interim dividend of 4.3 pence per share, this represents 25% of pro forma underlying profit attributable to ordinary shareholders. For calculation of 2019 final dividend, see Appendix.Read more
The TClarke Directors are proposing a final dividend of 3.65p (2018: 3.34p) per ordinary share totalling £1.6 million (2018: £1.4 million). Subject to approval at the Annual General Meeting, the final dividend will be paid on 22nd May 2020 to shareholders on the register as at 24th April 2020. The shares will go ex-dividend on 23rd April 2020. This dividend has not been accrued at the balance sheet date. A dividend reinvestment plan is available to shareholders.Read more
The NewRiver REIT have announce their focus is on managing cash resources very carefully and maintaining liquidity in the business. The Company has £72 million of unrestricted cash reserves and £45 million of undrawn revolving credit facilities, giving available liquidity of £117 million.Read more