This week we are going to use DividendMax to have a look at some large caps and suggest one or two must haves for any income portfolio. We start with an annualised yield over 7% and a market cap over 10 billion. All of these stocks are forecast to increase their dividends over the coming year and all have increased their dividends for at least the past two years.
The list reveals eight stocks of which 5 are in the U.K. AstraZeneca, Aviva, Vivendi, RWE, Altria, Vodafone, BAE systems and Imperial tobacco group.
There are two tobacco stocks and it is easy to eliminate Altria on dividend growth and dividend cover grounds compared to Imperial. Of the remaining stocks, AstraZeneca are facing their very own revenue cliff and lost out to GlaxoSmithkline in a previous dividend of the week. Aviva look to be at or near the top of their trading range. Vivendi and RWE both look safe and pretty unspectacular with low dividend growth forecast.
BAE systems have had a pretty good run of late in spite of what looks like a tough year ahead. So, we are down to the two must haves. Vodafone and Imperial Tobacco Group.
Both have come off recent highs. Vodafone shares have fallen slightly over 15% from their recent high during what has been a pretty good time for the market and sits on a PE of 10.4 compared to 11.4 for Imperial. Both stocks are buying back their own shares. Vodafone is somewhat dependent upon Verizon Wireless paying it dividends over the coming years.
This will probably continue as Verizon Communications is also dependent on the Verizon wireless business paying it dividends. Vodafone looks more exposed to economic uncertainty than Imperial.
It is a very close call to pick the dividend of the week, but I am going to go for Vodafone with it sitting near its 52 week low and with no reason to believe it will abandon it’s policy of increasing the dividend by 7% per annum. As I write it has hit 156p and looks good value at these levels.
