Dividend of the week - Centrica
Given their reputation for big dividends, it is about time that we looked at companies in the Utilities sector. As a start point we cannot consider any companies yielding under 5% on the 3 dividend optimizer in DividendMax. This yields fifteen Electricity companies and what is surprising is that so many of them are from outside the U.K. The gas, water and multi-utilities sector throws up five more companies. Mobile telecoms throws up a couple more and telecoms another fifteen. Thirty seven companies is too big a start point so we will eliminate the Mobile telecoms sector as we have featured Vodafone in a previous dividend of the week. Next, we insist on having a forecast dividend increase and this reduces our list to twenty three. Still too many, so we up the yield criteria to >7% and this makes our list a more manageable 11 companies. From the telecoms sector, we have Belgacom, Mobistar and Kcom group. From the multi-utilities sector we get Centrica and from the Electicity sector, we have EON, RWE, EDF, Iberdrola, Red Electrica, National Grid and SSE. For these companies, dividend cover is not so important as their earnings tend to be very consistent and they can pay high dividends with relatively low cover. In this sector, it is important to consider the consistency of the payout, so we next look only at companies that have increased their annual dividend for at least the past 5 years. This eliminates a good number of companies and to some extent explodes the myth that these companies always increase their dividends.