The Dividend Dozen paying shareholders over £3.2bn in February

It’s a big month for dividend payments by FTSE 100 companies and one of the country’s most popular investment trust. Here are the latest shareholders to be rewarded in 2023.

Dividends from Vodafone Group (LSE:VOD) and British American Tobacco (LSE:BATS) will be among the £3.2 billion of payments that shareholders of 12 leading companies need to look out for in February.

The bulk of these payments in value terms will be paid out this week, including £1.2 billion from BAT on Thursday and £1.1 billion by the mobile phone giant on Friday.

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The February dividends begin to flow from tomorrow with the awards from F&C Investment Trust Ord (LSE:FCIT) and Johnson Matthey (LSE:JMAT), as well as the 15.17p a share interim dividend from the dependable and widely held income stock United Utilities Group (LSE:UU.).

BT Group (LSE:BT.A) shareholders get in on the act the following week through Monday’s payment of an interim dividend of 2.31p a share worth £229 million. There’s also the final dividend payment of worth £124 million from accounting software group Sage Group (The) (LSE:SGE) due on 10 February before FTSE 250-listed City of London Ord (LSE:CTY) Investment Trust hands out £23.9 million on 28 February.

The dividend dozen includes this Friday’s planned one-off special award of 20p a share worth £200 million by B&M European Value Retail SA (LSE:BME), which it disclosed at the start of January after posting a robust trading performance in its Christmas trading update.

The payments should be well received by retail investors amid the ongoing cost-of-living crisis and following the dividend drought seen in the early part of the pandemic.

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Link Group said yesterday that FTSE 100 dividends rose by a headline 9.1% in 2022 and an underlying 14.8% once lower special dividends were excluded. The next 250 largest companies’ dividends rose by a headline 5% and an underlying 23.8%.

The payment from British American Tobacco is the final tranche of the four equal quarterly instalments of 54.45p a share disclosed by the FTSE 100-listed company with annual results on 11 February 2022. The total of 217.8p represented an increase of 1% on 2020’s award and a pay-out ratio of 66.2% against 2021’s adjusted diluted earnings per share.

The payment forms part of 6% compound annual dividend growth over 10 years, reflecting a record of strong profitability and over 90% operating cash conversion.

Vodafone’s dividend award of 4.50 euro cents has been the same level since January 2020, although for UK-based investors there’s some variability in their level of payments.

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Whereas 4.50 euro cents converted to a payment of 4.08p a share in 2020, last year's January award was 3.75p a share and this week’s is 3.95p based on last Friday’s euro exchange rate.

A bigger threat concerns speculation that Vodafone’s dividend is unsustainable and that it may slash shareholder returns in order to focus resources on its operational performance.

Vodafone is due to post a trading update on Wednesday, when interim boss Margherita Della Valle may come under pressure for guidance on the outlook for the dividend ahead of the mobile phone giant’s annual results on 16 May.

Bank of America said recently that a 30% dividend cut is a potential risk, but added that a reduction would mean a more sustainable 6% yield along with a better Vodafone. It moved to a “buy” recommendation, with a sum of parts price target of 131p.