Interactive Investor

The four stocks with yields above 8% about to pay dividends

Fifteen FTSE 100 companies will be returning cash to shareholders over the next few weeks, among them some of the highest-yielding stocks around. Graeme Evans names them here.

31st October 2023 14:17

by Graeme Evans from interactive investor

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A hand sharing dividend payouts 600

High-yielding Barratt Developments (LSE:BDEV) and Taylor Wimpey (LSE:TW.) are to pay shareholders a total of £398 million as part of £2.75 billion of blue-chip dividends due in November.

The housebuilding pair and 13 other FTSE 100 companies, including Tesco (LSE:TSCO), British Gas owner Centrica (LSE:CNA) and British American Tobacco (LSE:BATS), have shareholder distributions planned for the month.

All but two of these companies are handing out interim or quarterly dividends, which is why the monthly total is much smaller than the 2023 best of £15.7 billion recorded for September.

The payments include Friday’s 6.5p a share from the 10% yielding savings and investments firm M&G (LSE:MNG), with its £153 million half-year award taking shareholder distributions since the company’s 2019 demerger from Prudential (LSE:PRU) to £2.5 billion.

The return of cash built up on their balance sheets means housebuilders often lead the FTSE 100 in terms of above-average yields.

The stock market opportunity for investors looking to offset inflation comes with a health warning, however, as yields of 8% and above can be regarded as a sign that the market thinks the dividend is unsustainable.

Against a backdrop of depressed valuations across the sector, Taylor Wimpey and Barratt Developments currently yield 8.8% and 8.3% respectively.

Taylor Wimpey’s interim dividend of 4.79p for payment on 17 November amounts to £169 million. That’s £6 million more than the previous year, in line with a policy to return 7.5% of net assets or at least £250 million annually throughout the cycle.

The company reassured investors in August that this policy had been stress tested to withstand conditions beyond what it would consider a normal downturn, including up to a 20% fall in house prices and 30% decline in volumes.

Friday’s full-year payment of 23.5p a share worth £229 million by Barratt is down from 25.7p a year earlier, reflecting lower earnings per share during the year to 30 June but partly offset by a reduction in dividend cover to two times.

Despite the difficult market conditions, the board is pressing ahead with reducing cover to 1.75 times by 2024 as part of a policy of phased cuts from 2.5 times in 2021.

However, there will be no further share buybacks for the time being and the Barratt board will continue to review the capital allocation policy as market conditions develop.

The month’s other big-yielding stock is British American Tobacco, which on Friday is paying the equivalent of £1.29 billion through 57.72p a share. This is the third of four equal quarterly instalments in relation to its 2022 performance, leading to a 8.9% yield.

The next biggest dividend payer in the month is BAE Systems (LSE:BA.), which is distributing £350 million through an interim dividend of 11.5p a share. This represents an 11% improvement on a year earlier and comes amid a three-year buyback programme worth £1.5 billion

The interim dividend from Tesco of 3.85p, or £273 million, is due to be paid on 24 November and is in line with a policy to distribute 35% of the previous full-year dividend.

For holders of former British Gas shares, the rebuilding of the Centrica dividend continues on 16 November when the company distributes 1.33p a share, worth £73 million.

This interim award is an increase of a third on the previous year’s 1p, which was the first handed to shareholders since the pandemic caused distributions to go on hold.

The first payments of the month are due tomorrow when Smith & Nephew (LSE:SN.) shareholders get £104 million from an interim award of 11.89p a share and F&C Investment Trust (LSE:FCIT) £17 million from 3.40p a share.

Source: interactive investor, SharePad. Data correct as at 27 October 2023.

These articles are provided for information purposes only.  Occasionally, an opinion about whether to buy or sell a specific investment may be provided by third parties.  The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.

Full performance can be found on the company or index summary page on the interactive investor website. Simply click on the company's or index name highlighted in the article.

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