Interactive Investor

ii reveals the FTSE 100 and FTSE 250 dividend heroes

17th December 2020 12:00

Myron Jobson from interactive investor

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Here are the blue chips and mid-caps that have kept a dividend this year.

Income investors may well be hopeful that banks, having been given the green light by the Prudential Regulation Authority to resume dividend payments next year, will mark a more positive chapter – but there are no guarantees.

In a year which has seen dividend paying companies slam the brakes on payouts to stay financially afloat amid the Covid-19 turmoil, there are a handful of ‘Dividend Hero’ FTSE 100 and FTSE 250 income shares that have been able to maintain their sheen to date.

interactive investor, the UK’s second largest direct to consumer investment platform, reveals its updated list of ‘Dividend Hero’ companies with 10 years or more continuous dividend growth and forecast dividend growth of at least 2% during these uncertain times. Investment trusts are not included, being well covered by the AIC’s ‘dividend heroes’ and ‘Next Generation Dividend heroes’ research.

On the FTSE 100 front, the biggest changes since the first instalment back in May is the fall of Legal & General (LSE:LGEN) and Croda International (LSE:CRDA) out of the ranks. While both stocks left interim payments unchanged, the forecast dividend growth for each is currently below 2% which takes them off the hero list. 

Sage Group (LSE:SGE) is a new entrant on the list as its forecast dividend growth has gone above 2%. It is the only stock boasting yields above 3% with a forecast yield of 3.1% (although there are no guarantees).

There are now just four companies that meet the criteria. Bunzl (LSE:BNZL), Halma (LSE:HLMA), Sage Group (LSE:SGE) and Spirax-Sarco Engineering (LSE:SPX) have grown dividend payments for at least 10 plus years in a row and are forecasted to increase the dividend over the next year by at least 2%. 

When it comes to the FTSE 250 ‘Dividend Heroes’, Avon Rubber (LSE:AVON) and Diploma (LSE:DPLM) are two new faces on the list.

There are seven shares to have made the cut including Cranswick (LSE:CWK), Dechra Pharmaceuticals (LSE:DPH), Derwent London (LSE:DLN), Genus (LSE:GNS), Safestore Holdings (LSE:SAFE) which maintain their places on the list.

Keith Bowman, Equity Analyst, interactive investor, says: “Stocks that have a good track record of paying consistent and growing dividends are like gold dust for income investors, but investors should never be tempted by income alone – it’s one of many factors to bear in mind. The acid test for income stocks is whether they can maintain their growth trajectory in uncertain times, and only a handful of FTSE 100 and FTSE 250 shares have been able to achieve this amid the coronavirus crisis (although past performance is not indicative of future results).

“The current yields of some of these stocks are hardly thrilling but are more or less in line with inflation, and reinvesting dividends can be a powerful way to boost long-term returns from the stock market. The longer this virtuous cycle is left to work, the better.

“While the dividend hero status is a good barometer of consistency, there are a number of income stocks that still offer a healthy dividend despite cutting their payout to weather the Covid-19 storm and could represent longer term buying opportunities. 

“The start of the mass rollout of the coronavirus vaccine and the Prudential Regulation Authority giving banks the green light to resume dividend payments in the new year suggests a reprieve might be on the cards for the dividend register – but with so much uncertainty remaining, there could still be a hard slog ahead.”

Fallen Stars

Commenting on the hardest hit income stocks, Keith Bowman, Equity Analyst, interactive investor, says: “Shell (LSE:RDSB) cutting its dividend for the first time since World War Two following the collapse in global oil demand due to the coronavirus pandemic underpins what has been a difficult year for the oil industry. For the oil majors, the move into lockdowns globally arguably underlined an ability to cut fossil fuel usage and yet still function. The period has accelerated a change at the majors towards greener energy against the backdrop of climate change.

“Property companies or REITs provided mixed fortunes. Those exposed to shops such as Land Securities (LSE:LAND) and British Land (LSE:BLND), cancelled payments. Other companies with exposure to warehouses and online delivery services such as Segro (LSE:SGRO) and Tritax Big Box (LSE:BBOX)continued payments. Hotel operators suffered, with many hotels closed during lockdown, again suspending payments.

“Housebuilders, having come into the 2020 as a sector generating attractive shareholder returns, mostly suspended dividend payments. Large builders Persimmon (LSE:PSN), Barratt's (LSE:BDEV) and Taylor Wimpey (LSE:TW.) all halted payments.

“Tobacco stocks, given the inelasticity of demand, have over the years often been relied on for income by those who have the stomach for such stocks. However, 2020 saw Imperial Tobacco cut its dividend by 33% - although arguably this was to help it reduce debt going forward and not a full function of the pandemic. Rival British American Tobacco raised its dividend year-over-year by 3.6%.”

FTSE 100 shares with 10 years or more continuous dividend growth and forecast dividend growth of at least 2%

Company Years of dividend growth Yield (%) Forecast yield (%)
Bunzl 14 2.1 2.4
Halma 27 0.7 0.7
Sage Group 20 3 3.1
Spirax-Sacro Engineering 27 1 1

FTSE 250 dividend shares with 10 years or more continuous dividend growth and forecast dividend growth of at least 2%

Company Years of dividend growth Yield (%) Forecast yield (%)
Avon Rubber 10 0.7 1
Cranswick 17 1.8 1.9
Dechra Pharmaceuticals 17 1.1 1.1
Derwent London 27 2.4 2.4
Diploma 20 1.4 1.6
Genus 14 0.7 0.8
Safestore Holdings 10 2.3 2.4

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 data 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.

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