Sunday 31 May 2009

10 shares that pay good dividends

10 shares that pay good dividends

Dividend payments are once again under pressure – no sooner had BT announced a 60pc cut in its dividend than M&S said its payout to shareholders would be 30pc lower– its first cut for nine years.

Last Updated: 1:24PM BST 27 May 2009


Nick Raynor of The Share Centre, a stockbroker, said: "The past year has been one of turmoil for income-seeking investors as historically favoured sectors such as banking have either seen an aggressive cut or a complete erosion in dividends as the credit crunch took effect.

"However, there are still some great opportunities for those wishing to generate income from their investments. In particular, investors should be looking out for companies that are traditionally defensive, coupled with an ability to expand operations around the world."


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The Share Centre has identified a number of investment opportunities for income seekers.

National Grid
Currently trading at 590p and offering a yield of 5.7pc.

Comment from The Share Centre: "National Grid said recently that it intended to grow its dividends by at least 8pc this year and is due to progress at the same level until 2012. In the long term we feel that this is a solid performer; income and growth seekers can expect stable dividend payments from a good solid company."

Northumbrian Water
Currently trading at 245p and offering a yield of 4.7pc

Comment: "The last trading update from Northumbrian Water reported a 1pc (£4m) fall in revenue. Considering the performance of other water companies in the utilities sector this is not bad.

"From a cash position the company is financially sound, currently sitting on a cash pile of £371m with a further £75m available through drawdowns. With this in mind we expect the dividend to remain secure, and a rise should not be ruled out."

British American Tobacco (BAT)
Currently trading at £16.61 and offering a yield of 4.2pc.

Comment: "BAT's defensive nature has helped to keep the company buoyant in a choppy market. Last year pre-tax profits rose from £3.1bn to £3.7bn, therefore the likelihood of BAT cutting its dividend is minimal. BAT also has a reasonable dividend cover of 1.76 and is therefore suitable for income seekers and the risk averse."

Centrica
Currently trading at 243p and offering a yield of 5.6pc.

Comment: "As well as being the biggest provider of gas in the UK, Centrica now generates a quarter of revenues in the US, which could protect it from the group's exposure to the volatile commodity market."

BP
Currently trading at 501p and offering a yield of 7.5pc.

Comment: "For those wanting exposure to the oil sector, we believe BP is the best bet. Dependency on oil is unlikely to reduce and BP's profits remain strong. BP has a high level of reserves, and as a financially strong company it has plenty of cash available to purchase additional reserves should the need arise."

GlaxoSmithKline
Currently trading at £10.52 and offering a yield of 5.2pc.

Comment: "Despite the company's share price dropping by around 20pc so far this year, we believe GSK's defensive nature will stand the company in good stead throughout 2009. GSK has a significant pipeline of drugs either at late stage testing or due for release very soon. It is suitable for investors seeking income and growth."

Vodafone
Currently trading at 115p and offering a yield of 6.5pc.

Comment: "Vodafone continues to be a favourite of The Share Centre. Vodafone recently announced a strong set of full-year figures, after the weaker pound helped boost the value of overseas sales. Due to the increase in profit, Vodafone has an attractive dividend and growth prospects."

Scottish & Southern Energy
Currently trading at £11.63 and offering a yield of 5.4pc.

Comment: "In these volatile times a well managed utility has many attractions for investors seeking a safer haven. Scottish & Southern pays consistent dividends to shareholders and is attractive for those looking for steady growth and a reasonable income.

"Due to the company's steady and solid earnings figures, the management has set its sights on improving performance of its assets and pushing up the dividend further."

Rexam
Currently trading at 302p and offering a yield of 6.6pc.

Comment: "Rexam is one of the world's leading packaging companies, specialising in beverage cans and bottles. The promise of a long hot summer is something Rexam can look forward to and it will be hoping that this will give the company a boost. The dividend looks as if it will remain unchanged and stands at well over 6pc."

RSA Insurance
Currently trading at 127.5p and offering a yield of 5.8pc.

Comment: "Now that the reconstruction of RSA [formerly Royal & Sun Alliance] is finally complete, shareholders will hope that chief executive Andy Haste shows as much flair for increasing profits as he did for stemming losses. This signs are good so far, with a refocusing on new markets and a hefty dividend increase.

"Recent figures were solid but not exciting. However, there has been no news of any cut in the dividend, so for those looking for an income this should remain a favourite."

http://www.telegraph.co.uk/finance/personalfinance/investing/shares-and-stock-tips/5393529/10-shares-that-pay-good-dividends.html

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