3 Tips to Improve Returns With Dividend Stocks

By Matt Nesto | Breakout – Fri, Jul 27, 2012

At a time of such strong demand for dividends and safety, the quest for a reasonable yield amidst historically low interest rates has become quite a competitive sport. With that in mind, for this installment of Investing 101, we brought in Marc Lichtenfeld, author of Get Rich With Dividends and Associate Investment Director at the Oxford Club, to discuss ways to get more for your money by investing in income-producing stocks. He provided the following three tips to improve your performance and total return.

1) Perpetual Dividend Raisers

One of the best ways to get more bang for your dividend buck is to simply get more bang — that is, to get more and more money paid to you year after year. Lichtenfeld says the universe of these so-called serial dividend raisers isn't that big. "There's about 400 companies that have a track record of at least five years [of consecutive increases], but once you get out to 10 years, you cut that number in half," he says in the attached video. And, as you might imagine, in the case of Standard & Poor's Dividend Aristocrats portfolio of companies with a 25-year track record, the list shrinks down to just 51 companies. However, Lichtenfeld warns not all of the perpetual raisers offer great yields. He suggests finding the ones that have the track record but that also authorize the biggest percentage annual increase — and pay this highest yields, too.

2) Boring Is Good

In an increasingly active marketplace, many investors have embraced a trader's mindset and have declared traditional buy-and-hold investing dead. Lichtenfeld disagrees with that notion and has devoted a chapter in his book (called Snooze Your Way to Millions) to dispel this notion and make the case for low-turnover and reinvestment. "If you bought $10k of McDonald's (MCD) in 2001, by 2011 you had $46k, assuming you reinvested the dividends," he says, adding that the hamburger giant has a 35-year streak of dividend increases.

3) Aim Higher

Right now the yield on a 10-year Treasury is about 1.4%, while the S&P 500 currently has about a 2.2% dividend yield. Generally speaking, Lichtenfeld says 4.5% is a reasonable starting yield to shoot for, and says larger yields can often be found in REITs and MLPs. "It really goes across the board," he says, pointing out that above-average yields can also be found in consumer stocks, financials, telecoms, and utilities. "You can look through a wide range of stocks and diversify your portfolio as well," he says, reminding investors that higher yields typically carry higher risks.

To be sure, dividends play an important role for the total return investor but are not the only consideration. Still, research has shown that owning a portfolio of quality stocks that have shown a commitment to shareholders via consistent dividend increase is a proven formula for long-term success.

http://finance.yahoo.com/blogs/breakout/3-tips-improve-returns-dividend-stocks-172506087.html

Corporate Finance - Dividend Theories

Dividend Irrelevance TheoryMuch like their work on the capital-structure irrelevance proposition, Modigliani and Miller also theorized that, with no taxes or bankruptcy costs, dividend policy is also irrelevant. This is known as the "dividend-irrelevance theory", indicating that there is no effect from dividends on a company's capital structure or stock price. 

MM's dividend-irrelevance theory says that investors can affect their return on a stock regardless of the stock's dividend. For example, suppose, from an investor's perspective, that a company's dividend is too big. That investor could then buy more stock with the dividend that is over the investor's expectations. Likewise, if, from an investor's perspective, a company's dividend is too small, an investor could sell some of the company's stock to replicate the cash flow he or she expected. As such, the dividend is irrelevant to investors, meaning investors care little about a company's dividend policy since they can simulate their own.

Bird-in-the-Hand TheoryThe bird-in-the-hand theory, however, states that dividends are relevant. Remember that total return (k) is equal to dividend yield plus capital gains. Myron Gordon and John Lintner (Gordon/Litner) took this equation and assumed that k would decrease as a company's payout increased. As such, as a company increases its payout ratio, investors become concerned that the company's future capital gains will dissipate since the retained earnings that the company reinvests into the business will be less. 

Gordon and Lintner argued that investors value dividends more than capital gains when making decisions related to stocks. The bird-in-the-hand may sound familiar as it is taken from an old saying: "a bird in the hand is worth two in the bush." In this theory "the bird in the hand' is referring to dividends and "the bush" is referring to capital gains.

Tax-Preference TheoryTaxes are important considerations for investors. Remember capital gains are taxed at a lower rate than dividends. As such, investors may prefer capital gains to dividends. This is known as the "tax Preference theory". 

Additionally, capital gains are not paid until an investment is actually sold. Investors can control when capital gains are realized, but, they can't control dividend payments, over which the related company has control. 

Capital gains are also not realized in an estate situation. For example, suppose an investor purchased a stock in a company 50 years ago. The investor held the stock until his or her death, when it is passed on to an heir. That heir does not have to pay taxes on that stock's appreciation. 

The Dividend-Irrelevance Theory and Company ValuationIn the determination of the value of a company, dividends are often used. However, MM's dividend-irrelevance theory indicates that there is no effect from dividends on a company's capital structure or stock price. 

MM's dividend-irrelevance theory says that investors can affect their return on a stock regardless of the stock's dividend. 

For example, suppose, from an investor's perspective, that a company's dividend is too big. That investor could then buy more stock with the dividend that is over his or her expectations. Likewise, if, from an investor's perspective, a company's dividend is too small, an investor could sell some of the company's stock to replicate the cash flow he or she expected. As such, the dividend is irrelevant to investors, meaning investors care little about a company's dividend policy since they can simulate their own. 

The Principal Conclusion for Dividend Policy

The dividend-irrelevance theory, recall, with no taxes or bankruptcy costs, assumes that a company's dividend policy is irrelevant. The dividend-irrelevance theory indicates that there is no effect from dividends on a company's capital structure or stock price. 

MM's dividend-irrelevance theory assumes that investors can affect their return on a stock regardless of the stock's dividend. As such, the dividend is irrelevant to an investor, meaning investors care little about a company's dividend policy when making their purchasing decision since they can simulate their own dividend policy.

How Any Shareholder Can Construct His or Her Own Dividend Policy.

Recall that the MM's dividend-irrelevance theory says that investors can affect their return on a stock regardless of the stock's dividend. As a result, a stockholder can construct his or her own dividend policy. 

• Suppose, from an investor's perspective, that a company's dividend is too big. That investor could then buy more stock with the dividend that is over the investor's expectations.
• Likewise, if, from an investor's perspective, a company's dividend is too small, an investor can sell some of the company's stock to replicate the cash flow the investor expected.

As such, the dividend is irrelevant to an investor, meaning investors care little about a company's dividend policy since they can simulate their own.

Read more: http://www.investopedia.com/exam-guide/cfa-level-1/corporate-finance/dividend-theories.asp#ixzz1yf1Ugmp6

The Impact of Reinvesting Dividends

The chart shows the value over time of a $100 investment made in the S&P 500 in 1925 with dividends reinvested vs. dividends not reinvested.  It appears in the book pretty much as shown below.

It makes the difference between reinvesting dividends (the top line) and not reinvesting dividends (the bottom line) look pretty impresive, but it also makes it look like there isn't much difference until 50 years or so after the initial investment.  That's because the vertical scale is linear.

A more typical way to show compound growth such as this would be to use a semi-log chart, as shown next.  (A somewhat less serious problem with the chart above is that the horizontal scale distorts the amount of time at the beginning and end of the data.)

1. All that's really going on here is the difference between about 10.5% compound annualized growth (dividends reinvested, on the top line) and 5.7% compound annualized growth (dividends not reinvested, on the bottom line). 
 
2. The semi-log chart (with time properly represented on the horizontal scale) makes it clear that there is constant percentage growth in the value of the investment regardless of whether or not dividends are reinvested.  That's because the lines are straight (remember that straight lines on the semi-log chart indicate consistent compound growth).         
3. It also shows more clearly that reinvestment of dividends 

• affects the investment value right from the beginning and
  •  
• provides a consistently increasing benefit as more and more time passes.

Dividend Decision

Dividend Decisions

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He is 18 years old!

Divine Dividends

Dividends represent nothing more than the investor's share of earnings that will be received immediately (rather than through reinvestment and future growth of the stock).

Dividends are one of the quickest and healthiest ways that earnings can make their way into shareholders' pockets.

Graham argued that intelligent investors would rather have dividends in their pockets (even if investors use them to buy more of the same stock) than risk waiting for possible future growth.  Furthermore, he insisted, it is management's responsibility to pay dividends.

For long-term investors who follow a "buy and hold" strategy, dividends are the only way to collect on investment gains.

In addition to representing money in the bank, dividends are, to many investors, a reliable indicator of future growth.  

Values are determined roughly by earnings available for dividends.  This relation among earnings, dividends and values survives.

A long history of dividend payments and regular dividend increases also indicates a substantial company with limited risk.  

Additionally, a rise in the dividend is tangible confirmation of the confidence of management in good times ahead.  A cut in the dividend is a red flag indicating trouble on the track.

Not all corporate income need be paid in dividends.  Depending on the industry and how much capital is required to keep the business growing, the appropriate payout may be as much as 80% or as little as 50% of net earnings.  

When studying the dividend payout of a company, calculate both average earnings and average dividends over a 10-year period.  From those two averages you can determine the average payout.  

Earnings fluctuate, but dividends tend to remain stable or,  in the best companies, to rise gradually.


One way of determining if a stock is overvalued or undervalued is to compare its dividend yield with that of similar companies.

• Safety, growth, and other factors being equal, the stock with the highest dividend and the lowest share price is the best bargain.
• As a further check of value, investors should compare the stock's dividend yield with that of the whole stock market dividend yield.

Rationale for Withholding Dividends

If a company isn't paying dividends it should, like Berkshire Hathaway, be doing something profitable with its earnings.  

It is acceptable to withhold dividends for the following reasons:

• To strengthen the company's working capital
• To increase productive capacity
• To reduce debt.

Graham contended that when corporate management is stingy with dividends or withholds them altogether, it is sometimes for self-serving reasons.  It is easier to keep the cash on hand to bail management out of bad times or bad decisions.  Sometimes the dividend policy is simply a reflection of the tax status of management and large investors - they don't want the addition to their current taxable income.  Consequently, other investors get no income.

Dividends in Jeopardy

Dividends may be put in jeopardy in two ways:

• When a company's earnings per share is less than its dividend per share
• When debt is excessive.

A company's average earnings (over several years) should be sufficient to cover its average dividend.  Though earnings per share can fall below dividend per share from time to time with reserves making up the difference, the condition can persist for only so long.  

A company with substantial earnings rarely becomes insolvent because of bank loans.  But when a company is under pressure, lenders may require a suspension of dividends as a form of financial discipline.

3 Different Stock Investing Tips

Depending upon the type of stock, you may need an altogether different investment strategy. We are providing you with three investing tips which will assist you in figuring out as to which one best suit your requirements.

Investing Tip #1: Income
Income stocks are a good investment option for getting regular income from a company. In this investor are paid in the shape of dividends. Though income is taxed yet it provides for a regular income to investors from the stocks.

A company usually divides any excess amount of cash it has as dividend when its operations do no need that money for growth. It can happen because company may have borrowed cash from market or banks or has decided not to expand due to narrow opportunities in the growth.

Investing Tip #2: Growth
These are termed as the hot stocks. They are so called because of their ability to double, triple or even quadruple the investment made by investors in short period of few years. However, to hunt growth stocks is quite a challenge. Like for example, it is not easy to find another Microsoft or Wal-Mart.

But I have some tips for you. You must search and find stocks which have good Earning per Share Growth Rate, have rapidly growing sales and have sufficient operating cash flow and nice profits. When you buy such stocks you become certain that stocks will grow with the time.

Investing Tip #3: Speculative
Investment in speculative stock is based on high risk with high return formula. This is all about getting 100 % returns in shortest time or maybe losing your invested amount altogether! Though returns can usually be good as they normally deal in penny stocks, but all said, risk is there as nobody is sure if speculation is there in stocks. If you are new in stock trade you must resist investing in these stocks.

http://www.makemoneyinstocks.net/3-different-stock-investing-tips/

Valuing A Stock With Supernormal Dividend Growth Rates

by Peter Cherewyk 

The supernormal growth model is most commonly seen in finance classes or more advanced investing certificate exams. It is based on discounting cash flows, and the purpose of the supernormal growth model is to value a stock which is expected to have higher than normal growth in dividend payments for some period in the future. After this supernormal growth the dividend is expected to go back to a normal with a constant growth. (For a background reading, check out Digging Into The Dividend Discount Model.)

Tutorial: Discounted Cash Flow Analysis

To understand the supernormal growth model we will go through three steps.

1. Dividend discount model (no growth in dividend payments)

2. Dividend growth model with constant growth (Gordon Growth Model)

3. Dividend discount model with supernormal growth

Dividend Discount Model (No Growth in Dividend Payments)
Preferred equity will usually pay the stockholder a fixed dividend, unlike common shares. If you take this payment and find the present value of the perpetuity you will find the implied value of the stock.

For example, if ABC Company is set to pay a $1.45 dividend next period and the required rate of return is 9%, then the expected value of the stock using this method would be 1.45/0.09 = $16.11. Every dividend payment in the future was discounted back to the present and added together.

V = D1/(1+k) + D2/(1+k)2 + D3/(1+k)3 + ... + Dn/(1+k)n

Where:
V = the value
D₁ = the dividend next period
k = the required rate of return

For example:

V = $1.45/(1.09) + $1.45/(1.09)2 + $1.45/(1.09)3 + … + $1.45/(1.09)n V= $1.33 + 1.22 + 1.12 + . . . V= $16.11

Because every dividend is the same we can reduce this equation down to: V= D/k

V=$1.45/0.09

V=$16.11

With common shares you will not have the predictability in the dividend distribution. To find the value of a common share, take the dividends you expect to receive during your holding period and discount it back to the present period. But there is one additional calculation: when you sell the common shares you will have a lump sum in the future which will have to be discounted back as well. We will use "P" to represent the future price of the shares when you sell them. Take this expected price (P) of the stock at the end of the holding period and discount it back at the discount rate. You can already see that there are more assumptions you need to make which increases the odds of miscalculating. (Explore arguments for and against company dividend policy, and learn how companies determine how much to pay out, read How And Why Do Companies Pay Dividends?)

For example, if you were thinking about holding a stock for three years and expected the price to be $35 after the third year,  the expected dividend is $1.45 per year.

V= D1/(1+k) + D2/(1+k)2  + D3/(1+k)3 + P/(1+k)3 V = $1.45/1.09 + $1.45/1.092 + $1.45/1.093 +$35/1.093

Dividend Growth Model with Constant Growth (Gordon Growth Model)
Next let's assume there is a constant growth in the dividend. This would be best suited for evaluating larger stable dividend paying stocks. Look to the history of consistent dividend payments and predict the growth rate given the economy the industry and the company's policy on retained earnings.

Again we base the value on the present value of future cash flows:

V = D1/(1+k) + D2/(1+k)2+…..+Dn/(1+k)n

But we add a growth rate to each of the dividends (D₁, D₂, D₃, etc.) In this example we will assume a 3% growth rate.

So D₁ would be $1.45(1.03) = $1.49

D₂ = $1.45(1.03)² = $1.54

D₃ = $1.45(1.03)³ = $1.58

This changes our original equation to : 

V = D1(1.03)/(1+k) + D2(1.03)2/(1+k)2+…..+Dn(1.03)n/(1+k)n V = $1.45(1.03)/(1.09) + $1.45(1.03)2/(1.09)2 + $1.45(1.03)3/(1.09)3 + … + $1.45(1.03)n/(1.09)n V = $1.37 +$1.29 + $1.22 + …. V = 24.89

This reduces down to: V = D₁/k-g

Dividend Discount Model with Supernormal Growth
Now that we know how to calculate the value of a stock with a constantly growing dividend we can move on to a supernormal growth dividend.

One way to think about the dividend payments is in two parts (A and B). Part A has a higher growth dividend; Part B has a constant growth dividend. (For more, see How Dividends Work For Investors.)

A) Higher Growth
This part is pretty straight forward - calculate each dividend amount at the higher growth rate and discount it back to the present period. This takes care of the supernormal growth period; all that is left is the value of the dividend payments which will grow at a continuous rate.

B) Regular Growth
Still working with the last period of higher growth, calculate the value of the remaining dividends using the V = D₁/(k-g) equation from the previous section. But D₁ in this case would be next year's dividend, expected to be growing at the constant rate. Now discount back to the present value through four periods. A common mistake is discounting back five periods instead of four. But we use the fourth period because the valuation of the perpetuity of dividends is based on the end of year dividend in period four, which takes into account dividends in year five and on.

The values of all discounted dividend payments are added up to get the net present value. For example if you have a stock which pays a $1.45 dividend which is expected to grow at 15% for three years then at a constant 6% into the future. The discount rate is 12%.

Steps

1. Find the four high growth dividends.

2. Find the value of the constant growth dividends from the fifth dividend onward.

3. Discount each value.

4. Add up the total amount.

Period	Dividend	Calculation	Amount	Present Value
1	D1	$1.45 x 1.151	$1.67	$1.50
2	D2	$1.45 x 1.152	$1.92	$1.56
3	D3	$1.45 x 1.153	$2.21	$1.61
4	D4	$1.45 x 1.154	$2.54	$1.67
5	D5 …	$2.536 x 1.06	$2.69
		$2.688 / (0.11 - 0.06)	$53.76
		$53.76 / 1.114		$35.42
			NPV	$41.76

Implementation
When doing a discount calculation you are usually attempting to estimate the value of the future payments. Then you can compare this calculated intrinsic value to the market price to see if the stock is over or undervalued compared to your calculations. In theory this technique would be used on growth companies expecting higher than normal growth, but the assumptions and expectations are hard to predict. Companies could not maintain a high growth rate over long periods of time. In a competitive market new entrants and alternatives will compete for the same returns thus bringing return on equity (ROE) down.

The Bottom LineCalculations using the supernormal growth model are difficult because of the assumptions involved such as the required rate or return, growth or length of higher returns. If this is off, it could drastically change the value of the shares. In most cases, such as tests or homework, these numbers will be given, but in the real world we are left to calculate and estimate each of the metrics and evaluate the current asking price for shares. Supernormal growth is based on a simple idea but can even give veteran investors trouble. (For more, check out Taking Stock Of Discounted Cash Flow.)

by Peter Cherewyk (Contact Author | Biography)

Peter Cherewyk has worked in the financial field for over 10 years. He completed his Bachelor of Commerce from the University of Alberta, and is currently working towards a Chartered Financial Analyst designation. He enjoys hockey and hiking and the opportunity to teach others.

Filed Under: Dividend, Fundamental Analysis, Stock Analysis, Stocks

http://www.investopedia.com/articles/fundamental-analysis/11/supernormal-growth-analysis.asp

Questor share tip: GlaxoSmithKline has potential for growth

Last week's third-quarter numbers from pharma giant GlaxoSmithKline (GSK) demonstrated progress on its core strategy. This was welcome news.

By Garry White, Questor Editor
Published: 9:00PM BST 23 Oct 2010

Comment

GlaxoSmithKline

GlaxoSmithKline

£12.80½

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Questor says BUY

The company has been suffering from patent expiries on some of its major products – but is refocusing its business away from "white pills/Western markets" to a more consumer-orientated and emerging market focused group.

The headline numbers suffered from generic competition to herpes treatment Valtrex in the US and the withdrawal of diabetes treatment Avandia from some markets.

Last year's figures were also boosted by one-off sales of influenza pandemic vaccines.

This meant third-quarter pre-tax profits were lower than last year – at £1.97bn, compared with £2.07bn, on revenues that rose 0.8pc to £6.8bn. These numbers were ahead of expectations.

However, when the effect of Valtrex, Avandia and flu are stripped out, revenue growth was about 6pc. This is significant, as it represents the core of the company's business in the future.

GSK remains a dividend play, with the shares yielding 4.7pc. The group raised its interim payment to 16p from 15p last year – it will be paid on January 6 next year and the shares trade ex-dividend for this payment on October 27.

The shares were recommended as a dividend play on October 29 last year at £12.51 and they are now 2pc higher than that level compared with a market up 12pc. Trading on a December 2010 earnings multiple of 11.6 times, falling to 10.4 next year, the shares are a solid yield play with growth potential

http://www.telegraph.co.uk/finance/markets/questor/8082032/Questor-share-tip-GlaxoSmithKline-has-potential-for-growth.html

10 shares for dividends

Investors had something to cheer about, with news that dividend payments are rising again.

Published: 7:03AM BST 26 Oct 2010

Comment

Carnival controls about 60pc of the cruise market

In the third quarter of this year (July to September), the dividends paid by British companies rose 1.6pc, the first rise since early 2009, according to the latest report by Capita Registrars.

Perhaps surprisingly, the biggest growth came from smaller and medium-sized companies. Dividends paid by FTSE 250 companies grew by a third, far faster than the growth in payments by the larger companies that dominate the FTSE 100. These payments actually fell 2pc in the last quarter, although these figures were skewed by BP's decision to cancel its dividend payout completely following the Gulf of Mexico oil spill.

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Amid more general economic pessimism, fund managers say this information shows that many British companies are in rude health. Clive Beagles, equity income manager at J O Hambro, said: "We remain optimistic that this trend will continue."

The companies starting or reinstating dividend payments to shareholders outnumber by three to one those that cut or cancelled their dividends.

But not all equity income managers are as bullish. Bill Mott, the veteran income manager who now runs Psigma Income, remains "fairly cautious" about the outlook for UK companies.

"I think we are in for a few years of fairly anaemic growth. The companies best placed to pay dividends will be stable, predictable businesses that do not have to spend a lot of money maintaining or growing their market position," he said. He said these tended to be companies that are already in the dividend arena such as pharmaceutical, telecoms, tobacco and utility companies.

But both fund managers agree that for smart investors there are opportunities for significant dividend growth outside these established stalwarts. Below is a list of companies tipped by various fund managers to deliver strong dividend growth over the next few years.

Of course, those not wanting to risk investing in individual shares should consider an equity income fund, which invests in a broad basket of companies that have the potential to pay a good dividend stream.

DEBENHAMS

Mr Beagles said this high street retailer had certainly had its problems. It stopped paying dividends two years ago, but since then has managed to reduce the debt it is carrying by about two-thirds.

On the back of more optimistic trading statements he said he is optimistic that these payments should resume next year. "If it only paid out a third of its earnings, this would mean a dividend of about 9 to 10p. On current share prices that would represent a yield of about 4.5pc," he said.

CARNIVAL CRUISES

This is another smaller company that Mr Beagles said had the potential to deliver strong dividend growth. The company, which bought P & O Princess at the start of the previous decade, controls about 60pc of the cruise market. It has expanded over the past decade, but again two years ago it cut its dividends right back as customer demand dropped in the wake of the financial crisis. It is now paying a small dividend but this is just a quarter of what it paid before payments were scaled back.

Mr Beagles said: "The company has spent less on new ships, and demand is growing again, so its cash flow position has improved. We would expect to see this translate into a growing dividend stream again."

Investors should bear in mind that, as this company has a dual listing in Britain and America, dividends are paid in US cents.

BP

Most analysts expect the oil giant to reinstate its dividend payments in 2011. The question is, at what level. Tineke Frikkee, a fund manager at Newton Investments, said: "Optimists might be hoping that payments will resume at its previous level, of about US 14c per quarter, while the most pessimistic commentators reckon shareholders will be lucky to get half this."

Ms Frikkee said she sat "somewhere between the two" and expected a dividend payment of between 9c and 10c next year. However, although this will show a big jump in dividend payments, the yields may not be as high as other companies'.

She added that fluctuations in the pound to dollar exchange rate could affect returns for British investors.

TESCO (AND SAINSBURY'S AND MORRISONS)

Mr Mott said those looking for good dividends and consistent growth should look at these food retailers. Yields currently range from just under 3pc to just over 4pc. "Each of these are good defensive companies," he said.

"And are looking to expand in various ways, both in the UK, thanks to our growing population, and overseas." He added: "They are cash generative businesses, with potential for good dividend growth, but they remain a low risk investment, particularly if economic conditions worsen."

BOOKER

This cash-and-carry business is also favoured by Mr Mott for future dividend growth. He said: "They have a very good chief executive in Charles Wilson, who has turned the company around from having massive debt to virtually no debt at all."

The business is involved in a start-up venture in India, but also has the stable cash flow from its UK base. He added: "This company has the potential to grow its earnings and its dividend. And on today's share price this yield looks attractive."

L & G

Many life insurers, like other financial companies, scaled back their dividend payments at the start of the credit crisis, but many are now increasing these payments again, on the back of good growth.

Legal & General, for example, halved its dividend at the end of 2008, from almost 6p to 3p. Its last dividend was up 30pc; "But even with this rise there is still considerable scope for further rises to reach their previous levels," said Mr Beagles. Other life insurers are also edging up dividend payments: Aviva, for example, recently grew its dividend by 10pc‑15pc.

CAPE

This industrial services company (which is involved in the safety and maintenance of oil rigs, among other things) has not paid a dividend for 10 years. This has been largely due to it carrying significant debts and having a substantial historical asbestos liability.

But the company has managed to reduce its debts, and has made provision for outstanding asbestos claims. Mr Beagles said: "We expect this company to start behaving as it should have done for the past decade, as a well run £400m company that trades on a reasonable price to earnings ratio."

HSBC

Analysts expect HSBC to be the bank that provides the biggest dividend growth in 2011. Ms Frikkee said: "Investors must remember again though that this is paid in dollars."

Although bank balance sheets are improving, political and regulatory consideration could impair their ability to return to dividend yields seen in the past. Ms Frikkee said that, looking to the long term, Lloyds Banking Group looked a good bet to provide a steady and consistent dividend stream, but it is unlikely to start paying shareholders over the next year.

http://www.telegraph.co.uk/finance/personalfinance/investing/8085698/10-shares-for-dividends.html