Top FTSE 100 UK Dividend Paying Stocks

UPDATED for April 2024: No great surprises from earnings season, but AstraZeneca and HSBC have rewarded shareholders

James Gard 30 April, 2024 | 8:35AM Sunniva Kolostyak
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Earnings season is in full swing and some of our high-yielding FTSE 100 stocks have updated the market with their Q1 numbers. In terms of concrete dividend announcements, these have been light on detail, but as always there has been plenty going on in the world of UK income investing.

Stocks That Have Raised Dividends Recently

• AstraZeneca 
• HSBC 

Stocks to Pay Dividends in May

• Reckitt Benckiser
• Lloyds Banking Group

The most obvious market trend to note is that the FTSE 100, from which our dividends stocks are drawn, has recently hit a record high. For income investors this feels like background noise – after all, this milestone has taken a long while to arrive. While rising share prices send yields lower, on the surface it’s still a positive sign for UK reporting companies.

But that has to be weighed against the overseas takeovers of companies like Anglo American (AAL) and Darktrace (DARK), which potentially removes two more stocks from London, one from the cash generative mining sector and one from cybersecurity. And the year-to-date total returns of the companies on our list has been mixed, so the FTSE’s rise has not been a case of “a rising tide lifts all boats”. Still, it's worth noting that all the stocks on our list are considered undervalued by Morningstar metrics

While the top four of our leaderboard on yield terms, British American Tobacco (BATS), Imperial Brands (IMB), Schroders (SDR), Burberry (BRBY) and BT (BT.A) don’t report properly until the spring and summer, there’s been some updates lower down the table.

Number five in our list, Lloyds Banking Group (LLOY) revealed a fall in profits in the first quarter amid a rise in costs, but maintained its full-year profit guidance. The final dividend for 2023 of 1.84p is due to be paid on May 21, but the latest update contained no new information on future dividends.

Advertising group WPP (WPP) also reiterated its full-year profit and revenue guidance. Its final dividend for 2023 of 24.4p will be paid on July 5, 2024 and the record date for that payout is June 7, 2024. Consumer defensive stock Reckitt Benckiser (RKT) joined the list of companies affirming its guidance in its latest update to the market. Again, its final dividend is imminent, with a payment date of May 24 and value of 115.9p per share.

There’s also been a new entrant in the table of 3%+ yielders, Coca-Cola HB (CCH), which is a division of the famous US drinks firm.

Sometimes, the real drama occurs away from our main monthly list. Former members Astra Zeneca (AZN) and HSBC (HSBA) have announced positive news for income investors; the pharma giant has raised its payout by 7% while the bank has just announced a special dividend as well as $3 billion in new buybacks.

Full Year Outlook for UK Dividend Stocks

We’re four months into 2024, and while the Q1 earnings season is often the least instructive in terms of forward expectations for dividends, it’s worth keeping an eye on the full-year outlook. According to Computershare’s latest Dividend Monitor, 95% of UK dividend payers in the first quarter increased or held their payouts. Total dividends amounted to £15.6 billion in that period, but this was boosted by one-off payouts, but regular dividends were just 2% higher year on year at £14.7 billion. Sector highlights include food, drink, tobacco, airlines, leisure and travel. Full-year payouts are forecast to be £94.5 billion, including specials, but £89.5 billion for regular dividends. The prospective yield for this year is forecast to be 4% (and the FTSE 100 usually yields more).

Keep that 4% figure in mind as I revisit a chart (above) from last month’s ISA special. The dividend yield on the Morningstar UK Dividend Yield Focus is very close to this, at 3.8%. This is now above inflation, which stands at 3.2% and is expected to keep falling towards the Bank of England inflation target of 2% by the end of this year. There was a recent period when dividend yields were way behind inflation and equity income yields looked less attractive. But could we soon see a time when UK dividend yields are double the inflation rate? We will revisit this topic in our income special in May, when we’ll also look at bonds.

Recent Morningstar Coverage on Dividends

My colleague Fernando Luque has recently updated his model dividend portfolio, Alphabet has pleased investors with a dividend, while US investor Larry Swedroe has offered the contrarian view on income investing.

Methodology for Dividend Stock Screen

To make it on to our monthly list, FTSE 100 companies need now to have a Narrow or Wide Economic Moat, pay a dividend, and have a forward yield of 3% or more. This is below the Bank of England base rate, which stands at 5.25%. We changed our methodology last year, introducing a hurdle of 3%. 

For the Morningstar Dividend Yield index: for the equity portion, Morningstar uses the forward dividend yield. 

My Model Dividend Portfolio

... Is Beating the Market

The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar
Rating
British American Tobacco PLC2,381.00 GBX-0.38Rating
BT Group PLC128.60 GBX1.18Rating
GSK PLC1,740.00 GBX-1.94Rating
HSBC Holdings PLC688.00 GBX-0.78Rating
Imperial Brands PLC1,919.00 GBX-0.88Rating
Lloyds Banking Group PLC55.58 GBX1.42Rating
Marks & Spencer Group PLC302.00 GBX0.94Rating
Reckitt Benckiser Group PLC4,379.00 GBX-0.75Rating
Schroders PLC393.40 GBX-0.41Rating
Unilever PLC4,256.00 GBX-0.93Rating
WPP PLC830.60 GBX0.87Rating

About Author

James Gard

James Gard  is senior editor for Morningstar.co.uk

 

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