The 12 Safest Dividends in the UK?

Morningstar analysts dig the data to try to find the most stable dividend-payers on the UK market

Todd Wenning 2 May, 2013 | 7:00AM

Going into a fifth year of ultra-low interest rates, investors remain keen on dividend-paying shares as a way to generate additional income. Indeed, it's easy to see why shares yielding 4% or more (with the potential for both income and capital appreciation) would appeal to someone earning less than 2% on his or her cash savings.

Since the financial crisis, a broad UK dividend-focused strategy has generally worked well--the markets have rebounded nicely, and in 2012, according to Capita Registrars, UK companies paid out a record £80.4 billion in dividends.

But as investors who held bank shares going into the financial crisis can attest, dividends are not guaranteed. Equities have a significantly different risk profile from bonds and savings, and once-generous dividends can be substantially cut or suspended if the company falls on hard times. And though the UK markets have thus far avoided a rash of dividend cuts like we saw during the financial crisis, there were in fact a few dividend cuts--including those by FTSE 100-listed insurers Aviva (AV.) and RSA Insurance (RSA)--in the first quarter. Further, there have been a number of notable dividend cuts in Europe in the past year including those by France Telecom (FTE) and Metro AG (MEO)--two firms with investment-grade balance sheets.

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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.

Securities Mentioned in Article

Security NamePriceChange (%)Morningstar
Rating
BAE Systems PLC512.80 GBX1.71
British American Tobacco PLC2,667.50 GBX-0.35
GlaxoSmithKline PLC1,389.20 GBX0.40
HSBC Holdings PLC396.95 GBX-1.95
National Grid PLC870.60 GBX-0.37
Reckitt Benckiser Group PLC6,619.43 GBX1.59
Royal Dutch Shell PLC B1,284.00 GBX-1.53
Sage Group (The) PLC605.60 GBX-0.69
Unilever PLC4,596.00 GBX0.22
Vodafone Group PLC125.06 GBX0.13

About Author

Todd Wenning

Todd Wenning  is an equities analyst with Morningstar.

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