Top FTSE 100 UK Dividend Paying Stocks

UPDATED for February 2024: Earnings season brought some surprises, some dividend increases, some decent and some miniscule. And one increase that isn't really an increase

James Gard 29 February, 2024 | 8:35AM Sunniva Kolostyak
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Most of the names on our monthly FTSE 100 dividend stock screen have reported in January and February so there have been plenty of dividend announcements to keep track of.

These include news from:

• British American Tobacco (BATS)
• Lloyds Banking Group (LLOY)
• WPP (WPP)
• GSK (GSK)
• Unilever (ULVR)
• Reckitt Benckiser (RKT)

Together, along with the other names on our list, these stocks pay out billions in dividends to UK investors every year.

Earnings season was eventful, as always, particularly as some full year results were in the mix. This early-year earnings season is a particularly useful one for the sake of comparison and nailing down dividend growth because full-year figures are often available.

Dividends were front and centre to a number of company results, such as Shell, which also announced another round of share buybacks.

Stocks That Raised, Stocks That Held Dividends

In summary, Lloyds, Schoders, GSK and Reckitt raised their dividends, while WPP and Unilever held theirs. In reality, GSK and Schroders' increases were small.

Consumer goods giant Reckitt Benckiser was the most recent to report. Its full year dividend was 192.5p, up from 183.3p the year before. The annual dividend was weighted towards the second half, with the final proposed dividend of 115.9p per share, up from 110.3p in 2022.

Reckitt was among the companies on the list to have increased their dividends on the year before. But investors focused on what the CEO called “disappointing” Q4 sales, sending shares down on the day. St James’s Place (STJ) also had a bad day on the markets when it released full-year results, with shares off 30%. The annual loss was one focus for investors, but another was a substantial cut in the dividend; the final dividend was declared for 8p, reduced from 37.19p; while the full-year dividend was 23.83p, sharply down from the 52.78p the year before.

Dividends: Unilever Holds, GSK Increases (Just)

Unilever held its quarterly dividend (again) in euro terms (€0.4268), a figure that investors will be familiar with as it’s been the same since 2020. While Schroders reported an increase in the total dividend, the change was marginal, from 21.4p in 2022 to 21.5p in 2023 (that's a 0.1p increase).

It’s been a while since GSK’s great reset in dividend terms, with investors slowly getting used to not receiving the usual 80p per share every year. The Q4 dividend was increased to 16p after a run of 14p payouts in Q1, Q2, and Q3. In Q4 2022 the payout was 13.75p, so the 16p for the most recent quarter is a year on year increase. Shareholders are entitled to ask: is the 2023 annual payout (58p) higher than that of 2022 (57.75p)? The answer is yes, but just. Some good news is coming though: the 2024 financial year payout is expected to be 60p per share.

One more name on our list is yet to report, and that’s insurance company Beazley (BEZ), which releases full year results on March 7.

What's the 2024 Dividend Forecast?

Away from our select screen of names, what about the overall picture for UK dividend investors? Computershare compiles the numbers and it has revealed that UK dividends totalled £88.5 billion in 2023 – up 5.4% year on year – and that was £90.5 billion including specials. This including specials number was up 3.7% on 2022, reflecting lower one-off payouts. Mining payouts were a drag on growth, while oil, utility and banks were drivers of growth.

What about 2024? Headline growth (including specials) is forecast to be 3.7%, reaching a total of £93.9 billion. But growth excluding specials is expected to be more modest at 2%, taking total dividend payments to just under £90 billion. This wouldn’t be a “vintage year” for dividends, certainly compared with the £100 billion before the Covid crash in payouts in 2020, as detailed in my article How Bad Was 2020 for Dividend Investors?

Dividend Increases Via Share Buybacks

As an aside: when is a dividend increase not a dividend increase? Barclays (BARC) caught my eye with its recent results; while the dividend is the same in cash terms, due to an accountancy quirk this can be reported as an increase. The bank is planning to return at least £10 billion to shareholders between 2024 and 2026 with a mixture of dividends and buybacks, “with a continued preference for buybacks”. The plan is to keep the total dividend stable at the 2023 level “in absolute terms”. How is dividend per share growth being driven? Through a reduction in the number of shares through buybacks.

As an income investor in an inflationary era, you would prefer an increase in the cash level of the dividend most times (indeed a select few UK stocks and investment trusts have managed this record over long periods). Many companies are shying away from pure dividend growth and taking the two-pronged approach of buybacks and dividends, one used by stocks such as Unilever. Investors still get their regular payouts and an artificial uplift in the share price, so they’re reasonably happy to accept that. In an ideal world they would get share price gains AND dividend growth, but the UK market at the moment is rarely offering this combination. On our screen

Globally, buybacks are all the rage so at least the UK exception. We’ll look at buybacks and what they mean for stocks and funds soon.

Further Reading on UK Stock Dividends

Our Dividend Screen Methodology

To make it on to our monthly list, FTSE 100 companies need now to have a narrow or wide economic moat and pay a dividend and have a forward yield of 3% or more. This is of course below the Bank of England base rate, which stands at 5.25%, and below some cash savings rates.  We changed our methodology last in 2022, introducing a hurdle of 3%, but there’s an argument for raising this to 4%.

A note on gain/loss: these are total return figures so include dividends.

 

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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.

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar
Rating
Admiral Group PLC2,678.00 GBX0.45Rating
Beazley PLC666.00 GBX2.15
BP PLC471.65 GBX2.38Rating
British American Tobacco PLC2,334.50 GBX-0.45Rating
BT Group PLC104.65 GBX0.19Rating
GSK PLC1,661.80 GBX-0.17Rating
HSBC Holdings PLC612.80 GBX-0.28Rating
Imperial Brands PLC1,697.50 GBX-0.41Rating
Lloyds Banking Group PLC47.37 GBX1.72Rating
Marks & Spencer Group PLC234.40 GBX-1.01Rating
Reckitt Benckiser Group PLC5,144.00 GBX2.92Rating
Schroders PLC393.70 GBX0.10Rating
Unilever PLC3,868.00 GBX0.04Rating
WPP PLC713.60 GBX0.90Rating

About Author

James Gard

James Gard  is senior editor for Morningstar.co.uk

 

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