Investors may be looking forward to the next earnings season, starting in October, but those focused on dividends are probably still working their way through the most recent updates from the UK’s biggest payers. In general, the trend has been positive, with a number of FTSE 100 income giants raising their payouts, including BP (BP.) and Shell (SHEL). And Rolls-Royce (RR) also restored its payout for the first time since the pandemic, supporting a share price which is already up 60% this year.
Noting BP’s 10% dividend increase, Morningstar analyst Allen Good said: “The dividend bump increases BP’s yield and acts as a further enticement to value-oriented investors to look at BP, which already screens cheap relative to peers, including based on our own price/fair value.
“However, that discount is not necessarily unwarranted as it reflects BP’s transition strategy, which likely augurs greater risk and lower returns as it relies on investment in low-carbon businesses to deliver about half of earnings growth through , 2025.”
Upcoming Dividend Payments
• Imperial Brands, (IMB), September 30
• BT, (BT.A), September 11
• Schroders (SDR)
• Lloyds Banking Group, (LLOY), September 10
• Reckitt Benckiser, (RKT), September 13
Focusing on our screen, there have been a number of updates, five of them including dividend increases. Starting with the top yielder, British American Tobacco (BATS), it’s half way through its annual payment schedule, which involves 58.88p quarterly payouts in May, August, November and February. The cigarette and vaping products maker reported a 5.7% rise in pretax profit to £5.60 billion for the first half of 2024 from £5.30 billion a year earlier.
Among stocks increasing their dividends on a year-on-year basis are BT, Lloyds Banking Group, Reckitt, Unilever (ULVR) and Diageo (DGE). Consumer goods giant Unilever stands out here because this is the first time since Q4 2020 that the dividend has been increased in euro terms, from 42 cents to just under 44 cents (the payments have varied in pence because of exchange rates). After an indifferent few years, Unilever shares are up 30% in 2024 so far, and as a result, it's slipped out of our top 10 because the yield is now below 3%.
Stocks Raising Dividends
• BT
• Lloyds Banking Group
• Reckitt
• Unilever
• Diageo
Stocks Maintaining Dividends
• WPP
• Schroders
• GSK
Companies Leaving and Joining the FTSE 100
One negative for UK income investors this summer has been Burberry (BRBY) scrapping its final dividend, which is usually paid in August.
FTSE Russell has confirmed Burberry’s exit from the FTSE 100, to replaced by specialist insurer Hiscox (HSX). For sector-agnostic dividend hunters, this isn’t a disaster, as Hiscox pays two dividends a year, an interim and final. New investors have just missed the interim payout, which is distributed on September 24, having gone ex-dividend on August 16. Its current yield is just below 3%.
Mixed Returns for UK Income Stocks
It’s also a realistic time of the year to look at share price gains in the context of total returns (see table). While there was an early August wobble for global markets, UK indices have trended higher this year: the FTSE AllShare is up nearly 7% in 2024. Two key questions remain for investors though: when the Federal Reserve will cut rates, and whether the AI-driven stock mania is unravelling, as evidenced by the volatility of the Nvidia share price recently.
These are beyond the scope of the UK income investor. And it can be argued that the UK is acting as a quasi safe haven in the chaos of the US market.
Recent Coverage on Dividends
Every month the best-performing UK and eurozone dividend stocks are revealed.
Methodology for Dividend Stock Screen
To make it on to our monthly list, FTSE 100 companies need now to have a Narrow or Wide Morningstar Economic Moat Rating, pay a dividend, and have a forward yield of 3% or more. This is below the Bank of England base rate, which still stands at 5%. We changed our methodology in 2022, introducing a hurdle of 3%
