Which Stocks' Dividends are Most at Risk?

Dividend cover – the extent to which dividends are covered by a company’s earnings – has fallen to record low levels, particularly among the UK’s largest dividend payers

Cherry Reynard 28 December, 2016 | 1:40PM

The UK Equity Income sector is prone to generating periodic bouts of concern among investors: complaints include that it is over-concentrated, reliant on relatively few sectors, while dividends are vulnerable to changes in the economic environment. This has done little to dent its enduring popularity and it remains the third most popular equity sector among investors, but do dividends now look unusually problematic?

Divided cover of below 1.0 should ring alarm bells

A new report by platform AJ Bell suggests that investors should be concerned about the sustainability of their dividends. Dividend cover – the extent to which dividends are covered by a company’s earnings – has fallen to record low levels, particularly among the UK’s largest dividend payers.

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar
Rating
AstraZeneca PLC7,035.00 GBX0.79
BHP Group PLC1,234.60 GBX-1.94
British American Tobacco PLC2,930.50 GBX-0.53
Capita PLC24.00 GBX-7.44
easyJet PLC469.98 GBX-5.47
HSBC Holdings PLC396.25 GBX-0.38
Informa PLC369.30 GBX-1.49
Kingfisher PLC135.70 GBX1.76
Lloyds Banking Group PLC28.03 GBX-3.03
Next PLC3,571.00 GBX-1.08
Royal Dutch Shell PLC B1,467.00 GBX-0.85
The Royal Bank of Scotland Group PLC102.85 GBX-1.53
Unilever PLC4,037.76 GBX-0.13
Vodafone Group PLC107.57 GBX-2.47
WPP PLC508.04 GBX-1.54

About Author

Cherry Reynard

Cherry Reynard  is a financial journalist writing for Morningstar.co.uk.

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