Top 10 consistent dividend income shares
With dividends coming back into fashion, number-crunchers claim to have found the 10 stocks with the most consistent yield over five years.
Game Group: The retailer tops the list for dividend yield
Investors in search of income will be glad that dividends are coming back into fashion after a turbulent two years – but which stocks have the highest consistent yield?
According to the latest quarterly data from Captia Registrars, Britain's quoted companies are on target to return around £65bn this year, a rise of almost 8%.
But it can be difficult for investors to separate volatile, high-yielding stocks from the steady stocks.
In theory, the higher the dividend yield, the better the pay-out. However, a high yield may be the result of a tumbling share price and not a generous dividend policy, so stay vigilant for these value traps.
Independent index service provider Indxis produces 'indicies' of different types of stock for use in the fund management industry.
According to the firm, roughly $10bn in assets under management are based on its data in the US and it launched its first UK index, the 'UK Dividend Achievers', last year.
This is an inventory of UK companies which have increased their annual regular cash dividends for the past five or more consecutive years, providing regular and reliable returns for those in need of income at low risk.
One star fund manager who is an advocate of following companies that consistently lift their dividends is Stuart Rhodes, manager of the £1bn M&G Global Dividend Fund.
He warns that blindly 'chasing dividend yield can be suicide for investors', but consistent dividend stocks are a different matter.
›› Rank top 350 shares by dividend yield
Consistent dividends also signal a company with healthy financials, so often choosing a consistent 'dividend achiever' can equal a steadily increasing share price and high total returns in some cases.
However, given the turbulent economic climate last year, it must be born in mind that the share price of some high yielding stocks also fell.
Indxis has provided This is Money with an exclusive list of the best dividend-yielding stocks in its UK Dividend Achievers Index in the year to January 31, 2011, for which the latest figures are available, including their overall total return.
Stock | Dividend Yield | Total Return |
---|---|---|
Source: Indxis | ||
Game Group PLC | 8.3% | -32.17% |
National Grid PLC | 7.2% | 3.95% |
Chesnara PLC | 6.6% | 19.01% |
Interserve PLC | 6.4% | 36.96% |
RSA Insurance Group PLC | 6.2% | 10.67% |
Beazley PLC | 6.1% | 24.01% |
PayPoint PLC | 6.1% | 17.09% |
Scottish & Southern Energy PLC | 5.8% | 15.64% |
Catlin Group PLC | 5.49% | 10.43% |
De La Rue PLC | 5.4% | -9.47% |
Game: don't put your eggs in one dividend payer's basket
One classic example of where putting all your eggs in one basket can be risky is Game Group PLC- a computer software and video games retailer and familiar fixture on the High Street.
It is the largest video games retailer in Europe, operating over 1,300 stores in the UK, Eire, Sweden, Denmark, Spain, Portugal, France and Australia.
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Although it has the highest dividend, it has the highest loss of the top ten companies on the list in a five year period and highlights the need to keep a diverse portfolio.
The danger for the group is the digital age, much like HMV, as an increasing number of computer gamers download or stream their games straight from the internet, through consoles such as the PlayStation 3 or Xbox 360.
In the last year, the highest price the stock has achieved was 99.5p in early 2010 and it now stands at less than half that, at 49p per share.
Although it has seen its price plummet, it fits the model, as it has a good dividend and the UK Dividend Achievers that Indxis has launched looks at the long-term outlook.
Game Group share performance in the last year:
Alan Price, sales director at Indxis, said: 'These amazing companies show the best way to find reliable dividend producing shares is not to chase after a particular sector, but to look at the real fundamentals underlying a stock – namely, whether they have consistently paid out in the past.
'Simply chasing the highest dividend-paying stocks regardless of consistency can come back to haunt you, as periodic high pay-outs can be used to deflect from a company's shortcomings.
'It is also unwise to rely on them for school fees or retirement income as you can never be sure when you will be left out of pocket. The key is to follow our philosophy and look for consistency.'
It is fundamental to have a diversified portfolio of stocks. The top dividend yield paying company, Game Group PLC, actually had a -32.17% total return in the five-year period.
Alan Price adds: 'The fall in share price of the highest consistent dividend-paying stock, Game Group, over the past year highlights the need to create a diversified portfolio of stocks – as we have done – rather than putting all your eggs in one basket.'
The best performing stock overall was ARM Holdings, with an impressive total return of 136.11%. Other firms with notable returns include Diploma (84.1%), Domino Printing Sciences (80.57%), and Croda International (80.46%).
The index of 102 stocks has been mostly composed of large caps at 82%, with over a quarter of funds invested in the services industry at 28%.
Financial services stocks also feature prominently in the index at 14%, followed by capital goods and consumer non-cyclical stocks at 12% and 11% respectively.
For more information on the top dividend yielding companies just click on the name:
- National Grid
- Chesnara
- Interserve
- RSA Insurance Group
- Beazley
- Scottish & Southern Energy
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