DIY Investor Magazine
| August 2017
26
The traditional consistent dividend paying sectors have
been steady as usual with the tobacco companies, the
pharmaceutical companies, beverages, telecoms and
the utilities all holding firm.
The construction industry has had it tough and none
more so than Carillion who issued a disastrous trading
update in which they announced that they were going to
cut their dividend completely in the 2017 financial year
with most analysts predicting that this will continue into
the 2019 financial year.
Another sector that has been in the doldrums has been
the support services sector, although this sector is
huge and dividend cuts have been restricted to some
big names such as Serco, whereas other companies in
this sector such as Rentokil have performed well from a
dividend perspective.
The retail sector remains under intense pressure as they
struggle to pass on their increased input prices as a
result of the demise of the pound following the decision
to leave the European Union; this has driven up inflation
to the point where real wages are stagnant and this has
put the consumer under the cosh. The large property
and Real Estate Investment Trust (REIT) has been a
happy hunting ground for investors seeking good yield
in a solid if unspectacular sector.
The media sector has some attractive yields led by ITV
who have been under pressure since the Brexit vote
as advertisers reduced their spending; other decent
yields in this sector come from WPP and Daily Mail and
General Trust. Big oil companies, namely BP and Royal
Dutch Shell continue to yield very highly with each so far
proving able to maintain their dividends in the face of a
low oil price.
However the advent of renewable does cast a long term
shadow over this sector and in addition governments,
including the UK, have been issuing longish term targets
for cars to be powered by electricity in the future.
The one-off effect of the pounds fall has now been
worked through from a dividend perspective as we are
over a year away from the Brexit decision.
The many companies listed on the London Stock
Exchange that earn lots of dollars and Euros will face
much tougher comparables in the current financial year.
Additionally, all of those companies that actually declare
their dividends in Euros or Dollars will need to drive
earnings in order to produce dividend increases; this, of
course presumes that the pound will not fall further.
The number of companies that have made dividend
increases is too large to list so we will focus on those
that have increased their dividend by 25% or more in
the recent reporting season and even this list is pretty
hefty with Derwent London (25%), Paddy Power Betfair
(25%), Centamin (25%), RSA (32%), Direct Line (39%),
FDM (29%), St James’s Place (25%) Jupiter Fund
Management (51%), Dart Group (26%), SSP (28%) Avon
Rubber (30%) and Stobart Group by 50%.
On the strength of the interim dividends that have been
announced to date, it appears that there is much cause
for optimism for those seeking income from equity
investments.
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