5 Shares Offering Decade-High Yields
LONDON -- Economic fears have hit share prices hard. However, many companies are still maintaining, or even raising, their payouts to shareholders. This is pushing dividend yields higher.
As always, future dividends are not guaranteed. It is possible that any of these shares might cut their payout in the future. However, today I've identified five shares whose current dividend is the highest it has been at any point in the last 10 years. They trade on a historic dividend yield of 6.9%, compared to just 3.9% for the FTSE 100 (INDEX: ^FTSE) index.
1. Tesco (OTC: TSCDY)
Tesco is the dividend king of the FTSE 100. The company's dividend payout to shareholders has been increased 27 years running. And that dividend has been paid for by Tesco's massive growth.
The recent profit warning from Tesco saw the shares slide dramatically. Today, Tesco shares are just pennies away from their lowest point since the worst of the banking crisis. Despite economic turmoil, Tesco's dividend has increased an average of 9.4% for the last six years.
Since its recent fall, Tesco has become one of the most debated shares on the market. Yet the analyst community still expects it to increase profits and dividends for the next two years. (Indeed, the man considered the greatest living investor recently topped up on the supermarket. You can read the full story in this free Motley Fool report: "One UK Share that Warren Buffett Loves.") The company's last announced dividend amounted to 14.8 pence per share. Consensus is for the dividend to hit 15.1 pence this year. That's a 4.9% dividend last year, rising to 5%.
2. Go-Ahead Group
Go-Ahead Group is an England-focused bus and rail operator. The company runs local bus services in areas as distant as the Isle of Wight and Durham. Go-Ahead also owns some well-known rail brands, such as London Midland, Southeastern, and Gatwick Express.
Between 2006 and 2008, Go-Ahead ramped up its shareholder dividend from 56 pence to 81 pence. The company has maintained its dividend since then. Today the shares trade at 1,100 pence. This puts the company on a historic yield of 7.4%.
Like most shares on the market, Go-Ahead is down recently. At the beginning of the year, the shares traded close to 14 pounds. Before the subprime financial crisis, they cost more than 25 pounds each. The share-price fall, combined with dividend increases, has pushed Go-Ahead's yield to its highest in 10 years.
3. Wm Morrison (ISE: MRW.L)
Morrison is the U.K.'s growth supermarket share. In 2007, net profit at the company was 248 million pounds. By 2012 this was 690 million pounds. The dividend has also grown at an impressive rate: For 2002, Morrison paid its shareholders 2.7 pence in dividends, and by 2012 the figure hit 10.7 pence.
Much of this growth was anticipated by the market. Morrison's share price is today only 40% higher than it was 10 years ago. As the business has matured, Morrison's yield has risen closer to its peers. On today's price, Morrison's 2012 yield equates to 3.9%. The 2012 dividend of 10.7 pence is well-covered by earnings of 26.1 pence per share. Even better, earnings and dividends are both forecast to grow significantly in the next two years.
Unlike companies such as Tesco and Go-Ahead, Morrison's high yield has not been caused by a significant share-price decline. The shares today are no more than 20% off their all-time high.
4. Man Group (ISE: EMG.L)
Man Group is an asset management company with a 1.4 billion pound market cap. Man specializes in providing hedge funds to large institutional investors. Shares in the company have suffered recently, though: At the beginning of the year, the shares were 125 pence, but today they're going for 73 pence.
For 2011, the company declared a dividend of 11 pence per share. That's a historic yield of 15.1%. Surprisingly, Man's dividend is expected to rise again next year to 14.2 pence. That would put the shares today on a forward yield of 19.5%. I cannot recall a time when such a large company has traded on such a yield.
Often when shares offer a high yield, it is because the market believes the dividend is not sustainable. Man could halve its dividend here and still yield far more than the average share.
Like Tesco, Man Group is one of the most debated shares on the Fool discussion boards. There are some excellent Fools with knowledge of Man's industry discussing its prospects here.
5. Capita (ISE: CPI.L)
Capita does the paperwork other companies think is too much trouble. This ranges from managing companies' shareholder registers to handling payroll for large employers.
All these contracts with other firms add up to a high-quality earnings stream. This has enabled Capita to increase its dividend tenfold from 1998 to today. That is an average dividend increase, year-on-year, of 17%.
Capita's history of rapidly increasing its dividend is beginning to catch up with its share price. On last year's payout, the shares now yield 3.5%. This is forecast to rise to 3.7% next year.
Let me finish by adding that more share ideas can be found within "Top Sectors for 2012" -- a Motley Fool study of three favorable sectors that could offer opportunities for long-term investors. The report is free.
Further investment opportunities:
At the time thisarticle was published David does not own shares in any of the companies listed above. The Motley Fool owns shares of Tesco. Motley Fool newsletter services have recommended buying shares of Tesco. The Motley Fool has a disclosure policy. We Fools may not all hold the same opinions, but we all believe thatconsidering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.
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