5 FTSE 100 Dividend-Raising Stars
LONDON -- In an outcome that's tough on investors, the FTSE 100 has failed to deliver a rising dividend payout over the last few years.
Just look at the iShares FTSE 100 ETF, for example. This is an exchange-traded fund that tracks the benchmark index, and we can see that the aggregate payment from Britain's top 100 companies has yet to regain its pre-recession peak:
2007 | 2008 | 2009 | 2010 | 2011 | |
|---|---|---|---|---|---|
Dividend per Share (pence) | 19.1 | 20.2 | 17.1 | 16.2 | 18.1 |
That's disappointing. But some companies within London's premier index have performed well on dividends, despite these austere times, and this series aims to seek them out (you can see all of the companies I've covered so far on this page).
Over the last few weeks, I've looked at British American Tobacco (ISE: BATS.L) , WPP (ISE: WPP.L) , Compass Group (ISE: CPG.L) , British Sky Broadcasting Group (ISE: BSY.L) , and Johnson Matthey (ISE: JMAT.L) . Let's see how each scored against my dividend growth and valuation criteria (each score in the chart is out of a maximum of five):
BATS | WPP | Compass | BSkyB | Johnson | |
|---|---|---|---|---|---|
Dividend cover | 3 | 4 | 3 | 4 | 4 |
Net cash or debt | 3 | 3 | 4 | 2 | 4 |
Cash flow | 5 | 2 | 4 | 5 | 5 |
Outlook and recent trading | 4 | 4 | 4 | 4 | 3 |
Total (out of 20) | 15 | 13 | 15 | 15 | 16 |
Once again, the dividend growers I've looked at are capable of providing investors with plenty of industry diversification.
Tobacco
The dividend has nearly doubled over the last five years at British American Tobacco, and that performance has been possible thanks to stellar top- and bottom-line growth and strong cash conversion. The company has pushed hard into developing markets and now generates more than half its revenue from outside Europe and the U.S.
Marketing communications
WPP reckons that its margins are back to pre-credit-crunch levels, but it hasn't been sitting idly for the last five years, growing revenue and earnings such that it has almost doubled its dividend payout in that time. I reckon it's an encouraging sign that WPP's customers' businesses have been spending so much on marketing. It's not all gloomy economic news.
Catering
Food never goes out of fashion, and we need it whatever we are doing and wherever we are. Compass makes a living out of that need, and business has been growing steadily. It achieved revenue of 1.95 billion pounds and operating profit of 114 million pounds during 2011. Over five years, the dividend has almost doubled. Although it derives around 80% of revenue from developed countries, the firm sees its "Fast Growing and Emerging Markets" sector -- which includes countries such as Brazil, Turkey, and South Africa -- as being increasingly important to its forward growth strategy.
Satellite broadcasting
BSkyB's primary service, Sky TV, has found its way into more than 10 million homes, and that figure seems set to continue growing. It's good business, which the company manages to turn into strong flows of cash. Customers have been very loyal, and the firm quotes annualized churn rates typically as low as around 10%. Around 32% of customers take BSkyB's TV, broadband, and telephone options all together. So with growth continuing in both breadth and depth, the escalating flows of cash bode well for the prospects of the dividend, which has grown more than 50% over five years.
Chemicals
Johnson Matthey's operations, which focus on platinum, include manufacturing catalysts for vehicles, pollution control systems, fuel cells, and chemical processes. Business has been good, and in addition to normal dividend payments, which have increased by more than 50% over five years, the company recently paid investors a special dividend of 1 pound per share. Such confidence in the company's prospects encourages optimism for the continuation of the firm's progressive dividend policy.
Further ideas for dividend growth
Those five shares are among the several dividend outperformers currently trading on the London Stock Exchange. And there's one man who's as keen as I am to find them. I suggest you read all about dividend-investing legend Neil Woodford and his best investment ideas today in this free, limited-time report while you have the chance: "8 Top Income Plays Held By Britain's Super Investor." The free report analyzes the 20 billion pound portfolio and FTSE-thrashing history of the high-yield expert. Click here now to discover Woodford's favorite dividend opportunities with good growth potential.
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Kevin doesn't own shares in any of the companies mentioned. The Motley Fool has adisclosure policy. We Fools may not all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. Try any of our Foolish newsletter servicesfree for 30 days.
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