AJ Bell’s latest Dividend Dashboard shows:
• Just 14 FTSE 100 firms have increased their dividend for at least ten consecutive years, down from 25 at the start of the year
• 14 firms have broken their ten-year dividend growth streaks during the first half of the year, with three firms joining the list
• The average total return from the 14 ten-year dividend growers over the period is 622%, easily beating the FTSE 100’s 75% return
• The yield offered by their forecast 2020 dividend on their June 2010 share price is an average of 11.7%
Russ Mould, investment director at AJ Bell, comments:
“The pandemic and economic downturn have taken their toll on the FTSE 100’s elite list of serial dividend raisers. Just 14 firms can now point to a record of at least ten consecutive increases in their annual dividend, down from 25 at the start of the year, and that includes three newcomers - Pennon, Legal & General and Intermediate Capital.
“The casualties are Associated British Foods, BAE Systems, Bunzl, Burberry, Compass, Imperial Brands, InterContinental Hotels, JD Sports, Johnson Matthey, Rightmove, St James’s Place and also SSE and Prudential, although in the case of the final two a change to the group structure was a contributory factor following the sale or spin-out of certain assets.
“Ashtead confounded the sceptics when it squeezed out a small increase to maintain its proud run that dates back some fifteen years, according to data from Refinitiv while increases from London Stock Exchange, National Grid, RELX and United Utilities mean they are nurturing nine-year growth streaks with hopes of making it ten. However, Ferguson and Smiths Group both look destined to fall at the final hurdle after the cancellation of their first-half dividends for fiscal 2019-20.
“The demise of so many dividend growth streaks shows just how hard it is to increase the annual shareholder distribution for a decade or more.
“Any firm which can achieve a streak of ten or more increases in its annual dividend must, on balance, be doing something right and with the benefit of hindsight buying the FTSE 100’s 14 remaining serial dividend growers would have brought bumper returns to portfolio builders.
“The average capital gain from the 14 ten-year dividend growers is 481% and the average total return is 622%. Both easily beat the FTSE 100, at 20% and 75% respectively.
“If the streaks can be maintained then there could be rewards for patient shareholders. All of the 14 firms to have increased their dividend in each of the last ten years have beaten the FTSE 100 in capital and total return terms.
“The tricky bit is that only four of the 14 – BAT, Diageo, Legal & General and Sage - were actually in the FTSE 100 a decade ago, so investors may need to burrow through the FTSE 250 if they are looking for the next generation of dividend growth champions.
|
|
Total return |
Dividend CAGR* |
Forecast dividend growth** |
|
|
|
2010-2020 |
2010-19 |
2020E |
2021E |
|
Ashtead |
2589.6% |
29.3% |
(1.7%) |
18.5% |
|
Halma |
932.4% |
7.0% |
6.2% |
8.2% |
|
Spirax-Sarco Engineering |
768.4% |
11.8% |
5.9% |
5.8% |
|
Intermediate Capital |
693.4% |
11.6% |
5.4% |
18.3% |
|
Scottish Mortgage |
683.2% |
3.7% |
4.0% |
5.0% |
|
Croda |
536.3% |
15.3% |
5.2% |
2.6% |
|
Hargreaves Lansdown |
518.0% |
19.1% |
4.8% |
(15.0%) |
|
DCC |
429.1% |
11.5% |
0.8% |
5.6% |
|
Legal & General |
355.5% |
16.4% |
2.9% |
5.4% |
|
Intertek |
339.7% |
15.3% |
(13.4%) |
14.6% |
|
Sage |
266.1% |
8.6% |
(2.2%) |
6.1% |
|
Diageo |
242.9% |
6.6% |
(0.3%) |
4.4% |
|
Pennon |
223.8% |
6.9% |
4.4% |
4.6% |
|
BAT |
128.3% |
7.8% |
2.9% |
6.8% |
|
|
|
|
|
|
|
AVERAGE |
621.9% |
12.2% |
|
|
|
FTSE 100 |
74.9% |
5.2% |
|
|
Source: Refinitiv data, Company accounts. *Compound annual growth rate. **Source: Sharecast, consensus analysts’ forecasts.
“Dividend growth is so powerful as it almost inevitably drags a share price higher and if you’d purchased these shares ten years ago, the yield you would be receiving on your original investment is well over 10%.
“The average dividend yield for the 14 ten-year raisers is forecast to be 2.9% in 2020, below the 3.6% average across the FTSE 100.
“But the yield offered by their forecast 2020 dividend on their June 2010 share price is an average of 11.7% - and if anyone offered an investor a 11.7% dividend yield they would be delighted to pocket it. That shows how a rising dividend can lift a share price, boosting income and capital gains for a powerful total return.”
|
|
2020 estimated dividend yield on June 2010 share price |
2010 actual yield on December 2010 share price |
|
Ashtead |
36.3% |
2.7% |
|
Legal & General |
21.4% |
5.6% |
|
Intermediate Capital |
20.3% |
6.5% |
|
Hargreaves Lansdown |
12.6% |
2.1% |
|
British American Tobacco |
9.9% |
4.6% |
|
DCC |
8.8% |
3.0% |
|
Croda |
8.7% |
2.0% |
|
Spirax-Sarco Engineering |
8.3% |
3.1% |
|
Pennon |
8.3% |
4.5% |
|
Sage |
6.7% |
3.0% |
|
Halma |
6.7% |
3.2% |
|
Intertek |
6.3% |
1.8% |
|
Diageo |
6.1% |
3.2% |
|
Scottish Mortgage |
2.9% |
1.9% |
|
AVERAGE |
11.7% |
3.4% |
Source: Refinitiv data, company accounts, Digital Look, consensus analysts’ forecasts
Notes to editors:
Each quarter, AJ Bell takes the forecasts for the FTSE 100 companies from all the leading city analysts and aggregates them to provide the dividend outlook for each company. The data above relates to the outlook for 2020 and 2021. Data correct as at 19 June 2020.
