In this month’s Master Investor magazine, I reviewed Centrica, a large and mature business operating in a very defensive sector, which at the time of writing had a dividend yield of more than 8%.
Continue reading “Centrica’s 8% dividend yield means it’s priced for energy Armageddon”Category: In the Media
4 High growth dividend champions
In the latest issue of Master Investor magazine, I looked at four high-growth “dividend champions”, i.e. companies that have grown quickly whilst raising their dividends every year for the last decade or more.
Continue reading “4 High growth dividend champions”Is Connect Group’s 15% dividend yield sustainable?
Few stocks have a dividend yield of 15% or more. And when they do, the dividend has usually already been cut drastically or suspended altogether.
Continue reading “Is Connect Group’s 15% dividend yield sustainable?”Who will be the next Carillion?
For many dividend investors, the demise of Carillion was a disaster.
Not only did their portfolios lose an important source of income, they also saw a permanent loss of capital.
As usual, it’s easy to see what went wrong with hindsight, and in the August 2017 issue of Master Investor magazine, I wrote about some of the key lessons from Carillion’s collapse.
But in this case, hindsight was not necessary, and the problems with Carillion were easy to spot even several years before its eventual demise.
Of course, simply saying Carillion’s problems were easy to spot is of no use to anybody, so rather than do yet another Carillion post-mortem, I thought I would apply a little foresight and look for companies with similar “red flags” which investors might want to avoid or get out of.
Continue reading “Who will be the next Carillion?”Is Galliford Try’s 8% dividend yield enough to offset the risks?
Galliford Try is currently the highest-yielding housebuilder with a dividend yield of 8%. That’s a very high yield, but is it enough to offset the risks of this notoriously cyclical industry?
Continue reading “Is Galliford Try’s 8% dividend yield enough to offset the risks?”Is Buffett right to choose Coca Cola over Microsoft?
As regular readers will know, I think many low-risk defensive “bond proxy” stocks are probably too expensive.
Although I usually only talk about UK stocks, I thought I would take a look at two high-profile examples of the bond proxy genre from across the pond: Coca-Cola and Microsoft.
Continue reading “Is Buffett right to choose Coca Cola over Microsoft?”Hunting for trustworthy dividend stocks
Trustworthy dividend stocks are hard to find.
Yes, you could look at Unilever, Reckitt Benckiser, or any of the other “bond proxies” that dividend investors are so in love with.
But those stocks are mostly expensive and personally, I want to receive a nice dividend yield today as well as healthy dividend growth tomorrow.
There are alternatives to these expensive defensives though, and in this month’s Master Investor magazine, I looked at three of them.
Continue reading “Hunting for trustworthy dividend stocks”Unearthing bargains among high yield stocks
In this month’s Dividend Hunter column for Master Investor magazine, I looked at some of the highest-yielding stocks in the FTSE All-Share.
Continue reading “Unearthing bargains among high yield stocks”Prudential or Legal and General: Which is the best dividend growth stock?
As dividend stocks go, Prudential and Legal and General both have mixed track records.
On the one hand, they operate in a sector which is relatively immune to the economic cycle (people don’t typically cancel their life insurance just because there’s a recession).
On the other hand, and despite their blue chip credentials, Prudential cut its dividend following the bear market of 2003 and Legal and General cut its dividend following the bear market of 2008.
However, if these insurers have learned the right lessons, and if their shares are trading at reasonable prices today, then I think the potential yield plus growth rewards could be worth the risk.
With that in mind, I used my latest article for Master Investor magazine as an opportunity to pit these two life insurance giants against each other to see who comes out on top.
Continue reading “Prudential or Legal and General: Which is the best dividend growth stock?”Important lessons from the collapse of Carillion’s share price
The recent collapse in the share price of Carillion took many investors by surprise, but should it have?
Continue reading “Important lessons from the collapse of Carillion’s share price”Was Woodford right to sell Glaxo?
Neil Woodford strides across the equity income landscape like a colossus, gazing down upon his competitors as they scurry about like ants in the dust.
Okay, perhaps that’s taking it a bit too far, but Neil Woodford is without a doubt the UK’s best know income-focused fund manager.
And one of his largest and best-known holdings for the last 15 years has been GlaxoSmithKline, the pharmaceutical and consumer goods giant which is also a household name.
But now these two giants have parted ways, with Woodford announcing recently that Glaxo was no longer a holding in his portfolio.
However, Woodford’s sale of Glaxo was only a partial exit from the pharmaceutical industry. AstraZeneca, another Big Pharma company, continues to be Woodford’s largest holding, taking up more than 8% of his main fund.
I thought it was interesting that he decided to sell Glaxo but keep AstraZeneca, so I decided to have a look at both companies in this month’s Master Investor magazine.
Was he right to sell Glaxo? Should he have sold AstraZeneca instead? And, since I hold both companies in my model portfolio and personal portfolio, should I (and other dividend investors like me) follow Woodford, or not?
Continue reading “Was Woodford right to sell Glaxo?”Who is the heavyweight dividend champion?
One argument against investing in mega-cap dividend stocks is that elephants don’t gallop, and it’s true; they don’t.
However, as a dividend-focused investor, I’m not necessarily looking for companies that can grow at ten or twenty percent each year.
What’s important to me is a market-beating combination of income today and potential growth tomorrow, from companies that are less risky than average. And many mega-cap stocks, including some of the biggest dividend payers in the market, fit that description nicely.
That’s why in this month’s Master Investor magazine I’ve taken a look at the three biggest companies on my stock screen.
In other words, the three highest market cap companies from the FTSE 100 that also paid a dividend in every one of the last ten years.
The three companies (Shell, HSBC and BAT) are all very different, so which one will be the heavyweight dividend champion?
Continue reading “Who is the heavyweight dividend champion?”Can KCOM Group maintain its 6% dividend or is it a yield trap?
KCOM Group’s dividend yield is currently more than 6%. That makes it attractive, but it also puts it squarely in yield trap territory.
For a high-yield stock, KCOM is interesting because it’s a company of two halves.
The first half can trace its origins back to the early 20th century, where it started out as the council-run Hull Telephone Department. This is a defensive but declining business, providing fixed-line telephone and internet services to the people of Hull and East Yorkshire.
KCOM’s other half is an internet services business, helping large organisations with complex and long-term internet-related projects. This business is far less defensive, far more cyclical and far more likely to generate long-term growth.
The question for KCOM’s high dividend yield is this:
Can the cyclical internet services business grow fast enough to offset the declining fixed-line business?
And even if it can, will the cyclical nature of that business undermine KCOM’s dividend, just when the yield is at its most attractive?
These are hard questions to answer with any degree of certainty, but you can find out what I thought of KCOM in the May issue of Master Investor magazine.
Continue reading “Can KCOM Group maintain its 6% dividend or is it a yield trap?”Some more questions to help you avoid yield traps
Last month I outlined six questions designed to help investors avoid potential yield traps. This month I’ll cover four more.
These four questions, plus the six from last month, look for a variety of warning signs including:
- bad management
- high costs
- dangerously large or risky projects
- excessive acquisitions
- highly cyclical markets and
- markets that are likely to decline over the next decade or more
Although it can be difficult to define exactly what bad management is, for example, investigating these issues and drawing conclusions is still a very worthwhile activity.
That’s because it can help you build up a nicely rounded picture of a company, far beyond what you’ll get from just looking at financial statements.
Continue reading “Some more questions to help you avoid yield traps”6 Questions to help you avoid yield traps
As a dividend-focused investor, I’m always on the lookout for high-yield shares, whether that yield is high relative to the market average or high relative to the company’s peers.
However, as most yield-seeking investors soon discover, high-yield stocks do not always deliver the yield you were hoping for. That’s because dividends can be cut or even completely suspended, and the higher the historic or forecast yield the more likely that is to happen.
This is the dreaded yield trap, where investors are lured in by an attractive yield and then stung with a capital loss when the dividend is cut.
In order to avoid this fate where possible, I’ve built up a series of questions which every potential investment must answer before I’ll invest so much as a penny. These questions are designed to help me avoid companies that are exposed to significant risks, where those risks arise from factors such as large acquisitions, excessive expansion or changing patterns of market demand.
Of course, these questions are not foolproof, but I’ve found them extremely useful in recent years and in the latest issue of Master Investor magazine I’ve covered the first six yield trap questions in some detail.
Continue reading “6 Questions to help you avoid yield traps”Marks & Spencer’s dividend yield: Is it big enough to offset the risks?
As dividend-paying stocks go, Mark’s & Spencer is not exactly a “hidden champion”. On the contrary, it’s a company that just about everyone in the UK (investor or not) is aware of.
Because of its long history as the centrepiece of many UK high streets, the company is often seen as a safe and dependable investment, and today the company’s shares can be purchased for about 330p and with a dividend yield of around 5.5%.
Safe, dependable and with a yield of 5.5%; what’s not to like?
But the reality of the last decade or two shows that M&S is not quite as safe and dependable as its enduring presence suggests.
In fact, after recently reviewing M&S I found a company that:
- Is strongly cyclical (which is normal for clothing retailers)
- Has grown very slowly (and failed to keep up with inflation)
- Tends to increase its dividend unsustainably during economic booms (only to cut it back during the next inevitable bust)
- Is carrying large debt and pension liabilities (which is usually not a good idea for cyclical companies)
But it isn’t all bad news. If the company continues to focus on its more successful food business rather than its ailing clothing business, then things may just work out better in the future than they have in the recent past.
Continue reading “Marks & Spencer’s dividend yield: Is it big enough to offset the risks?”National Grid PLC: The ultimate low-risk dividend stock?
If you ask most people what the UK national grid is, they’ll probably say something about it being the electricity grid.
What they’ll have in mind is a network of pylons, cables, transformers and other such infrastructure which enables the transmission of power from power stations to homes and businesses around the country.
I think that’s a reasonable description and National Grid PLC is the company that owns and operates that infrastructure. If you also include the transmission and distribution of gas in that description, as well as a significant and similar business in the US, then you’ll have a fair summary of what National Grid PLC does.
As you might expect, building, maintaining and managing the electricity and gas network is a very defensive business. Booms and busts may come and go, but people still need to cook, heat their homes and boil their kettles. So it should come as no great surprise that the financial crisis had relatively little impact on the company or its progressive dividend.
That progressive dividend, combined with its recent near-5% dividend yield, is why I decided to take an in-depth look at National Grid.
What I found was a very unusual company operating as a state-appointed monopoly, and you can read my full review in the January issue of Master Investor magazine.
Continue reading “National Grid PLC: The ultimate low-risk dividend stock?”How I find long-term dividend growth stocks
Although I think of myself as investing in defensive value stocks, I could just as easily call them dividend growth stocks.
That’s because finding companies with a good combination of dividend yield and dividend growth is absolutely central to everything I do.
Continue reading “How I find long-term dividend growth stocks”3 Super-high yield stocks for brave investors
Super-high-yield investing involves buying shares where the dividend yield is close to or above twice the market yield. Of course, this means taking on more risk, but the returns can be much greater as well.
For example, when I bought UK Mail in 2011 it had a yield of 8.6% because the market expected a dividend cut. The cut never came and within a year I sold UK Mail for a total return of 32%.
An even faster re-rating occurred after I bought N Brown in 2012 with a yield of 5.4%. Just eight months later the share price had increased by 47% and I sold N Brown for a total return of 52%.
Although I don’t invest in many of these situations they have, on average, worked out quite well over the years. The trick, of course, is to try to separate out those companies that can sustain the dividend from those that are about to cut or suspend it.
In November’s Master Investor magazine, I reviewed three super-high yield companies (N Brown, Carillion and Connect Group) in order to highlight some of the factors I look at in order to separate out the wheat from the chaff.
There are no guarantees of course, but hopefully you’ll find something useful in there.
Continue reading “3 Super-high yield stocks for brave investors”Five inflation-beating dividend stocks
Dividends tend to rise faster than inflation, and that could become their most attractive feature if the value of the pound and the interest rate on savings keep falling.
With inflation in mind, I decided to focus my latest article for Master Investor magazine on a handful of UK stocks that combine a decent dividend yield today with super-consistent and inflation-beating dividend growth.
The five companies in question are The Restaurant Group, Sky, Stagecoach Group, British American Tobacco and Capita.
What I learned from analysing them is that – unsurprisingly- very few stocks can combine consistent past growth with a decent dividend yield today and bright future prospects.
Most of those five companies have problems of one sort or another, although having said that, I do hold The Restaurant Group and British American Tobacco in both the UKVI portfolio and my personal portfolio.
You can download just the article or the entire Master Investor magazine (which this month is about how to protect your portfolio from inflation) using the links below.
Continue reading “Five inflation-beating dividend stocks”