Category: Share research

Tate & Lyle PLC no longer runs the branded sugar or syrup businesses it’s famous for, but the company is still an interesting and relatively defensive option for many investors.

With its shares trading at 675p Tate & Lyle’s dividend yield is 4.2%, which is slightly above the FTSE 100’s yield of 3.8% (with the index at 6,900).

That high yield is attractive, especially for investors who are fond of dividends, as I am. Another positive is that the company paid a dividend in every one of the last ten years, and also increased that dividend almost every year.

However, despite its attractive dividend yield and dividend history, I won’t be buying any Tate & Lyle shares at their current price. Here’s why.

BT is a company which is known to virtually everyone in the UK and its shares are a favourite among investors seeking low risks and reliable dividends.

After all, what could be safer than a company which used to be a state-owned monopoly, and which today is far and away the leader in the UK’s fixed and mobile telecoms markets?

In reality, the situation is very different and, despite some recent successes, BT could be much riskier than many investors think. Here are five reasons why.

Sainsbury’s has been one of the better-performing Big Four supermarkets in recent years but the company still faces some enormous challenges.

Chief among these challenges is the changing nature of its customers’ shopping habits.

Marks and Spencer is one of those companies that always seems to either need or be in the middle of a turnaround. However, despite all the endless talk of turnarounds, one thing that hasn’t turned around yet is its results.

Admittedly the recent 2016 results weren’t terrible, but they weren’t exactly awe-inspiring either.

Revenues, normalised earnings and dividends were all up a bit, but only by low single-digit percentages, and that has more or less been the story for most of the last decade.

I’ve had my eye on Next PLC for a long time and now, thanks to some recent and dramatic share price declines, the shares may at last be as attractive as the underlying company.

BAE Systems is one of the bluest blue chip stocks you could imagine: It’s big, it’s defensive and it has a dividend yield of more than 4%. It sounds like the perfect choice for a high-yield portfolio.

Shares in Rolls-Royce have become one of the most high-profile underperformers of recent years. However, despite the share price now sitting some 50% below its all-time high I’m still not tempted to buy.

There are two main reasons:

1. The company has a pension scheme which I think is dangerously large
2. The share price just isn’t low enough

If those two issues were somehow fixed I would be more than happy to invest because, by most other measures, Rolls-Royce appears to be a solid (but not infallible) company.

The oil price collapse which began in 2014 has not exactly been good news for BP’s share price. More importantly, cheap oil has also seriously undermined BP’s dividend.

For now, the company has maintained the dividend, but how long can that last in the face of dwindling revenues, profits and cash flows?

Unilever is one of the most popular companies among dividend-focused investors. As one of the world’s largest consumer goods companies, it makes a huge range of well-known products, from Dove soap to Magnum ice cream and Comfort fabric softener.

Over many decades the company has grown its dividend above the rate of inflation, which is precisely why it is so popular with investors.

But despite Unilever’s impressive track record, I think the odds are that its shares will not perform as well in the future as they have in the past.

In the rest of this post, I’ll explain why.

There are some amazingly high dividend yields on offer these days, most notably from some of the largest blue-chip shares in the market.

The question, as always, is whether or not those massive yields are sustainable.

Take GlaxoSmithKline as an example.

Go-Ahead Group is one of the UK’s leading public transport companies, operating buses and trains across most of the country, although primarily in London and the South East.

In this post, I’ll look at Go-Ahead‘s financial track record and balance sheet, and outline why I wouldn’t invest in the company, even if the price was significantly lower than it is today.

PZ Cussons is a favourite among defensive and income-focused investors and for good reason. It has, for example, raised its dividend for 42 consecutive years, which puts it firmly into “dividend aristocrat” territory.

The company has achieved this primarily by selling small-ticket repeat purchase items with strong brands and market-leading positions, such as soap (Imperial Leather), olive oil (Minerva) and washing-up liquid (Morning Fresh).

These high-margin and frequently purchased items give the company a steady and defensive cash income. At the same time, its exposure to emerging markets and willingness to make carefully chosen bolt-on acquisitions have allowed it to grow faster than most other companies.

Imperial Tobacco has been a fantastic investment in recent years, with highly addictive products leading to extremely consistent dividend growth.

Associated British Foods has become a misnomer. Most of the company’s profits today are generated by its fast-fashion retailer Primark which has, as far as I am aware, very little to do with food.

When I looked at WH Smith last year I was surprised to find a high-growth company.

The impression I get from its high street stores is of a “stalwart”; a very mature business in a mature industry that is, if anything, being squeezed by the world of online retail.

That image is largely correct, but it ignores the best part of WH Smith – its travel retail business.

• Stagecoach Group PLC is a FTSE 250-listed public transport company which is focused on the UK bus market but also has UK rail and North American bus businesses
• The company has grown quickly and steadily in recent years and the shares are up by about 75% over the last five years
• My “fair value” share price of 625p is over 50% above the current price, but the company’s financial obligations could be a problem