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 J. Sainsbury (LSE: SBRY.L  ) , Pennon Group (LSE: PNN.L  ) , Centrica (LSE: CNA.L  ) , SSE (LSE: SSE.L  ) , and GlaxoSmithKline (LSE: GSK.L  ) .

Let's see how each scored against my dividend growth and valuation criteria (each score in the chart is out of a maximum possible five):

 

Sainsbury

Pennon

Centrica

SSE

GlaxoSmithKline

Dividend Cover

3

3

3

3

3

Net Cash or Debt

3

2

3

3

3

Cash Flow

5

2

4

4

4

Outlook and Recent Trading

4

3

4

3

4

Total (out of 20)

15

10

14

13

14

This crop of dividend growers includes a bit of industry diversification and an opportunity to compare three companies operating in the utility space.

Food retailing
Britain's third-largest supermarket chain, Sainsbury, is battling it out in fresh food with the U.K.'s other players. They're not hurling carrots and knobbly potatoes at each other, though, but trying to out-maneuver each other in terms of the freshness and appeal of their fresh food offering in order to attract and retain customers. Sainsbury's strategy involves sourcing its fresh produce closer to home -- from Britain, in fact. "This will help develop British farming and protect livelihoods, while reducing food miles and delivering fresh, healthy, nutritious food to the table," the directors say. That sounds like a good idea that might catch on.

Utilities
Pennon derives 76% of its profit from its water and sewage business in southwestern Britain, with the remaining 24% coming primarily from waste management. Cash flows are strong, but as with other utility providers, the company's operations are highly regulated, which leads to constant investment in infrastructure. One outcome is the seemingly ever-growing debt pile, which could make some investors nervous, including me.

Meanwhile, electricity and gas supplier SSE operates mainly in the U.K. and Ireland. The firm also claims to be the U.K.'s fourth-largest telecom network company, and to be the U.K.'s second largest mechanical and electrical contracting business. It also has an upstream business generating electricity in power stations, hydroelectric schemes, and wind farms, and it owns the U.K.'s largest onshore gas-storage facility. In common with other energy suppliers, SSE found 2011 difficult as rising wholesale prices and volatile demand squeezed profits. 2012's half-year results showed some improvement, but trading is still proving difficult.

Centrica supplies gas and electricity to customers in the U.K. and the U.S. There's also an upstream business involving gas, oil, and power generation. Last year, about 87% of operating profit came from the company's U.K. business, and the remaining 13% came from North America. However, wholesale energy prices and exceptionally warm weather led the company's downstream energy business in the U.K. to become loss-making at one point last year. Fortunately, that didn't stop the dividend from rising.

Pharmaceuticals
U.K.-based GlaxoSmithKline continues to appeal to income investors. Medicine has strong repeat-purchase characteristics, which ensures a steady cash stream -- handy for paying that rising dividend. The firm makes prescription and over-the-counter medicines, vaccines, and oral and nutritional health-care products to treat major disease areas such as asthma, virus control, infections, mental health, diabetes, and cardiovascular and digestive conditions. It's also developing new treatments for cancer. The company is seeing perky growth in emerging markets, which is helping to offset somewhat limp recent trading in the U.S. and Europe.

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 and invest in them. I suggest you read all about dividend legend Neil Woodford and his best investment ideas today in this free, time-limited 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.

Kevin doesn't own any of the shares mentioned. The Motley Fool has a disclosure policy. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.


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