LONDON -- The FTSE 100 has put the "Summer Sale Now On!" signs up. The index has fallen 8% from its recent high, and I've been rummaging through the clearance section looking for some blue-chip dividend bargains.
Some companies' shares have fallen more heavily than the index, but at the same time, the City consensus on their forecast dividends has risen. The combination of a lower share price and a higher dividend means you're getting much more income bang for your buck than just a few weeks ago.
British American Tobacco (BATS 1.24%) (BTI +0.39%), Tesco (TSCO +1.48%) (TSCDY +2.58%), and Severn Trent (SVT +0.07%) fit the bill, and the table below gives the low-down on them.
|
Company |
Recent Share-Price High |
Current Share Price |
Change |
Forecast Dividend One Month Ago |
Current Forecast Dividend |
Current Forecast Yield |
|---|---|---|---|---|---|---|
|
British American Tobacco |
3,807 pence |
3,469 pence |
(9%) |
149.59 pence |
149.61 pence |
4.3% |
|
Tesco |
388 pence |
337 pence |
(13%) |
15.10 pence |
15.16 pence |
4.5% |
|
Severn Trent |
2,200 pence |
1760 pence |
(20%) |
80.34 pence |
80.37 pence |
4.6% |
British American Tobacco
The shares of British American Tobacco, the world's second-largest tobacco company, don't tend to track the wilder gyrations of the stock market. The owner of global top-10 cigarette brands Dunhill and Lucky Strike is known as one of the "Steady Eddies" of the FTSE 100.
However, the recent downswing has seen BAT's shares drop with the market and then some. As a result, the company's forecast dividend yield has risen to 4.3% -- a full percentage point higher than the market average. I'd say 4.3% isn't a bad starting income for a company that has grown its dividend by double digits for the past five years and is forecast to continue doing so.
Tesco
I have to admit that I didn't go along with the general Foolish wisdom that Tesco was a good bet after its shares were hammered by a profit warning some 18 months ago. My view was that Tesco's problems are more deep-rooted than many fans would like to believe and that struggling supermarkets take an awful long time to turn around. As such, I felt my money could be more profitably employed elsewhere.
Having said that, if you believe in Tesco's long-term future and are prepared to tough it out, the shares have dropped 13% from their recent high -- they began falling a week or so before unimpressive first-quarter results announced on June 5 -- and are now yielding a forecast 4.5%.
Severn Trent
Severn Trent, the water utility that takes its name from the catchment area of two of Britain's largest rivers, is something of a special case. Ever since Northumbrian Water was acquired by leading Hong Kong infrastructure group Cheung Kong Infrastructure Holdings a couple of years ago, it's been clear that U.K. regulated water utilities are coveted by foreign cash-rich investors prepared to take a long-term investment view.
From the middle of May, Severn Trent's shares were driven up by a series of offers from a Canadian-led consortium. The price has fallen back after the consortium withdrew its interest last week following Severn Trent's rejection of a final £22-per-share proposal. The U.K. water company's shares are now 20% below that level, which has pushed the forecast dividend yield up to 4.6%.
To wind up, let me tell you that while Severn Trent sports a pretty decent yield after the recent drop in its shares, another FTSE 100 utility offers an even better income of 5.7% -- and has just been declared the Motley Fool's No. 1 dividend stock. Our top income analyst believes this company will provide investors with steady annual dividend growth for many years to come. Not only that, but he calculates the stock is trading today at more than 100 pence a share below current fair value of 850 pence. To read the in-depth analysis of this dividend dynamo for free, simply click here.
