LONDON -- Back in August, when markets had sold off and everyone was worried about Europe, I looked for the 10 potentially fattest and most reliable dividend yields on my watchlist of consistent, dividend-growing companies.
I said then: "These shares have underlying businesses that are growing, so when markets stabilize, their prices could return to former levels before continuing to grow alongside their profits."
Fast-forward to June 18, 2012. Markets have sold off, and everyone is worried about Europe -- but the results from those underlying businesses have been encouraging. Without considering the return from the dividend payments, performance has been as follows:
|
Share |
Share Price on Aug. 22, 2011 (pence) |
Forward Yield on Aug. 22, 2011 |
Share Price on June 18, 2012 (pence) |
Gain/Loss |
|---|---|---|---|---|
| Man Group | 180 | 9% | 74 | (59%) |
| Kier (LSE: KIE.L) | 1075 | 5.9% | 1259 | 17% |
| Safestore | 98 | 5.7% | 116 | 18% |
| N. Brown | 252 | 5.2% | 243 | (3.6%) |
| Regus | 66 | 5.1% | 91 | 38% |
| BP | 386 | 4.8% | 421 | 9% |
| Greggs | 465 | 4.5% | 491 | 5.6% |
| Cranswick | 620 | 4.5% | 802 | 29% |
| RPC | 300 | 4.5% | 384 | 28% |
| Morrisons (LSE: MRW.L) | 278 | 3.9% | 279 | 0.4% |
Thanks to the big stinker, Man Group, the average gain has only been about 8.2%. That compares to a gain in the FTSE All-Share index of 7.7% over the period. Nevertheless, the results are sufficiently encouraging to justify running the process again.
10 big, growing dividends now
This time, I've skipped the mega cap, BP, which currently has a forward yield of around 4.9%, and turned my back on Man Group to discourage averaging down on a loser. That leaves 10 places for big-yielding mid-cap and smaller FTSE 100 companies from my dividend-grower watchlist.
Each company name in the table has a link attached that takes you to an earlier article for more background:
|
Share |
Index |
Sector |
Share Price on June 18, 2012 (pence) |
Forward Yield |
|---|---|---|---|---|
| Carillion (LSE: CLLN.L) | FTSE 250 | Support services | 274 | 6.3% |
| Cape | FTSE 250 | Support services | 255 | 6.1% |
| N. Brown | FTSE 250 | General retailers | 245 | 5.5% |
| Tullett Prebon (LSE: TLPR.L) | FTSE 250 | Financial services | 293 | 5.4% |
| Kier | FTSE 250 | Construction and materials | 1,256 | 5.3% |
| Safestore | FTSE Small Cap | Real-estate investment and services | 115 | 5% |
| W. S. Atkins (LSE: ATK.L) | FTSE 250 | Support services | 690 | 4.6% |
| Hill & Smith | FTSE Small Cap | Industrial engineering | 322 | 4.3% |
| Morrisons | FTSE 100 | Food and drug retailers | 279 | 4.3% |
| Sage | FTSE 100 | Software and computer services | 250 | 4.2% |
City analysts have recently reduced most of these companies' earnings growth forecasts against the current uncertain macroeconomic background. That said, most have a good history of cash-covered dividend-raising and might be reluctant to break that pattern, in my view.
Fallen highflier Cape is worthy of special mention. It has found its way onto the high-yielder list thanks to a profit warning in May. The nonmechanical support services provider expects to lose around 14 million pounds on a contract in Algeria. The rest of the trading news from Cape is bullish, but it's worth mentioning that the long-serving CEO left the company shortly before the bad news emerged. That might be an unconnected event, of course, but it does incline investors to speculate about the financial integrity of Cape's other projects. On the other hand, the knocked share price could recover further if the company's other trading remains profitable.
Fool on
So there we have 10 ideas as a starting point for your own research.
I also recommend checking out the ideas in the free Motley Fool reports "Top Sectors For 2012," "8 Shares Held By Britain's Super Investor," and "The One UK Share Warren Buffett Loves."
Further investment opportunities:
