2020 was the year of the cancelled or cut dividend, with investors losing around £40 billion of investment income from UK shares. A 2021 gets underway, there are signs of improvement, as our monthly dividend list shows, but this year is still likely to be a lean one for dividends compared with 2019.
Despite the fairly gloomy outlook, there are a number of UK companies that are going against the trend and have managed, against the odds, a 10-year winning run of dividend increases. We’ve crunched the numbers using Morningstar Direct and can reveal which companies have managed to stay the course since 2011, as well as some stocks which haven’t cut their payouts over the period.
Stocks That Have Raised Dividends for 20 Years
Among companies rated by Morningstar, Diageo (DGE) is one of the elite group of FTSE 100 stocks that have increased their dividend every year for more than 20 years. Looking back over the past decade, 2011 saw the drinks giant pay 40p per share and by 2020 that had risen to 70p, an increase of 75%. The firm's shares are up 142% over that period too, and Morningstar analysts assign the company a wide economic moat, with the company’s brands – such as Guinness and Johnnie Walker – providing a bulwark against new entrants into the sector. A recent rally has left shares trading at nearly £30, above their fair value of £26. Diageo features in the portfolio of Silver-rated Finsbury Growth & Income (FGT); manager Nick Train says Diageo is an example of an aspirational consumer brand, which is one of his key investing themes for the future.
Another company in this list is equipment rental firm Ashtead (AHT), whose shares are now considered overvalued after a very strong run in the last few years. Ashstead's portable power equipment has been in demand by the NHS for Covid-19 testing and vaccination centres, for example. Ten years ago the company paid a dividend of 3p per share and by last year that had risen to 41p, a 1,266% increase. Shares are up 2,087% over that period, too. Morningstar recently started coverage of Ashtead and analyst Matthew Donan says the company is well positioned to benefit from the trend towards equipment rental as cost cutting becomes the norm following the pandemic. “We expect Ashtead will emerge from the current economic crisis in a strong position,” he says.
Shares in safety testing firm Intertek (ITRK) are also considered overvalued after a huge gains over the past decade, according to Morningstar analysts. This 1 star stock has a narrow economic moat as a global leader in testing, inspection and certification (TIC). “All of Intertek’s businesses operate under its globally recognised name, which is well respected in the TIC market due to its strong reputation for quality,” says analyst Michael Field.
10 Years of Dividend Increases
With tighter regulation, changing consumer habits and the rise of ESG, the tobacco industry has been a tough place to operate in recently, putting listed shares like Imperial and British American Tobacco under pressure. British American Tobacco (BATS) shares have struggled since their June 2017 peak and are now rated 5 stars by Morningstar analysts, which means they are undervalued. It’s one of a rare group of companies with a wide economic moat and a 5 star rating, but a mere 9% increase in the share price over 10 years puts it well behind the other companies on this list. Unlike rival Imperial Brands (IMB), which has cut its dividend, British American Tobacco actually increased its payout last year to 2.1p per share, and has done so every year since 2011.
FTSE 100 chemicals firm Croda (CRDA) rounds off the list of companies with a 10-year winning streak. It has a narrow economic moat, according to Morningstar analysts, but shares at £66 are above their fair value of £46, making the company a 1 star stock. “Shares are near all-time highs and well above our fair value estimate,” says analyst Rob Hales, who praises the company’s “exemplary” stewardship rating. Croda makes chemicals for personal care products such as skin creams, a division that makes up nearly half of annual profits, as well as products for the booming life sciences sector. The company paid out 90p per share last year, up from 53p per share in 2011, and the shares are up 284% over the 10 year period.
Given the pressure on company balance sheets in 2020, and the wave of dividend cuts, the following companies receive honourable mentions for maintaining - though not increasing - dividends over 10 years: investment management firm Ashmore (ASHM), newspaper group Daily Mail and General Trust (DMGT) and accountancy software company Sage (SGE). But it is worth noting that over time, the impact of inflation erodes the value of a stagnant dividend – so a 10p per share dividend in 2011 is worth less in real terms in 2021.
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