Summary
- Dividend yields curve of most high dividend-paying companies have sharply turned downwards in the past three months due to rising share prices
- Many companies have given a lower rate of dividend or no divided because of the pandemic
- Improving economic conditions in the country will ensure that many of the dividend-paying companies may continue to perform well
The current situation of the London Stock Exchange makes it suitable for income investors to pick up good dividend-paying stocks at a discount. These stocks which are currently battered by the pandemic could be underperforming and may be giving a lower rate of dividend or no divided because of it. However, whenever the economic situation improves in the country, these could be the leading companies who will show a smart bounce back and even get back to their regular dividend rates.
Investors planning to build an income portfolio look for good dividend-yielding stocks, we are going to discuss the top five dividend-yielding companies on the London Stock Exchange till May 2020, when the lockdown started being eased and businesses gradually moving back to normal.
- M&G Plc- (LON: MNG) – M&G Plc is a British investment management company which manages a wide variety of assets in the UK and abroad including fixed income, real estate as well as equities.
The company has a long and consistent history of paying dividends and in 2020 also it has paid a better rate of dividend despite the underlying economic situation in the country.
Till now in the year 2020, the company has paid a dividend of GBX 15.77, with a final dividend of GBX 11.92 on 29 May 2020.
The dividend yield for the company for the months of March, April and May 2020 was 10.58 per cent, 9.01 per cent and 8.51 per cent, respectively.
M&G Plc
Dividend Yield Curve
- Legal & General Group Plc- (LON: LGEN) – The company is a London based multinational financial services company providing services like investment management, pensions, annuity, and life assurance.
Legal and General Group Plc also has been a consistent dividend payer, and its latest revenue performance also indicates that it has a strong bottom line and a robust business model to support its dividend-paying trend.
The company paid its last dividend of GBX 12.64 on 04 June 2020. The dividend yields of the company for the months of March, April and May 2020 were 9.06 per cent, 8.58 per cent, and 8.85 per cent, respectively.
Legal & General Group Plc
Dividend Yield Curve
- Vodafone Group Plc- (LON: VOD) –It is a telecommunications company having reach in different parts of the world apart from Britain. The company principally operates in Europe, Asia, Africa, and Oceana. The company has a history of consistently paying dividends to its shareholders and has a strong business model which seems to have been affected due to a lesser extent by the coronavirus pandemic compared to other LSE listed companies. The company has declared a final dividend payment of 4.5-euro cents per share to be paid on 7 August 2020.
The dividend yields of the company for the months of March, April and May 2020 were 7.96 per cent, 8.02 per cent, and 6.76 per cent, respectively.
Vodafone Group Plc
Dividend Yield Curve
- Phoenix Group Holdings Plc– (LON: PHNX) - Phoenix Group Holdings is one of the largest insurance services providing company in the United Kingdom. The group comprises of four regulated companies, namely Phoenix life, Phoenix Ireland, AXA Wealth and Abbey Life.
The company has a resilient capital position, and despite the deteriorating economic condition in the country, it did not avail of any government financial assistance or put any of its employees under Furlough, with each receiving their salaries in full during the period. Despite the difficult business environment, the company expects a cash generation of £800 million to £900 million.
The company underpinning on its strong business model has been a consistent dividend payer.
The company paid its dividend of GBX 23.4 on 19 May 2020, as final dividend for 2019.
The dividend yields of the company for the months of March, April and May 2020 were 7.96 per cent, 8.02 per cent, and 6.76 per cent, respectively.
Phoenix Group Holdings Plc
Dividend Yield Curve
- British American Tobacco Plc - (LON: BATS) - British American Tobacco Plc is a British multinational cigarette and other nicotine products manufacturer. The company having famous cigarette brands Dunhill, Rothmans, Kent, Lucky Strike and Pall Mall, operates in around 180 countries of the world.
The company has been a very resilient company, and its bottom line has not been impacted that badly by the coronavirus pandemic. The company made an announcement on 27 February 2020 that its Board had declared an interim dividend of 210.4 pence per ordinary share of 25 pence, payable in four equal quarterly instalments of 52.6 pence per ordinary share in May 2020, August 2020, November 2020 and in February 2021.
The dividend yields of the company for the months of March, April and May 2020 are 7.96 per cent, 8.02 per cent, and 6.76 per cent, respectively.
British American Tobacco Plc
Dividend Yield Curve
If we go into the basics, the dividend yield of any company is calculated by dividing the latest dividend by the prevailing share prices. In all the above five cases, the dividend yield curve can be seen downward sloping. It is indicative that the share prices of each of these companies have risen during the past three months after they touched bottoms, in March when the lockdown was imposed in the United Kingdom. With the stock markets expected to gain strength over the next couple of months when the real business activity starts to recover, these yield curves may fall further. Similar is the case with other good dividend- paying companies, on the London Stock Exchange and for someone who wants to build an income portfolio, it may not be a good idea to wait further.
Conclusion
It is quite possible that many of these companies would be announcing more dividends further down the line during this year, making them more valuable in the eyes of potential investors. In such circumstances not only will the prices of their shares rise but will push the yield curves further down. A falling dividend yield curve is also a sign that the underlying business is performing well and that investors in the market are expecting the company to declare higher dividends in the near future whereby their future earnings would be higher than the current yield values.
