The Dividend Game In The Perspective Of The UK Markets

  • Oct 26, 2019 BST
  • Team Kalkine
The Dividend Game In The Perspective Of The UK Markets

By large the London Stock Exchange-traded stocks offer significantly higher dividend yield than all their counterparts, but the question is how significant they are in real terms.

Corporations distribute dividend among their shareholders out of their profit accumulated after servicing the company's liabilities. However, it is discretionary for the companies, unlike the interest payment on a bond, it doesn't have to be paid, and it can be reduced or even rejected altogether if required. Board of directors decide the proportion of profit should be distributed among the shareholders; however, it all depends upon how well the company has done.

In the present scenario, yields in the UK market is the highest among all the developed markets. The broader index of the London Stock Exchange, the FTSE 100 index which represents a movement in the portfolio of the 100 large companies traded on the London bourse. As on October 23, 2019, was offering an exclusively high dividend yield of 4.7%, whereas its peer index S&P 500 offering a dividend yield of 2.4%, almost half of the UK market dividend yield.

Let’s throw some light on some high dividend yield FTSE 100 index traded stocks on the London Stock Exchange:                  

Note: Stock Screener (FTSE 100 Companies, Dividend Yield >4.5% and 1yr Price % Change >1%)

  1. Standard Life Aberdeen Plc: Standard Life Aberdeen PLC (SLA) is a Scotland, United Kingdom-headquartered financial services company with operations spread across 54 locations worldwide. The group manages and administers over £577 billion of assets and offers a wide range of developed and emerging market financial assets across Europe, the Americas, Asia, the Middle East and Australia. On a YoY basis, its shares have rallied approximately 11.1%, and yet the company is offering an attractive dividend yield of 7.4%.
  2. SSE Plc: SSE PLC (SSE) is a Perth, United Kingdom-headquartered integrated energy utility company, with operations and investments across the UK and Ireland, including regulated electricity networks and renewable sources of energy. The group produces, stores, distributes and supplies gas, and generates, transmits, distributes and supplies electricity, with the bulk of profit coming from regulated electricity networks and renewable sources of energy. The operations of the group are differentiated in three operating segments, namely Retail, Networks and Wholesale. On a YoY basis, shares of the SSE Plc have delivered an absolute price return of 15.8% and yet offered a dividend yield of 7.4%.
  3. Phoenix Group Holdings Plc: Phoenix Group Holdings PLC (PHNX) is a London, the United Kingdom-based largest specialist life and pensions consolidator of heritage life assurance funds in Europe. The company specialises in the Heritage business, which focuses on closed life fund consolidation. The group has a strategic partnership with Standard Life Aberdeen wherein the company operates an open business which underwrites and manufactures new products and policies. On a YoY basis, its shares have handed a price return of 16.8% to its shareholders, despite a decent surge in the stock price, the dividend yield was 6.6%.
  4. BHP Group Plc: BP Plc (BP) is a London-headquartered global energy business with a diverse portfolio across businesses, resource types and geographies, and operations in 78 countries worldwide. BP is a vertically integrated group with operations in all areas of the oil and gas industry, ranging from upstream, downstream and renewables businesses to manufacturing and marketing fuels and raw materials. The operations of the group are differentiated in four operating segments (1) Upstream (2) Downstream (3) Rosneft and (4) Other businesses and corporate. On a YoY basis, shares of the BHP Group Plc have surged by 9.5%, and yet the company is offering a dividend yield of 6.4%.
  5. Legal & General Group Plc: Legal & General Group PLC (LGEN) is mainly engaged in providing products and services related to insurance and investment management (British holding company). It is one of the world's largest insurance and investment management groups. It operates worldwide through its subsidiaries and associates, with the United States and the United Kingdom being the primary markets. In the year over the period, its shares have delivered a price return of 12.7% and the dividend yield of the group stood at 6.2%.
  6. Lloyds Banking Group Plc: Lloyds Banking Group Plc (LLOY) is a lender based out of London which is into services of banking and non-banking, mainly in the UK. The group provides services of short and long-term loans, current and savings accounts, credit and debit cards, investment products, unsecured loans, mortgages, motor finance, syndicated loans and bonds. The company's operations are divided in four operating segments namely Retail segment, Commercial Banking segment, Consumer Finance and Insurance segment. On a YoY basis, its shares have increased by 7.1%, and the dividend yield of the group stood at 5.4%.
  7. GlaxoSmithKline Plc: GlaxoSmithKline Plc (GSK) is a healthcare company, which focuses on the manufacturing, commercialisation, and development of pharmaceuticals vaccines and consumer healthcare products. The company offers over the counter (OTC) products for pain, relief, nutrition, skin health, oral health, and gastrointestinal disorders. In the year-ago period, its shares have recorded price growth of 7.5%, and despite that, the dividend yield of the company stood at 4.8%.
  8. United Utilities Group Plc: United Utilities Group Plc (UU) is a provider of water and wastewater services in the North West region of England. It is involved in generating renewable energy, corporate fiduciary, provide funding, and management of the property. It serves households and business customers of about 3 million and 200,000 respectively. The company's operations are differentiated in three core operating segments: Wholesale water charges, Wholesale wastewater charges and the Residential, retail charges. Its shares have surged 25.3% in the past one year and yet offering a very attractive dividend yield of 4.6%.

The above-mentioned FTSE 100 companies are offering very high dividend yield despite the fact that their shares have delivered decent capital appreciation in a market condition where broader index FTSE 100 has just rallied 2.4%. Also, the majority of them are more global companies and holding significant market share across the globe as well.

However, the higher dividend yield is not a guarantee that the company is going great in the business, a steep plunge in the stock due to some fundamental issues or market-related issues could also send dividend yield higher, as the dividend is calculated upon the stock price. So, an increase in stock price will decrease dividend yield and vice-a-versa.

With Bank of England reducing the interest rates to a historic low level, the spotlight is back on diverse investment opportunities. 

Amidst this, are you getting worried about these falling interest rates and wondering where to put your money?

Well! Team Kalkine has a solution for you. You still can earn a relatively stable income by putting money in the dividend-paying stocks.

We think it is the perfect time when you should start accumulating selective dividend stocks to beat the low-interest rates, while we provide a tailored offering in view of valuable stock opportunities and any dividend cut backs to be considered amid scenarios including a prolonged market meltdown.

To know more about these dividend stocks, click here

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