Dividend Yielding Stocks: GSK, Vodafone and Imperial Brands - Kalkine Media

September 11, 2020 09:14 PM BST | By Kunal Sawhney
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Summary

  • Businesses in the some of the most affected sectors such as tourism & hospitality, aviation, and retail have cut or suspended dividend payments
  • Given the high level of uncertainty, even those companies that had ample financial capacity to keep paying dividends are adopting a cautious approach
  • However, 2021 and 2022 are expected to be better years for dividends according to market experts
  • Focus on three dividend yielding stocks namely GSK, Vodafone and Imperial Brands

The present scenario of the Covid-19 crisis has been significantly affecting the economic growth and the cash position of companies. Some of the businesses which are highly affected belong to sectors such as tourism & hospitality, aviation, and retail. Many of them have either cut or suspended dividend payments. Companies receiving government assistance for survival are also finding it particularly difficult to pay dividends to their shareholders.

Given the high level of uncertainty, even those companies that had ample financial capacity to keep paying dividends are adopting a cautious approach. For instance, some of the UK’s biggest banks, such as Barclays, Royal Bank of Scotland, HSBC, Lloyds, Santander, and Standard Chartered - all suspended dividend payments and share buybacks for 2019 and throughout 2020.

However, it is expected that 2021 will be a better year for dividends, and will see a fuller recovery in 2022, said George Luckraft, Portfolio Manager of the AXA Framlington Monthly Income Fund. Though, returning to previous levels will take some time, it would not come as a surprise if UK dividends fall by about forty or even fifty per cent overall when one look’s back at the year 2020, he added.

Some prominent companies have already reduced their dividend payments by a substantial amount. For instance, Royal Dutch Shell cut its dividend by two-thirds, and BP halved its dividend payouts.

At the same time, many of the sectors have started to see a rebound in demand. Moreover, the good news is that dividends comes from sectors where demand has remained robust such as retail companies/supermarkets selling utilities and the majority of the consumer staples. Mining companies have been in profit because of the rising commodity prices, and vehicle insurance companies have experienced low number of accidents as less people have commuted to work. Some technology and healthcare firms are also making good profits. On a broader level, while all such companies put together companies might not have the power to offset the widespread cuts in dividends, however, they definitely help in cushioning the blow, especially for funds that are exposed to them.

What Importance Does A Dividend Yield Hold?

A company having high dividend yield pays a substantial share of its profits in the form of dividends. High dividend yielding stocks are considered as a good option for investment, especially during volatile times, because these companies offer good payoff options. Investing in high dividend yielding stocks creates an efficient tax-saving asset.

Though there has been a slight halt in the dividend growth for the short term, we have good reasons to believe that this economic slowdown is likely to be short-lived with a lot of government policy initiatives to turn the tables around.

Let us follow up on some of the dividend yielding stocks in light of the Covid-19 crisis: GSK, VOD, and IMB.

Glaxosmithkline PLC

Glaxosmithkline PLC is a healthcare company, involved in the development, manufacture and commercialisation of pharmaceuticals, vaccines and consumer healthcare products. The company declared a dividend of 19 pence per share for Q2 2020.

The company reported that as on 31 December 2019 its dividend per share was 80 pence, dividend per share growth was (0.57) per cent, and dividend cover was 1.17 as per the statutory filings. The dividend yield recorded by the company was 4.50 per cent.

Source: 10 Years Dividend Yield of GSK, Thomson Reuters

Stock Performance

Glaxosmithkline PLC (LON: GSK) stock was trading at GBX 1,518.00 on 11 September 2020 at 9.47 PM, up by 0.07 per cent from its previous close of GBX 1,517.00. The 52-week low/high price was GBX 1,374.60/1,846.00. It was having a market capitalisation (Mcap) of £76,113.41 million. The volume traded at the time of reporting was 767,397. The company recorded a negative return on price, which was 14.64 per cent on a YTD (Year to Date) basis.

Vodafone Group PLC

Vodafone Group PLC is a telecommunications company, providing a range of services from voice, messaging to data across mobile to fixed networks.The company has declared a dividend of 9 cents per share for FY2020.

As per the statutory filings, the company reported that as on 31 March 2020 its dividend per share was 9 cents, dividend per share growth was (42.55) per cent, and dividend cover was (0.35). The dividend yield of the company was recorded as 7.05 per cent.

Source: 10 Years Dividend Yield of Vodafone, Thomson Reuters

Stock Performance

Vodafone Group PLC (LON: VOD) stock was trading at GBX 109.32 on 11 September 2020 at 9.49 AM, down by 0.09 per cent from its previous close of GBX 109.42. The 52-week low/high price was GBX 98.02/165.24. It was having a market capitalisation (Mcap) of £29,359.29 million. The volume traded at the time of reporting was 5,297,434. The company recorded a negative return on price, which was 25.97 per cent on a YTD (Year to Date) basis.

Imperial Brands PLC

Imperial Brands PLC is a fast-moving consumer goods company, involved in manufacturing cigarettes and cigars. The company has declared a dividend of 41.70 pence per share for H1 2020.

As per the statutory filings, the company reported that as on 30 September 2019 its dividend per share was 206.57 pence, dividend per share growth was 9.04 per cent, and dividend cover was 0.51. The dividend yield of the company was recorded as 11.30 per cent.

Source: 10 Years Dividend Yield of Imperial Brand, Thomson Reuters

Stock Performance

Imperial Brands PLC (LON: IMB) stock was trading at GBX 1,361.00 on 11 September 2020 at 9.52 AM, up by 0.37 per cent from its previous close of GBX 1,360.00. The 52-week low/high price was GBX 1,246.00/2,213.00. It was having a market capitalisation (Mcap) of £12,833.29 million. The volume traded at the time of reporting was 142,638. The company recorded a negative return on price, which was 27.72 per cent on a YTD (Year to Date) basis.


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