Summary

• Investing in companies that pay dividends can be beneficial, especially if an investor plans to stay invested for the long-term
• COVID-19 outbreak has compelled many LSE-listed players to withdraw or postpone their dividend payments
• Legal and General Group PLC will be paying the same interim dividend to its shareholders as the previous year

Established companies providing a portion of their earnings to its shareholders in the form of dividend every year basically constitute the dividend stocks. Investing in companies that pay dividends can be beneficial, especially if an investor plans to invest in them for the long-term. Along with providing consistent income, many dividend-paying stocks can withstand economic downturns with reduced volatility. Dividend-paying companies are usually reliable companies with good prospects for long-term performance because they have substantial amounts of cash.

The year 2020 has been a roller coaster ride for Britons, with the nation experiencing back to back challenges related to Brexit referendum, and the ongoing COVID-19 outbreak. These factors have compelled many LSE-listed players to withdraw or postpone their dividend payments as the economy struggled to cope with the threats. Companies had to take cost reduction initiatives, so their business can sustain for a longer duration.

In such a case, many market players looked towards those companies with consistent dividend history for 'certain' incomes in these times of uncertainty.

Reasons to Opt for Good Dividend Paying Companies

1. The main benefits of investing in dividend-paying companies are the growth and expansion of profits. Dividends tend to grow over time steadily. Dividend-paying well-established companies typically increase their dividend payouts year on year.
2. Stocks can be evaluated using dividends, which is often a more reliable equity evaluation measure than many other more commonly used metrics such as price-to-earnings, or P/E ratio.
3. Dividends help in diversification of overall portfolio risk and volatility. Payment of dividend mitigates losses occurring from a decline in stock price. Studies have consistently shown that dividend-paying stocks significantly outperform non-dividend-paying stocks during bear market periods.
4. Qualified dividends are taxed at substantially lower rates than ordinary income.
5. Dividends also help out in reducing the effect of inflation on investment returns. It helps in preserving the purchasing power of capital.

Legal and General Group PLC to pay same dividend as of last year

Legal and General Group PLC, a giant United Kingdom-based insurance company, will be paying the same interim dividend to its shareholders as the previous year. Though the company has faced a decline in its profits due to the cutting down of interest rates and the falling value of some investments, it has announced its intention to pay out a dividend of 4.93 pence per share.

Nigel Wilson, the owner of Legal and General Group, said that they wouldn't have such an announcement without having informed the regulators. He also commented that they did not receive any sort of criticisms from the regulators.

Despite being warned by the Bank of England that companies should be withholding cash with themselves to safeguard against a recession, the company surprised everyone by pledging to pay out an annual dividend of £754 million for 2019.

To know more, do read: Legal & General Plc to Go with Dividend Payment Defying Bank of England's Advice

About the company

Legal and General Group is a holding company, engaged in activities such as life assurance and long-term savings business, investment management, and general insurance and health business, with operations in the United Kingdom, the United States and other countries worldwide. The company is segmented into Legal and General Retirement (LGR), Legal and General Investment Management (LGIM), Legal and General Capital (LGC) and Legal and General Insurance (LGI) and Savings.

Financial Updates

On 5 August 2020, the company released its half-yearly results. There was a decline of 2 per cent in the operating profits from continuing divisions to £1,128 million (H1 2019: £1,154 million). The company also recorded a plunge of 6 per cent in the operating profits for the first half of the year to £946 million (H1 2019: £1,005 million). The profit after tax slumped by 67 per cent recording £290 million (H1 2019: £874 million), reflecting an impact of lower interest rates on LGI and the unrealised impact of market movements.

Stock Performance

Legal and General Group PLC (LON:LGEN) stock last traded at GBX 224.70 on 6 August 2020, up by 0.59 per cent from its previous close of GBX 223.00. The 52-week low/high price was GBX 138.60/318.40. It was having a market capitalisation (Mcap) of £13,305.93 million. The volume traded for the day was 8,811,236. The company recorded a negative return on price, which was 27.75 per cent on a YTD (Year to Date) basis.

Let us move the spotlight towards some other the well-established companies with a consistent dividend history and understand how they are presently placed.

Rio Tinto PLC

On 29 July 2020, the company released its half-yearly results, declaring an interim dividend of $2.5 billion (155 US cents) per share. The company recorded an underlying EBITDA of $9.6 billion, and the consolidated sales revenue stood at $19.4 billion.

Rio Tinto (LON:RIO) stock last traded at GBX 4,720.00 on 6 August 2020, down by 4.80 per cent from its previous close of GBX 4,958.00. The 52-week low/high price was GBX 2,968.00/4,959.50. It was having a market capitalisation (Mcap) of £58,844.24 million.

Smurfit Kappa Group PLC

On 29 July 2020, the company released its half-yearly results for the period ending on 30 June 2020. It has decided to pay an interim dividend of 80.9 cents per share. The company has recorded a revenue of €4,203 million and EBITDA of €735 million.

Smurfit Kappa Group PLC (LON:SKG) stock last traded at GBX 2,646.00 on 6 August 2020, up by 0.15 per cent from its previous close of GBX 2,642.00. The 52-week low/high price was GBX 1,944.00/3,010.00. It was having a market capitalisation (Mcap) of £6,312.46 million.

BAE Systems PLC

On 30 July 2020, the company released its half-yearly results for the period ending on 30 June 2020. It has declared an interim dividend of 9.4 pence per share. The company recorded sales of £9,871 million for the first half of the year.

BAE Systems PLC (LON: BA.) stock last traded at GBX 507.80 on 6 August 2020, down by 3.23 per cent from its previous close of GBX 524.80. The 52-week low/high price was GBX 438.90/669.00. It was having a market capitalisation (Mcap) of £16,331.99 million.