Shares with the longest record of rising dividends

Shares with the longest record of rising dividends

The fund, called the UK Dividend Aristocrats, contains only 30 shares. They qualify for inclusion if their dividends meet several criteria.

First, the dividend must have been increased or held steady for at least the past 10 years. Second, the yield cannot exceed 10pc, as a very high yield is often a sign that the market expects a dividend cut.

Third, the company must be profitable and not paying dividends from reserves or borrowings. Constituents must also have a market value of at least $ 1bn, currently equivalent to £625m. Once a list of companies meeting all these hurdles has been drawn up, the fund buys shares in the 30 with the highest dividend yields.

“The best dividend payers in the Aristocrats fund are a good representation of the best payers in the FTSE All Share index,” SPDR said.

So, among those 30 companies, which have the longest dividend records? Apart from Cobham, and from those shown in the graphic above, contenders include Capita, the outsourcing company that runs many firms’ shareholder registers; Pearson, the publisher of the Financial Times; Imperial Tobacco; WPP, the advertising agency; Reed Elsevier and Daily Mail & General Trust (DMGT), two other publishers; Sage, the software company; and Amec, the engineering business.

Capita’s record of paying dividends has been unbroken since October 1987, when it paid a dividend of 0.85p per share. The dividend now is 23.5p, a rise of 2,760pc compared with 26 years ago. Imperial Tobacco demerged from Hanson, the industrial conglomerate, in 1996 and has paid an increasing dividend every six months since, a 17-year record.

Asked how long DMGT had been paying uninterrupted dividends, a spokesman said: “We are struggling to come up with an answer. We have definitely consistently paid a dividend since 1988, which is as far back as our uninterrupted records go. The total dividend has increased every year bar one, with a compound annual growth rate between 1988 and 2012 of 10pc. The one year it didn’t increase was 2009, when the dividend was held at the same level as the previous year.”

The spokesman added: “I am pretty confident that a dividend was paid consistently since 1975 but I couldn’t say categorically and the dividend may have been reduced in some years.”

There have been no breaks in Sage‘s dividend payments since 1990.

Pearson said in its annual report this year that 2012 had marked “the 21st straight year of increasing the dividend above the rate of inflation” and that in the past 10 years it had increased the dividend at a compound annual rate of 7pc.

Amec has raised its dividend every year since 1992.

WPP‘s record goes back to 1993, when it paid an interim dividend of 0.35p per share. The dividend has not been axed or reduced since then. Reed Elsevier has paid a dividend at least since the merger of Reed and Elsevier in 1993, although it did cut the payment by a third in 1999. Since then the total dividend has grown every year apart from 2000 and 2010, when it was flat.

British American Tobacco has paid dividends every year since it listed in 1998 and has never cut the payment.

A long record of rising dividends will normally, although not always, lead to a rising share price. However, there will inevitably be ups and downs along the way because share prices are affected so strongly by market sentiment.

Jeremy Le Sueur of 4 Shires Asset Management said: “Sustainable growth of the dividend in companies should cause your shares to increase substantially in value. The only return from owning a company, before you finally sell your holding, is the dividend. Therefore a company that has consistently raised the dividend should see a consistent rise in its share price.

“The more consistent and sustainable the rise in the dividend, the more highly valued the company ought to be.”

But Mr Le Sueur added: “Companies sometimes raise the dividend but fail to see a consistent rise in their share price. Balfour Beatty is an example of this. It has raised its dividend for 13 years since 1999, since when the shares have risen nearly fivefold.

“But the shares have fallen by 40pc since their peak in 2007 – despite the fact that the record of rising dividends was maintained during this period.”

Impressive as some of the records above are, they are beaten comprehensively by some of Britain’s investment trusts. These trusts are funds that own shares in other businesses but also have their own shares listed on the stock market.

Scottish Mortgage, for example, has a 103-year dividend track record and has maintained or increased the payment every year for nearly 80 years. “The dividend has risen on average by 7.2pc every year since 1909, even with a blip for the Great Depression of the Thirties,” Mr Le Sueur said. “This has been valuable when inflation over that 103-year period has averaged just over 4pc.”

City of London Investment Trust has a 47-year dividend record while Alliance Trust and Bankers have delivered 46 years of uninterrupted dividend growth. Others with lengthy records include Caledonia (45 years), Foreign & Colonial and Brunner (42 years), Witan (38 years) and Scottish Mortgage (30 years), according to the Association of Investment companies.

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