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Humans sometimes we get stuck in short-term thinking. When it comes to dividend shares, we can fall into the trap of looking at the current dividend yield and ignoring issues with payments in the past. Therefore, one way to prevent this is to look at stocks with a long history of paying consistent income, as the track record speaks for itself.
Long-term office deals
First, let’s consider Derwent London (LSE:DLN). It’s a UK-listed real estate investment trust (REIT) specialising in commercial office property in central London. Interestingly, the company adopts a regeneration-led strategy. This means it acquires underutilised buildings and enhances their value through redevelopment and refurbishment.
The current dividend yield is 4.9%, with 25 years of consecutive dividend growth. However, the 30% fall in the share price over the past year needs to be addressed. Part of this is due to weaker sentiment in the market, as hybrid working trends reduce demand for office space and undermine long-term lease renewals. It’s also to do with concerns that interest rates will stay higher for longer. Given the amount of debt the company needs to finance new projects, it’ll increase overall costs going forward.
Despite this, the track record of income shows me it’s a clear priority for the management team. As a REIT, it must pay out a large portion of its earnings as dividends to maintain favourable tax treatment. The dividend cover is 1.5, meaning that the current earnings per share more than covers the paid out dividend.
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At a business level, I see revenue from rental income increasing in the coming year as many firms pivot back to working from offices. It also benefits from its diversified, high-quality tenant base, which is unlikely to dramatically reduce occupancy suddenly.
A niche insurance operator
A second stock is Chesnara (LSE:CSN). The stock is up 23% over the last year, with a dividend yield of 7.82%. It has paid out a constant dividend for two decades.
The company is a life insurance and pensions consolidator. In simple terms, it buys and manages closed books of life insurance and pension policies from other insurers that no longer want to run them. By taking on these portfolios, Chesnara earns steady, predictable cash flows from the premiums and investment returns linked to those policies. This is one reason why it has been a reliable dividend payer for so long.
Going forward, I don’t see this changing. It’s true that growth is modest. But at the same time, the company prioritises paying out to shareholders. Evidence of this can be seen from the dividends that have been maintained or increased steadily over the years. In essence, Chesnara trades growth potential for income reliability, which is why many investors view it as a dependable dividend stock.
As a risk, the business needs to keep up with new acquisitions going forward. After all, it manages closed books, where the policies naturally end in the future, so without good new purchases, cash flows could gradually decline.
But I think both companies are worth considering for investors, with a strong track record of income generation.
