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The FTSE 100 is packed with generous income stocks, and some yield as much as 8% or 9%. The trick is finding dividends that look sturdy enough to hold up over time. I was flicking through AJ Bell’s latest dividend dashboard this morning and three names jumped out because they all offered the same special thing. So what is it?
Legal & General for income
The first is Legal & General Group (LSE: LGEN), which has the highest trailing yield on the blue-chip index at 9%. High yields can be hard to sustain and this looks shaky as earnings cover has fallen below 0.9. Ideally, I’d like to see that closer to 2.
But here’s the thing that reassures me. Among the top 10 FTSE 100 high yielders on the dividend dashboard, Legal & General is one of just three that hasn’t cut the dividend per share in the last decade, not even once.
It was frozen once in 2020 but rose every other year, with an average annual compound increase of 6.2%. Of course, this doesn’t guarantee there won’t be a cut in future — but it feels less likely. The board has indicated it has the resources to keep returning cash, although the dividend is expected to grow at a slower pace of 2% a year.
Legal & General plans to return a total of £5bn over three years through dividends and share buybacks. I think its worth considering buying for the long term, although I’d like to see more share price progression too.
Schroders shares recover
The second stock with a 10-year record of avoiding dividends cuts is privately run fund manager Schroders (LSE: SDR). Sadly, the share price has been somewhat volatile, falling 25% over five years, although it’s up 22% over the last 12 months.
The blue-blood active fund specialist has struggled to find a modern identity in a world dominated by low-cost passive strategies. Management is now putting more emphasis on wealth management, exiting markets like Indonesia and Brazil, and launching its own active ETF range in Europe.
There are signs this is bearing fruit. On 23 October, the group reported record assets under management of £816.7bn, up 5% in the quarter, helped by a huge jump in new business.
Schroders looks decent value. The price-to-earnings ratio is 14.4 and the yield stands around 5.75%. The dividend per shares has been frozen four times in the decade, but never cut. I suspect its shares may continue to be bumpy so investors should carefully weigh the risks before they consider buying.
British American Tobacco is hot
Cigarette maker British American Tobacco (LSE: BATS) has a formidable dividend track record. It hasn’t cut shareholder payouts once this millennium, let alone for the last 10 years.
It enjoys regular net cash flows from its captive audience of smokers, supplemented by rising demand for next-generation products like vapes. The shares soared 45% in the last year, yet the P/E is still just 11.6 and the yield sits near 5.54%.
The tobacco sector faces intense regulatory pressure and the battle for market share is fierce. Yet this looks the most dependable dividend payer of the three I’ve covered there. It’s the one that income-focused investors might consider buying if they prize consistency above all else.
