Looking for yield? Start here.
Decent dividend-paying shares are always popular with income-seeking investors.
And that's because not only does research repeatedly highlight that dividends comprise a fairly hefty chunk of long-term total returns, but also because many investors rely on those dividends for income.
As I wrote a couple of weeks ago, for instance, one popular income-producing portfolio here at The Motley Fool has delivered £40,823 in dividends over eleven years, from an initial £75,000 investment.
And its capital value, meanwhile -- without dividend reinvestment -- has risen to £114,218, an increase of some 52% on the original £75,000 purchase cost.
That said, finding those long-term dividend-paying shares can be tricky.
Aim for too low a yield, for instance, and you'll wind up receiving a dividend that's either close to the FTSE All-Share average, or below it. At which point, you may as well just buy a low-cost tracker, and get some diversification into the bargain.
Aim for too high a yield, and you run the risk of latching on to a share that's destined to either cut its dividend, or implode altogether. Some of the FTSE's highest yields at the moment, for example, are shares with precisely such question marks over them: MAN Group (LSE: EMG), Cable & Wireless Communications (LSE: CWC) and Home Retail Group (LSE: HOME) all have yields of over 10% or higher.
And there's also the issue of sustainability to consider. A share might offer a decent yield now -- but will it last? Is the underlying business, in short, one with regular predictable earnings, and ideally earnings that are poised to grow?
No wonder, then, that some of our most popular discussion boards here at the Motley Fool are devoted to precisely these questions.
Poised to pay
Helpfully, analysts at Morgan Stanley have run a screen that asks such questions, and they reckon that the fifteen companies below offer a high and secure yield.
Decent dividends, in short, and dividends that look to be sustainable and secure in the medium to long term.
So which companies made the grade? Take a look at the table below:
Looking at the list, I see plenty of the 'usual suspects' -- companies regularly favoured by income investors on our discussion boards. Businesses such as British American Tobacco, GlaxoSmithKline, SSE, Vodafone, for instance. And it's difficult to quibble with such choices.
That said, some of the picks are rather pricey, and I'd be tempted to look for a cheaper entry point, and buy on a dip. Severn Trent, for instance, has a P/E of over 18. British American Tobacco's P/E of around 15 isn't cheap, either, although from a dividend perspective, the company has undeniably done the business over the past few years.
Then there's the question of sustainability. United Utilities, for one, has a somewhat erratic dividend history, likewise Marks & Spencer.
All in all, though, it’s a list with a lot of promise, and a good starting point for further research. By my reckoning, the average yield if you bought the lot (accepting, in the process, a portfolio concentrated around utilities, pharmaceutical and insurance) is a chunky 6.2%.
Try getting that from a savings account!
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More from Malcolm Wheatley:
> Malcolm owns shares in AstraZeneca, BAE Systems, GlaxoSmithKline, and Marks & Spencer. The Motley Fool owns shares in Admiral, AstraZeneca, GlaxoSmithKline and SSE.