5 Shares Offering Decade-High Yields

Published in Investing on 1 June 2012

Stock-market falls have pushed some company yields to their highest in a decade.

Economic fears have hit share prices hard. However, many companies are still maintaining or even raising their payouts to shareholders. This is pushing dividend yields higher.

I've identified five shares whose current dividend is the highest it has been at any point in the last 10 years. As always, future dividends are not guaranteed. It is possible that any of these shares might cut their payout in the future.

The five shares below trade today on a historic dividend yield of 6.9%. The FTSE 100 index yields just 3.9% in comparison.

1) Tesco

Tesco (LSE:TSCO) is the dividend king of the FTSE 100. The company's dividend payout to shareholders has been increased 27 years running.

That dividend has been paid from Tesco's massive growth.

The recent profit warning from Tesco saw the shares slide dramatically. Today, Tesco shares are just pennies away from their lowest point since the worst of the banking crisis. Despite economic turmoil, Tesco's dividend has increased on average 9.4% for the last six years.

Since its recent fall, Tesco has become one of the most debated shares on the market. Yet the analyst community still expects Tesco to increase profits and dividends for the next two years. (Indeed, the man considered the greatest living investor recently topped up on the supermarket; you can read the full story in this free Motley Fool report: "One UK Share Warren Buffett Loves".) The company's last announced dividend amounted to 14.8p per share. Consensus is for the dividend to hit 15.1p this year. That's a 4.9% dividend last year, rising to 5.0%.

2) Go-Ahead Group

Go-Ahead Group (LSE:GOG) is a England-focused bus and rail operator. The company runs local bus services in areas as distant as the Isle of Wight and Durham. Go-Ahead also owns some well-known rail brands, such as London Midland, Southeastern and Gatwick Express.

Between 2006 and 2008, Go-Ahead ramped up its shareholder dividend from 56p to 81p. The company has maintained its dividend since then.

Today the shares trade at 1,100p. This puts the company on a historic yield of 7.4%.

Like most shares on the market, Go-Ahead is down recently. At the beginning of the year, the shares traded close to £14. Before the sub-prime financial crisis, they cost more than £25 each.

The share price fall, combined with dividend increases, have pushed Go-Ahead's yield to its highest in 10 years.

3) WM Morrison

Morrison's (LSE:MRW) is the UK's growth supermarket share. In 2007, net profit at the company was £248m. By 2012 this was £690m. The dividend has also grown at an impressive rate: for 2002, Morrison's paid its shareholders 2.7p in dividends. By 2012, the figure hit 10.7p.

Much of this growth was anticipated by the market. Morrison's share price is today only 40% higher than it was 10 years ago.

As the business has matured, Morrison's yield has risen closer to its peers. On today's price, Morrison's 2012 yield equates to 3.9%. The 2012 dividend of 10.7p is well covered by earnings of 26.1p per share. Even better, earnings and dividends are both forecast to grow significantly in the next two years.

Unlike companies such as Tesco and Go-Ahead, Morrison's high yield has not been caused by a significant shareprice decline. The shares today are no more than 20% off their all-time high.

ADVERTISEMENT

Get FREE instant access to our two latest
share recommendations and all our previous picks

If you’re ready to start investing but want someone else to do the hard work for you, Motley Fool Share Advisor can help.

Each month, our analyst team provides the names and details of two top shares for new investment. These aren’t crazy punts or poorly vetted ideas … no, these are thoughtfully researched shares to hold for years.

And we don’t stop at the recommendation.

We provide ongoing coverage for each share we recommend – telling you what to buy and when, but also when sell. To take the guesswork out of building your portfolio, come see how Share Advisor can help you.

Click here to start your 30-day free trial today

4) Man Group

Man Group (LSE:EMG) is an asset management company with a £1.4bn market cap. Man specialises in providing hedge funds to large institutional investors. Shares in the company have suffered recently, though: since the beginning of the year, the shares were 125p. Today they are 73p.

For 2011, the company declared a dividend of 11p per share. That's a historic yield of 15.1%. Surprisingly, Man's dividend is expected to rise again next year to 14.2p. That would put the shares today on a forward yield of 19.5%. I can never recall a time when such a large company has traded on such a yield.

Often when shares offer a high yield, it is because the market believes the dividend is not sustainable. Man could halve its dividend here and still be yielding far more than the average share.

Like Tesco, Man Group is one of the most debated shares on the Fool discussion boards. There are some excellent Fools with knowledge of Man's industry discussing its prospects here.

5) Capita

Capita (LSE:CPI) does the paperwork other companies think is too much trouble. This ranges from managing companies' shareholder registers to payroll for large employers.

All these contracts with other firms add up to a high-quality earnings stream. This has enabled Capita to increase its dividend tenfold from 1998 to today. That is an average dividend increase, year-on-year of 17%.

Capita's history of rapidly increasing its dividend is beginning to catch up with its share price. On last year's payout, the shares now yield 3.5%. This is forecast to rise to 3.7% next year.

Let me finish by adding that more share ideas can be found within "Top Sectors For 2012" -- a Motley Fool study of three favourable sectors that could offer potential opportunities for long-term investors. The report is free.

Further investment opportunities:

> David does not own shares in any of the companies listed above. The Motley Fool owns shares in Tesco.

Share & subscribe

Comments

The opinions expressed here are those of the individual writers and are not representative of The Motley Fool. If you spot any comments that are unsuitable hit the flag to alert our moderators.

performer777 01 Jun 2012 , 12:35pm

Man Group are top of the DividendMax optimizer. There are 10 stocks yielding more than Go-ahead group which is in 12th place.Tesco lie in 77th place, William Morrison lie in position 103 and finally Capita lie in 114th place, so there is a massive selection to choose from in DividendMax.

dukindiva 02 Jun 2012 , 1:49pm

MAN are losing money (in terms of fund value managed..its core activity) but are (still?) commited to paying a dividend, how long this lasts will depend on if it can keep its' investors happy. The high yield is merely a reflection of its drop in share price.

Join the conversation

Please take note - some tags have changed.

Line breaks are converted automatically.

You may use the following tags in your post: [b]bolded text[/b], [i]italicised text[/i]. All other tags will be removed from your post.

If you want to add a link, please ensure you type it as http://www.fool.co.uk as opposed to www.fool.co.uk.

Hello stranger

To add your own comment, please login.

Not yet registered? Register now.