Save, make, understand money

Experienced Investor

Covid-19 takes its toll on FTSE’s serial dividend raisers

Emma Lunn
Written By:
Emma Lunn

AJ Bell’s latest “Dividend Dashboard” shows that 14 firms have broken their 10-year dividend growth streaks during the first half of the year, with three firms joining the list.

The investment platform also found that just 14 FTSE 100 firms have increased their dividend for at least 10 consecutive years, down from 25 at the start of the year.

The average total return from the 14 ten-year dividend growers over the period is 622%, easily beating the FTSE 100’s 75% return.

Russ Mould, investment director at AJ Bell, says: “The pandemic and economic downturn have taken their toll on the FTSE 100’s elite list of serial dividend raisers. Just 14 firms can now point to a record of at least 10 consecutive increases in their annual dividend, down from 25 at the start of the year, and that includes three newcomers – Pennon, Legal & General and Intermediate Capital.

“The casualties are Associated British Foods, BAE Systems, Bunzl, Burberry, Compass, Imperial Brands, InterContinental Hotels, JD Sports, Johnson Matthey, Rightmove, St James’s Place and also SSE and Prudential, although in the case of the final two a change to the group structure was a contributory factor following the sale or spin-out of certain assets.”

“Any firm which can achieve a streak of 10 or more increases in its annual dividend must, on balance, be doing something right and with the benefit of hindsight buying the FTSE 100’s 14 remaining serial dividend growers would have brought bumper returns to portfolio builders.”

AJ Bell found that average capital gain from the 14 10-year dividend growers is 481% and the average total return is 622%. Both easily beat the FTSE 100, at 20% and 75% respectively.

If the streaks can be maintained then there could be rewards for patient shareholders. All of the 14 firms to have increased their dividend in each of the past 10 years have beaten the FTSE 100 in capital and total return terms.

“The tricky bit is that only four of the 14 – BAT, Diageo, Legal & General and Sage – were actually in the FTSE 100 a decade ago, so investors may need to burrow through the FTSE 250 if they are looking for the next generation of dividend growth champions,” says Mould.