With interest rates set to remain low over the medium term, high-yield stocks have enjoyed increased popularity among savers. However, dividends can be held flat, cut or even not paid and this can make them far riskier than having cash in a savings account. With this is mind, here are three companies that have a strong track record of increasing dividend payments and whose shares also offer good value at current prices.
An obvious choice for income-seeking investors, National Grid (LSE: NG) has increased dividends in each of the last three years. However, the key attraction for investors moving forward is the companys aim to increase dividends per share in line with inflation. While this may not sound so appealing when inflation is below 2%, it could prove to be a major asset for investors in future years, as considerable amounts of quantitative easing could push the inflation rate up.
With shares in National Grid yielding 4.8% and trading on a price to earnings (P/E) ratio of 13.5, they seem to offer an attractive mix of value, income and dividend growth potential.
You may be surprised to see a bank in a list of reliable dividend paying companies, however HSBC (LSE: HSBA) (NYSE: HSBC.US) has increased dividends per share in each of the last four years and is set to do so in the next two years as well. Interestingly, HSBC remained profitable throughout the credit crunch and appears to be the most stable of the major banks when it comes to bottom line (and dividend) growth.
Furthermore, HSBC has vast potential when it comes to emerging markets in Asia where, for example, it is well placed to benefit from increasing demand for loans in China. With shares in the bank trading on a P/E of 12.1 and yielding 4.8%, they could be considered a core income holding.
When it comes to dividend reliability, there are few shares that can beat Imperial Tobacco (LSE: IMT). Over the last four years it has increased dividends per share by 60% in total and, over the next two years, the company is expected to raise them by a further 20%. The main reason for such high levels of consistency is an earnings profile that is extremely stable: people buy cigarettes come economic rain or shine, so whether the UK and global economies are experiencing a boom or bust, Imperial Tobacco should deliver.
With shares in the company trading on a P/E of 12.8 and yielding 4.9%, they could prove to be a highly attractive (and reliable) income play.
Of course, there are other top notch yield plays in the FTSE 100. That’s why we’ve put together a free and without obligation guide to how to create dividends for life.
The guide is simple, clear and actionable – you can put it use right away on your own portfolio. It could help you to generate a great income from your investments for the rest of your life, meaning an even earlier retirement could be just around the corner…
Click here for your copy of the guide – it’s completely free and comes without any further obligation.
Peter Stephens owns shares of HSBC Holdings, Imperial Tobacco Group and National Grid. We Fools don’t all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.