When choosingincome stocks simply selecting one with the highest yield isnt enough, the payout also has to be sustainable.The following three companies arent the juiciestyielders on the FTSE 100, but the dividends shouldkeep flowingyear after year.
Imperial stretch
Tobacco giantImperial Brands Group (LSE: IMB) currently yields a steady 3.53%, slightlybelow the FTSE 100 average of 3.71%. Thats actually more impressive than it seems given that the stock has also delivered punchyshare price growth of 30% over the past year, and a higher share priceinevitably squeezes the yield.Over five years the stock is up 101%, which shows thatmanagement has worked hard to ensure the yield keeps up.
And so it has: dividends at Imperial Brands have increased at an annualcompound rate of 12% since 2008, with the company consistently increasing its dividend per share by over 10% each year, including the lastone. That really does make it one of the most solid yields on the index today, in truetobacco company style. Inevitably, it isnt cheap, trading at 18.99 times earnings butthats a minor concern given itssatisfyingincome stream.
National treasure
Transmissions giant National Grid (LSE: NG) has also had an impressive 12 months, its share price up27%. Thestocknonetheless yields a solid 4.03% although future growth is likely tobe less electric than at Imperial Brands. Lastyear managementraised the dividend by just 1.1% to 43.34p. It has committed to raise itby at least RPI for the foreseeable future: in July that figurestoodat 1.9%, notably higher than the consumer price index figure of 0.6%.
National Grid remains my favourite utility play. Anybody whos dissatisfied with their banks savings rate (just about everybody) shouldconsider this as their first step into higher-yieldingstocks: the share price may be volatile but the underlying business is as secureas it gets, givenitsduty to runessential gas and electricity structure across the UK and US. The price is slightlyhigh at 16.93 times earnings and regulators maycome under political pressure to tightenmargins every time itsposts a strong set of profits, but these are minor quibbles.
United stands
Its been a good year for safe haven stocks with water businessUnitedUtilities Group (LSE: UU) gushing 18% share price growth in thattime. Yet the yield remains a far from watery 3.92%, supplyingmuch-needed relief to parched investors.The companys management did have designs on electrifying the business by purchasing regional power utilities but has sensiblybacktracked after running up debts for little reward. Now its stickingto what it knows best, promisinginvestors RPI-linked dividend growth for aslong as human beings need water.
United Utilities isnt the raciest investment around, earnings per share are expected to fall 5% in the yearto March 2017, and creep up by3% the year afterwards. At 20.48 times earnings it isnt even cheap. But the yield looks solid and is likely to grow, which is more than can be saidabout todays savings rates.
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Harvey Joneshas no position in any shares mentioned. The Motley Fool UKhas no position in any shares mentioned. We Fools don’t all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.