Were in weird times for FTSE 100 dividends, with some pretty high potential yields that people just arent rushing for often with very good reason.
Look at Rio Tinto (LSE: RIO) for example. Like the rest of the mining sector its shares have been battered by the commodities slump and have lost 41% in the past 12 months, to 1,761p. Profits are plunging too, with the firm expected to report a fall in earnings per share (EPS) for 2015 of close to 50% and analysts are forecasting a further 15% drop in 2016.
But despite a need for financial discipline in such tough times, Rio upped its first-half dividend by 12%, and is expected to pay a 7.1% yield for the year just ended and on top of that, forecasts suggest 7.3% for 2016!
And at the same time as handing over these levels of cash, Rio is also engaged in a $2bn share buyback programme, while competitor Glencore is slashing its dividend and is raising cash. Is this a demonstration of supreme confidence in Rios future, or is it madness? The worlds turned upside down, I tell you.
Invest in Asia?
Shares in Aberdeen Asset Management (LSE: ADN) have shed 51% since Aprils peak, to 250p, as fears over its focus on Asian markets have led to net ouflows from funds under management of 34bn in the year to September 2015. But the firm upped its dividend by 8.3% to 19.5p per share, from 18p a year previously, as part of its progressive dividend policy.
Whether that progressive policy can continue into 2016 is open to question, and while analysts are forecasting a rise to 19.8p to yield 6.5%, that would be less than 1.2 times covered by earnings if EPS falls by the predicted 24% this year. I like progressive dividends, but in the face of falling earnings some caution is called for, and I reckon investors should definitely not consider rises in Aberdeens dividend over the next few years as a given.
Utilities companies are pretty much a byword for steady dividends these days, and SSE (LSE: SSE) is no exception. The energy supplier has been serving up yields of close to 6% for years, and at interim report time in November, chairman Richard Gillingwater told us that this business is well-placed to continue to deliver annual dividend growth of at least RPI inflation.
The SSE share price has actually dipped 7% over 12 months to 1,483p, and thats helped push the prospective dividend yield as high as 6.3% for the year to March 2016, followed by 6.4% a year later. Remember not that long ago when Ed Miliband was threatening to clamp down on energy suppliers? Ed who?
The energy companies continue to be great long-term dividend providers, and they will surely form the cornerstones of many an income portfolio for years to come.
It’s hard to beat the idea of putting your money into top dividend-paying companies with progressive cash-handout policies, which have the potential to lift your income year after year. Our newest report, A Top Income Share From The Motley Fool, reveals a company that might just fit that bill.
It’s a company with a market cap of around 500m, so it’s not a high-risk tiddler, and dividends have been growing very strongly over the past few years.
Want to know more? Click here to get your completely free copy of the report delivered to your inbox today.
Alan Oscroft has no position in any shares mentioned. The Motley Fool UK has recommended Aberdeen Asset Management. We Fools don’t all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.