LONDON -- Shareholders had a nasty surprise last week with the announcement of a dividend cut at RSA Insurance. Prior to the cut, the shares offered one of the highest yields in the FTSE 100.
I trawled the FTSE 100 to find three shares with a big yield and little chance of it being cut.
Telecom titan Vodafone has been increasing its dividend year in and year out for the last 13 years. In the last five years, the dividend has been increased at an average rate of 7.1% per year.
Vodafone's U.S. joint venture with Verizon Communications is going great guns.
Vodafone has recently been buying back its own shares, using cash from its American operations. All the signs are that these payments will likely increase in coming years. These strong cash flows and the reduced number of shares in issue will help support future dividend increases.
At today's price, the forecast dividend yield from Vodafone shares for the year is 6.1%.
Energy company SSE has increased its dividend by an average of 7.8% a year for the last five years. Increases are expected to continue. For 2013, the payout is forecast to rise to 84.1 pence per share. The payout is expected to reach 87.9 pence for 2014. This means that the shares today offer a 2014 yield of 6.1%.
SSE earns around 1.35 pounds for every 1 pound it is expected to pay out in dividends. For a normal business, that would not be regarded as a great level of dividend cover. SSE, however, is a utility. In this sector, sales and profits are very reliable.
Royal Dutch Shell
Royal Dutch Shell is a world-class dividend payer. The company has not cut its payout since the end of the second world war.
The shares have fallen 5.5% in the last month. Buyers today are getting a significantly higher yield from the shares. Last year, the company paid out dividends of $1.72, equal to a yield today of 5.1%. Shell is expected to grow its payout this year and next. This puts the shares on a forecast yield for 2014 of 5.8%.
Earnings growth at the company is expected to be less than the dividend increases. Cover remains healthy. EPS is forecast to be more than double the dividend payouts.
While these three income stocks offer impressive payouts today, our analysts here at The Motley Fool think that there is an even better income share available in the FTSE 100 today. This share offers not only a high yield but also a real chance of significant share price appreciation. All of our expert opinion and analysis is in the new Motley Fool report "The Motley Fool's Top Income Share for 2013." This report is totally free. Get it delivered to your inbox immediately. Click here to learn more about this big dividend payer today.
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