City of London Investment Trust (LSE: CTY) intends to lift its dividend by 4.1% for the year ended 30 June, extending its record to 47 years of unbroken dividend growth. At a recent share price of 356p, the trust yields 4%.
Picking great dividend shares has helped City of London outperform the FTSE All-Share Index over the past three, five and 10 years.
Let’s take a look at City’s current top three holdings: HSBC Holdings (LSE: HSBA) (NYSE: HBC.US), British American Tobacco (LSE: BATS) and GlaxoSmithKline (LSE: GSK).
HSBC
HSBC is not only Britain’s biggest bank but also currently offers investors the biggest income within the sector. The global giant’s dividend yield is markedly higher than the yields of its peers.
HSBC pays quarterly dividends in a pattern of three equal dividends and a variable fourth. The company has already declared a first interim dividend for 2013 of $0.10 a share — an 11% increase on last year — supported by a first-quarter 34% rise in underlying profit before tax.
The shares are currently trading at 721p and analysts’ full-year dividend forecasts for the year to December 2013 give a prospective yield of 4.6% for investors buying today. The City experts reckon HSBC will hike the dividend 11% again for 2014.
British American Tobacco
The UK’s £68bn tobacco titan British American Tobacco (BAT) is as international a company as you’ll find within the FTSE 100. You’ll come across a BAT brand — Lucky Strike, Kent, Pall Mall and Dunhill are the group’s leading quartet — just about anywhere in the world.
BAT lifted its dividend 7% last year. Analysts are expecting earnings growth to continue at a good clip with the dividend following suit: an 8% increase for the current year and a further 8% increase for 2014.
At a recent share price of 3,529p, BAT offers investors a prospective dividend income of 4.1% this year, rising to 4.5% for 2014.
GlaxoSmithKline
Pharmaceuticals firm GlaxoSmithKline (GSK) is another FTSE 100 giant with global reach. The company also has a diversified stable of products, with over-the-counter consumer brands complementing drugs and vaccines.
GSK saw a dip in sales and earnings during 2012, but still lifted its dividend by 6%. The company has guided on a return to sales and earnings growth for the current year: 1% for sales and 3-4% for core earnings per share. The directors have increased this year’s first-quarter dividend by 6%.
GSK’s shares are currently trading at 1,725p, and if the year’s dividends follow the first-quarter rise, the prospective income is 4.5%.
Happy retirement!
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> G A Chester does not own any shares mentioned in this article.