What This Top Dividend Portfolio Is Holding Now: Royal Dutch Shell Plc, BP plc and Rio Tinto plc

Royal Dutch Shell Plc (LON:RDSB), BP plc (LON:BP) and Rio Tinto plc (LON:RIO) are heavyweight holdings of JP Morgan Claverhouse Investment Trust (LON:JCH).

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JP Morgan Claverhouse IT has a record of 41 successive years of dividend growth. The trust lifted its dividend by an above-inflation 3.4% for 2013, giving a trailing yield of 3.3% at a current share price of 594p.

Picking great dividend shares has helped JP Morgan Claverhouse outperform the FTSE All-Share Index over the past three, five and 10 years.

Hole-diggers currently fill three of the top five places in the trust’s portfolio: Royal Dutch Shell (LSE: RDSB) (NYSE: RDS-B.US), BP (LSE:BP) (NYSE: BP.US) and Rio Tinto (LSE: RIO).

Royal Dutch Shell

The £145bn oil supermajor had a poor 2013, with earnings per share (EPS) falling 39%, impacted by a number of factors, including lower volumes, increased exploration expenses and a challenging security environment in Nigeria.

However, the board lifted the dividend by 5%, and promised a change of emphasis in 2014, focusing on improving returns and cash flow performance. Analysts expect EPS to bounce back 30% this year, and see a further 5% increase in the dividend.

At 2,385p, Shell’s shares are trading close to their 52-week high. Nevertheless, the forward income is a healthy 4.8%, compared with a market average 3.3%.

BP

Before BP’s disastrous Gulf of Mexico oil spill of 2010, the market value of the company was almost the same as Shell’s. Today, Shell is valued by the market at more than one-and-a-half times BP.

Still, we investors need to look to the future, not the past. BP’s dividend has grown strongly since being rebased as a result of the oil spill, and analysts are expecting an increase this year at around the level of last year’s 9% — along with a 13% rise in EPS.

At a share price of 487p, BP’s forward yield of 4.9% is a nose ahead of Shell’s.

Rio Tinto

The investment managers of JP Morgan Claverhouse said in the trust’s annual report last month:

“We still favour Rio Tinto, as a low cost producer with new management which is now focused on improving returns to shareholders. The shares remain lowly valued and their improving cashflow characteristics could enable decent dividend growth prospects”.

Rio’s board showed it was serious about improving returns to shareholders by hiking the 2013 dividend 15%. Analysts see high-single-digit growth ahead, giving a prospective income of 3.8% at a share price of 3,280p — pretty decent, historically, for a big miner.

RISK WARNING: should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice. The Motley Fool believes in building wealth through long-term investing and so we do not promote or encourage high-risk activities including day trading, CFDs, spread betting, cryptocurrencies, and forex. Where we promote an affiliate partner’s brokerage products, these are focused on the trading of readily releasable securities.

G A Chester does not own any shares mentioned in this article.

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