For any sensible portfolio, dividends should be a consideration. Even if focusing on growth, having some stocks with decent yields, particularly if reinvested, can help a portfolio move in the right direction through the lean years as well as the good.
Personally I look to the FTSE 100 and FTSE 250 for my dividend shares, wanting stable blue-chips as a foundation that supports any riskier investments. Here are three stocks I have for just this reason.
Royal Dutch Shell
The oil major Royal Dutch Shell (LSE: RDSB) has been a cornerstone of my portfolio for years. As it currently stands, the firm offers a dividend yield of about 6.5% — a very nice figure that comes about through some edging off in the share price rather than the company over-extending itself.
Shell has some of the most consistent dividends in the FTSE 100, including extraordinary dividends when there is cash to spare, and has seen its payouts increase almost 6% year-on-year for the past five years. It’s a stable blue-chip that, while subject to crude price fluctuations like all oil firms, has diversified and shown an ability to make sensible decisions when necessary.
Meanwhile the company has committed to a number of share buybacks and dividend increases for at least the next two years, and looking at the its financials, I agree with my fellow Fool G A Chester, there is potential for growth here as well as income.
BAE Systems
The UK giant BAE Systems (LSE: BA) offers another stable base to any portfolio. A defensive stock both by industry and in its nature as an investment, the company currently offers a dividend yield of about 4% — the lower end of what I would look for as an income stock, but solid nevertheless.
Another consistent performer in terms of dividend payouts, BAE has been able to increase dividends by about 2% year-on-year. Even with some recent gains in the share price, the stock comes in with a forward-looking P/E of about 12, making it pretty cheap for a company so well established.
HSBC Holdings
The final company I think of as a long-term solid performer, is the London-based, Asia-focused HSBC Holdings (LSE: HSBA). Having seen its price edge lower this month, the current yield stands at a very nice 6.7% — one of the highest on the FTSE 100.
HSBC has increased these dividends by an average 6% per annum for the past five years, and while banking and financial stocks are sometimes towards the more volatile end of what I consider blue-chips, HSBC has a solid brand and the finances to back it up.
As with many UK stocks at the moment, the uncertainty surrounding Brexit is a worry, but I think HSBC will be in a strong position in the long run, no matter what the outcome. Royal Dutch Shell and BAE Systems meanwhile, are also well placed to weather economic storms – exactly what I want as the backbone of a portfolio.