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For these of us who depend on passive earnings, dividend shares are the bedrock of a long-term portfolio. Dependable payouts imply an investor can reinvest or spend with out overly worrying about sudden cuts.
After all, there’s all the time a steadiness between yield and dependability — the FTSE 100 tends to offer steady however modest payouts, whereas the FTSE 250 generally presents larger yields which might be extra fragile.
Sometimes nevertheless, a handful of firms handle to ship the very best of each worlds. Listed here are 5 FTSE shares with yields above 5% which have by no means missed a cost in 20 years: Admiral Group, BP, TP ICAP, Main Well being Properties, and Telecom Plus (LSE: TEP).
I already personal shares within the first 4 and have lined them extensively. So on this piece, I’ll deal with the lesser-known fifth entry.
Telecom Plus is the holding firm behind Utility Warehouse, which bundles broadband, cellular, power and insurance coverage right into a single package deal. Based in 1996 and headquartered in London, the corporate has quietly constructed a loyal buyer base.
Over the previous 5 years, the share value is up 37% — higher than Admiral, TP ICAP and Main Well being Properties, although it trails BP’s 61% rise. For a mid-cap inventory, that’s not a foul exhibiting in any respect.
The dividend is the massive draw right here. At 5%, it’s comfortably above the FTSE 100 common. Protection is skinny however nearly adequate, with a payout ratio of 97.5% and money dividend protection of 1.5 occasions. That’s not excellent, however the firm has confirmed resilient in maintaining funds flowing.
Latest outcomes had been fascinating. Income fell 9.9% yr on yr, primarily as a result of discount of the UK’s power value cap. But earnings moved in the wrong way, up 6.9%. Pre-tax revenue for the yr to March rose to £105.9m from £100m.
So general, its operational effectivity appears to be bettering — the corporate’s web margin has virtually doubled since 2022, from 2.7% to 4.2%.
A inventory to contemplate?
There’s loads that’s engaging about Telecom Plus but additionally a number of issues price noting. Firstly, it isn’t screamingly low cost. The value-to-earnings progress (PEG) ratio sits at 2.8, which suggests the inventory could possibly be overvalued based mostly on its earnings outlook. I feel that’s price maintaining in thoughts for any investor seeking to contemplate it.
Moreover, its steadiness sheet raises some issues. Debt has greater than doubled in two years, climbing from £90m to £194m. Money reserves in the meantime, have halved from £193m to £79m. Money stream’s important relating to dividends, and if debt retains rising, a payout discount can’t be dominated out.
One other threat is competitors. Telecom Plus operates in crowded sectors the place rivals are keen to struggle exhausting on value. That might make progress tough, significantly as family budgets tighten.
Nonetheless, whereas Telecom Plus could not have the deep roots of BP or the defensive energy of Admiral, its dividend file makes it a inventory price contemplating for earnings. Progress could possibly be powerful in a aggressive market and debt’s price watching intently. However for a corporation that hasn’t missed a payout in 20 years, it earns a spot on my radar.
