5 FTSE 100 Dividend Dogs For Your 2015 ISA: HSBC Holdings Plc, SSE Plc, Royal Dutch Shell Plc, Centrica Plc & BHP Billiton Plc

Dave Sullivan looks at 5 ‘dividend dogs’ for consideration: HSBC Holdings Plc (LON: HSBA), SSE Plc (LON: SSE), Royal Dutch Shell Plc (LON: RDSB), Centrica Plc (LON: CNA) and BHP Billiton Plc (LON: BLT)

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

Today I’ll be taking a look at a simple dividend strategy that focuses on generating gains from both dividend income and, to a lesser degree, some capital growth.  Historically, dividend payouts were a primary motivation for investors: there are numerous studies that show us returns can be significantly augmented when dividends are reinvested.  So, whilst they may sound boring, dividend-based strategies and the power of compounding form part of most investors’ arsenal.  There are numerous variances in approach circulating across the globe; here, I highlight the ‘Dividend Dogs’ and some of the constituents.  Instead of using the current yield, I will look at the forward yield on offer in order to try and avoid the possibility of any dividend cuts going forward.  Other than that, there are but two rules:

  • Index membership — must be in the FTSE 100 index; and
  • Qualify in the top 10 stocks — sorted by yield.

HSBC

As I type, HSBC Holdings (LSE: HSBA) trades on a forward yield of over 6% and a lowly forward price-to-earnings ratio of around 10 times earnings — rather cheap, some might say.  Sadly, anyone holding the stock or following the story will know that it has been the focus of allegations that its private bank was assisting their wealthy clients evade paying the correct tax, coupled with an unwelcome fall in profits for the year ending 31/12/14. Add to the mix an increased banking levy announced by George Osborne in his pre-election Budget, and one can start to see the issues driving the price lower.

SSE

One of the “Big Six” energy companies, SSE (LSE: SSE) is doing business in a tough market.  If it isn’t being squeezed by smaller, more nimble competitors like Ovo and Cooperative Energy, it’s being fined for demanding excessive charges to switch off power stations.  The company has already advised shareholders to expect profits to be at the lower end of expectations for the end of 2015, but the good news is that the dividend will increase at least in line with RPI inflation.  With the shares trading on a forward P/E of 13.5 times earnings and yielding almost 6% — they’re in!

Should you invest £1,000 in NatWest Group right now?

When investing expert Mark Rogers has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets. And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if NatWest Group made the list?

See the 6 stocks

Centrica

In some ways, Centrica (LSE: CNA) is the odd one out here.  True, it is in the same sectors as SSE and is a member of the FTSE 100.  The reason is due to the fact that it recently cut its dividend. Despite this bad news, it still yields almost 5% and one could reasonably expect that it shouldn’t be cut again in the near future.  A possible risk to both Centrica and SSE is the level of regulation in the form of price freezes, should Labour get the keys to Number 10.

Royal Dutch Shell

The dividends need no introduction at this company.  Royal Dutch Shell (LSE: RDSB) has not cut its dividend since World War 2, and the CEO has pledged to do everything to protect it.  The company is diversified and has plenty of tools at its disposal, including:

  • Cutting back on production;
  • Selling non-core assets; and
  • Raising current debt levels.

The company has ridden storms like these before and, in my opinion, will continue to do so.  The shares trade on a forward P/E of just under 12 times earnings and yield over 6%.

BHP Billiton

Our final candidate is BHP Billiton (LSE: BLT), one of the world’s most diversified resource stocks.   It has been in the news, mainly for lower commodity prices and for a rather large demerger. As the company spins off South32, it has promised that the dividend to shareholders will not be reduced and continue to be progressive.  The shares trade on a forward PE of nearly 15 times earnings and yield just under 6%.

Taking A Contrarian View

It is easy to see why these companies are yielding market-beating dividends — factors such as the fall in the price of oil and other commodities, political pressure, amongst other factors that have affected their business in a negative way.  Some shareholders will be running for the hills, whilst others may take this opportunity to secure a yield that is hard to find elsewhere.

But there are other promising opportunities in the stock market right now. In fact, here are:

5 stocks for trying to build wealth after 50

The cost of living crisis shows no signs of slowing… the conflict in the Middle East and Ukraine shows no sign of resolution, while the global economy could be teetering on the brink of recession.

Whether you’re a newbie investor or a seasoned pro, deciding which stocks to add to your shopping list can be a daunting prospect during such unprecedented times. Yet despite the stock market’s recent gains, we think many shares still trade at a discount to their true value.

Fortunately, The Motley Fool UK analyst team have short-listed five companies that they believe STILL boast significant long-term growth prospects despite the global upheaval…

We’re sharing the names in a special FREE investing report that you can download today. We believe these stocks could be a great fit for any well-diversified portfolio with the goal of building wealth in your 50’s.

Claim your free copy now

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.

Dave Sullivan has no position in any shares mentioned. The Motley Fool UK has recommended Centrica and HSBC Holdings. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Investing Articles

At $184, I reckon this S&P 500 juggernaut is still on sale

Our writer sees Amazon (NASDAQ:AMZN) as an attractive S&P 500 stock to consider while it is priced 23% lower than…

Read more »

Investing Articles

Cheap FTSE 250 shares to consider buying right now?

These FTSE 250 growth stocks had weak starts to 2025, and face short-term uncertainty. But their long-term valuations could be…

Read more »

Investing Articles

As stocks dive, is this a rare chance for ISA investors to build generational wealth?

Globally, stocks have pulled back significantly following the announcement of tariffs by the US president. Is this an opportunity for…

Read more »

Investing Articles

2 ultra-cheap shares to consider right now!

These cheap UK shares offer considerable growth and income potential over the long term, reckons our writer Royston Wild.

Read more »

Investing Articles

Legal & General Group shares go ex-dividend on 24 April – time to grab that 9% yield?

Harvey Jones holds Legal & General Group shares and is already looking forward to the next bumper dividend from this…

Read more »

Young female analyst working at her desk in the office
Investing Articles

3 FTSE 100 dividend stocks to consider buying while they’re on sale

Paul Summers reckons canny investors should think about snapping up quality, dividend-paying stocks while they're going cheap

Read more »

Investing Articles

2 cheap passive income shares to consider buying right now

The passive income we can earn from the UK stock market looks set to climb this year, and could even…

Read more »

Investing Articles

Down 15% in a month, this FTSE 100 dividend share offers investors a stunning 10.8% yield

Harvey Jones plucks out a FTSE 100 dividend share that offers frankly a quite staggering yield and is now a…

Read more »