These 2 stocks just raised their dividends

Edward Sheldon looks at two stocks that have recently rewarded shareholders with an increased dividend payout.

| 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.

Is there an easier way to build wealth than a dividend growth strategy? As companies increase their dividend payouts over time, their share prices generally rise as a result of the increased payouts. This means that investors can enjoy both an increased level of income and capital gains, with minimal effort.
 
With that in mind, here’s a look at two stocks that have recently raised their dividends.  

Pennon Group

Pennon Group (LSE: PNN) released its full year results in late May. While revenue was flat, EBITDA increased 8.4% to £486m and profit before tax rose a healthy 18.3% to £250m. Importantly for dividend investors, the company lifted its dividend payout from 33.58p last year to 35.96p this year, an increase of a robust 7.1%.
 
Pennon has an impressive dividend growth history, having increased its dividend from 26.52p five years ago to 35.96p for FY2017, a compound annual growth rate (CAGR) of 6.3%. And it looks like this level of growth should continue in the medium term, with the company saying: “We believe Pennon is well positioned now and for the future and our performance underpins our long established sector-leading 10-year dividend policy of 4% growth per annum above RPI inflation out to 2020.” 
 
While the company’s dividend yield of 4.1% looks attractive, investors should note that dividend coverage has been thin recently, with coverage averaging just 1.25 times over the last three years. Furthermore, on a forward looking P/E ratio of 20 times FY2018 forecast earnings, Pennon looks a little expensive right now given the lack of revenue growth generated in recent years.  

ITV 

Also increasing its dividend recently was ITV (LSE: ITV), announcing back in March that its full-year dividend would be increased to 7.2p, a 20% increase on last year. Furthermore, the board also rewarded shareholders with a special dividend of 5p, taking the total payout for the year to a huge 12.2p.
 
ITV has been a fantastic dividend growth stock in recent years, with the company increasing its dividend from 1.6p in FY2011 to 7.2p last year, a CAGR of 35%. The firm has said that it is committed to a “long-term sustainable dividend policy” and that the ordinary dividend will “grow broadly in line with earnings.” City analysts expect dividend growth of 17% and 4% for the next two years.
 
The market clearly has some concerns that political and economic uncertainty could drag down advertising revenues, and the share price has fallen 20% in the last two months as a result. However dividends and dividend growth rates give a powerful insight into a company’s financial health, and you have to wonder whether ITV would lift its dividend by an impressive 20% and make a special payment if it thought there was significant trouble ahead. The company stated in March that it has the “flexibility and capacity to continue to invest across the business and deliver sustainable returns to our shareholders.”
 
The share price fall has pushed the yield above 4%, and on forecast earnings of 15.9p for FY2017, the stock trades on a P/E of just 11.2 right now. At that valuation, I believe ITV is starting to look interesting.

Should you invest £1,000 in Bank of Georgia 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 Bank of Georgia made the list?

See the 6 stocks

Should you invest £1,000 in Bank of Georgia 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 Bank of Georgia made the list?

See the 6 stocks

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.

Edward Sheldon has no position in any shares mentioned. The Motley Fool UK has recommended ITV. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Investing Articles

4 REITs Fools own for passive income

REITs often have higher-than-average dividend yields compared to other stocks, making them a solid choice to consider for passive income…

Read more »

artificial intelligence investing algorithms
Investing Articles

Up 272% in just a year, is Palantir stock just getting started?

This writer recognises that Palantir has grown its business very well -- but does the stock price offer him an…

Read more »

Runner standing at the starting point with 2025 year for starting in new year 2025 to achieve business planing and success concept.
Investing Articles

Up 50%? The Aston Martin share price forecast is mind-blowing! 

If analysts are right, the Aston Aston Martin share price could absolutely rocket in the year ahead. Harvey Jones says…

Read more »

Investing Articles

As the S&P 500 drops, here are 2 Stocks and Shares ISA holdings I’m watching

Our writer has different views on how President Trump's tariffs might affect these two US holdings in his Stocks and…

Read more »

Surprised Black girl holding teddy bear toy on Christmas
Investing Articles

£10,000 invested in Tesla stock at Christmas is now worth…

Tesla stock has been one of best-performing investments of the past decade. But things haven't gone to plan for investors…

Read more »

Investing Articles

Up 279% in 5 years, could Meta stock keep soaring?

Meta stock has more than tripled in five years. This writer sees lots to like about the business but also…

Read more »

Pink 3D image of the numbers '2025' growing in size
Investing Articles

25% total return in a year? Is now the perfect time to buy BP shares?

BP shares are on the front line of today's global economic and political uncertainty but analysts think they can still…

Read more »

Affectionate Asian senior mother and daughter using smartphone together at home, smiling joyfully
Investing Articles

With Cash ISA changes coming, could now be the time to consider buying shares?

Changes to the Cash ISA could lead to greater investment in the stock market. This could be a good thing…

Read more »