The FTSE 100 (UKX) is home to the largest listed companies on the London market. These shares are often the hunting ground of income investors: their history and scale of operations often brings a certainty to their profits and dividends.
I trawled the UK's premier index to find the 10 companies whose historic dividend payments make them the highest yielding on today's prices. Note that just because the past dividends from these companies have been high, that does not mean that large payouts will continue in the future.
|Company||Price (p)||Yield (%, Trailing 12m)||Market cap (£m)|
|RSA Insurance (LSE: RSA)||125||7.4||4,452|
|Aviva (LSE: AV)||373||7.0||10,871|
|Vodafone (LSE: VOD)||163||6.0||80,164|
|AstraZeneca (LSE: AZN)||3042||5.8||37,868|
|GlaxoSmithKline (LSE: GSK)||1363||5.4||67,170|
These five stood out:
Insurer Aviva is one of the most-discussed shares here at The Motley Fool. As the statistics show, it is also one of the cheapest companies in the FTSE 100 today.
The total expected dividends from Aviva for 2012 put the company on a yield of 6.8% with a price-to-earnings (P/E) ratio of 8. The average FTSE 100 share trades on a forecast P/E of 15.8 with a yield of 3.3%. By these measures, Aviva is too cheap by half.
If you had worries over Aviva's ability to keep paying its dividend, a look into its recent past is unlikely to reassure. Aviva cut its dividend by 27% for 2009 and has since paid out between 24p and 26p.
Analysts are already forecasting a dividend cut at the company, with the total payout expected to fall by 0.5p for 2012.
One of the first things that dividend investors look for in a share is income sustainability. One sign that a dividend may be under threat of being reduced is if it has not been increasing. This often suggests that management have decided that the company cannot afford to pay more but has not yet bitten the bullet and cut.
Vodafone is one of the best dividend-raising shares on the market today. In the last five years, dividends at Vodafone have increased, on average, by 7.1% per annum. That's a fantastic inflation-thumping feat.
Vodafone is forecast to continue increasing its dividend, putting the shares on a likely 2014 yield of 6.3%.
Better still, there is the possibility that Vodafone will be paying additional special dividends in the future, from the profits of its US joint-venture Verizon Wireless. The current share buyback programme will help Vodafone sustain and progress its ordinary dividend.
AstraZeneca is probably the high-yield share that income investors worry about most. In the last five years, the company has managed annual sales growth of 4.9% per annum. In that time, earnings per share (EPS) has increased at an average of 13.4% per annum. The dividend has been rising at an average rate of 10.2% a year.
Nothing wrong with that, you might think. However, sales and profit in the next two years are expected to go into reverse. This will make it much harder for the company to pay the forecast dividend increases.
In October, Pascal Soriot took over as CEO at AstraZeneca. On the same day he announced the suspension of the company's share buyback programme. If Mr Soriot can turnaround AstraZeneca's prospects then the shares could rise significantly.
Glaxo is one of the bluest of blue-chip shares. The company is a pharmaceuticals giant that also owns a number of well-known consumer brands. Coming down with a cold? Pick up some Beecham's powder. Need an energy boost? Grab a Lucozade.
Glaxo has increased its dividend to shareholders every year since 1998. In the last five years, the dividend has increased at an average of 7.8% a year.
Some investors fear that government austerity initiatives will cut healthcare spending. Sector analysts expect that this will constrain earnings growth at Glaxo over the next two years. Small rises in EPS are forecast, with dividend increases coming in above inflation. The forecast payout for 2012 is covered 1.5 times by expected earnings.
General insurer RSA has long been one of the FTSE 100's highest-yielding shares. The per share payout has increased every year from 4.61p for 2006 to 9.16p for 2011. Analysts forecast that the 2012 payout will be 9.33p per share.
The RSA yield has fallen in recent months as the shares have risen. In the last six months, shares in RSA have risen 13.6% as some of the eurozone panic has exited the markets.
With 2012 earnings of 11.4p per share forecast, cover at RSA is not massive. However, the company has previously managed to pay out with even thinner cover. I'm not worried about the 2012 dividend. Just as a downturn in business could put the dividend under threat, better trading would make it even safer.
Fund manager Neil Woodford has been beating the market for years. He has an unassailable record as the UK's top income investor. If you want to learn what this top investor has been buying then get the free Motley Fool report "8 Shares Held By Britain's Super Investor". This report is 100% free and will be delivered to your inbox immediately, just click here to start reading today.