How safe is your dividend?

The dividend: it's the one thing that all investors are interested in. But just how safe is that all-important payout? Tim Bennett explains.

Dividends matter. Over the past ten years the share price of utility group United Utilities has been nigh-on flat. Yet with dividends, an investor would have enjoyed around a 90% return. But how can you tell whether the dividend payout is safe and won't be slashed to conserve cash? Many investors focus on a firm's profits. But a much better approach, says Socit Gnrale (SocGen), is to look at balance-sheet strength.

What are balance sheets for?

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Tim graduated with a history degree from Cambridge University in 1989 and, after a year of travelling, joined the financial services firm Ernst and Young in 1990, qualifying as a chartered accountant in 1994.

He then moved into financial markets training, designing and running a variety of courses at graduate level and beyond for a range of organisations including the Securities and Investment Institute and UBS. He joined MoneyWeek in 2007.