How safe is your dividend?

By knowing what to look for, you can tell if a company's dividend is under threat. Phil Oakley explains.

Many purists and academics argue that dividends don't matter. They say that the value of a company does not depend on the size of its dividend and that in fact a company that pays no dividend can be worth more than one that does.

In lots of ways these people are right. But in practical terms, dividends do matter. With very low interest rates, dividends have become an important source of income for many people. And the annual dividend declared by a firm can also act as a signal to investors about the company's prospects.

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Row 0 - Cell 0
DPS6.84p14.76p
Dividend cover2.38 times2.17 times
Free cash dividend cover0.67 times0.88 times
ROCE13.50%10.20%
Debt and hidden debt£6.3bn£21.1bn
Average age of assets5.9 years9.2 years

Phil spent 13 years as an investment analyst for both stockbroking and fund management companies.

 

After graduating with a MSc in International Banking, Economics & Finance from Liverpool Business School in 1996, Phil went to work for BWD Rensburg, a Liverpool based investment manager. In 2001, he joined ABN AMRO as a transport analyst. After a brief spell as a food retail analyst, he spent five years with ABN's very successful UK Smaller Companies team where he covered engineering, transport and support services stocks.

 

In 2007, Phil joined Halbis Capital Management as a European equities analyst. He began writing for MoneyWeek in 2010.