The stock market crash has put a premium on FTSE 100 stocks that can continue to pay dividends. Today, a top FTSE 100 dividend stock stood by its shareholder payouts, and committed to increase them by more than inflation for the next five years.
This is the type of company I’d target if looking to build a rising passive income from a portfolio of FTSE 100 stocks and shares. I reckon Pennon Group (LSE: PNN) is a good way to keep the dividend income flowing as you build wealth for retirement and beyond.
The Pennon share price flies
The Exeter-based water utility and waste management company’s full-year results, published today, confirmed another year of real dividend growth, with the payment up 6.6%. That is a tonic for investors, given that so many FTSE 100 companies have cut theirs dividends in the wake of the stock market crash.
Management is now targeting growth of 2% a year above inflation, for the next five years. Even if inflation does fall in the wake of the recession, that protection is valuable. Should inflation take off in the next few years, as some analysts believe, it will be even more handy.
The group has had a busy and successful year, agreeing to sell its waste, recycling, and energy recovery division Viridor in March, for £4.2bn, and recently securing Ofwat’s Fast Track status for its five-year plan.
Despite this, the Pennon share price fell by around 4% today. That mostly reflects profit-taking, after a rip-roaring year. Not many FTSE 100 companies can boast share price growth of a whopping 62% over the last 12 turbulent months.
Even Covid-19 had little impact on its share price. The downside is that Pennon is not cheap, trading at more than 20 times earnings. The yield is a steady 3.58% a year.
Selling off Viridor looks like win-win, as Pennon can now use the proceeds to reduce debt levels, boost its pension fund, and reward loyal shareholders as it sees fit. That should help cover the cost of any rise in late bill payments, as customers struggle for money in the stock market crash and recession.
Stock market crash uncertainty
National Grid (LSE: NG) is another FTSE 100 dividend stalwart but it is not completely out of the woods yet. Last month, it said its dividend is under review due to the pandemic, and promised further updates when it publishes its delayed year-end results this month.
However, management reported little material impact on its financial performance, despite delays and disruption to its capital programme. Its balance sheet is “strong“, with £5.5bn of undrawn committed bank facilities.
The National Grid share price trades 21% higher than a year ago, although it is currently 10% lower than before the stock market crash. It looks slightly cheaper than Pennon as a result, trading at 16.89 times earnings. That would be a good entry price, providing the dividend holds. National Grid currently yields 4.98%.
While some investors will be prioritising oversold bargain stocks right now, these two FTSE 100 dividend stalwarts merit your attention.
With global markets in turmoil as the coronavirus pandemic tightens its grip, turning to shares to generate income isn’t as simple as it used to be…
As the realities of ‘life under lockdown’ begin to bite, many of the stock market’s ‘go-to’ high-yielding companies have either taken an axe to their dividend pay-outs… or worse, opted to suspended them altogether – for the near-term at least.
With so many blue-chip and mid-cap companies scrambling to hoard cash right now, where are we income investors to turn for decent yields?
Fortunately, The Motley Fool is here to help…
Our analyst has unearthed what he believes could be a very attractive option for income- seeking investors – a company that, in his view, boasts a ‘reliably defensive’ business model, combined with a current forecast dividend yield of 4.2% to boot!*
But here’s the really exciting part…
This business even has form in riding out this kind of situation, too… having previously increased sales and profits back in 2008 and 2009 when the world was gripped in the deepest economic crisis since the Great Depression.
*Please be aware that dividends are variable and not guaranteed.
Harvey Jones has no position in any of the shares mentioned. The Motley Fool UK has recommended Pennon Group. 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.