As well as the attraction of income, high yield can be a sign of value. On the flip side, this can signal a value trap which is why Algy Hall included several stringent quality criteria when he designed our dividend yield screens - and few companies pass all his tests. Even with such a rigorous process, it is necessary to further investigate companies that score well.
- SSP Group (SSPG), which manages concessions for food and beverage outlets at travel hubs, is the only company in the FTSE All Share index to pass all our income tests this month.
- Companies which only miss one of the tests include International Consolidated Airlines (IAG), which fails on expected earnings growth; tobacco firm Imperial Brands (IMB) and miner Polymetal (POLY), which fail dividend cover; home consumer product company Norcros (NXR), which isn’t converting enough accounting profit into cash; regeneration-focussed property specialist Morgan Sindell (MGNS) and leisure cruise firm Carnival (CCL), which have beta above 0.75; and leisure company Hollywood Bowl (BOWL) which doesn’t meet our dividend growth test.
- Our small-cap dividend screen is more growth focussed, no main market listings included in the FTSE All Small Companies index get full marks. Fashion group Superdry (SDRY) and floor product specialist Headlam (HEAD) only fail the earnings forecast test; and scientific recruitment specialist SThree (STHR) just misses the dividend growth check.
