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AlphaScreens: Keeping tabs on dividend safety

The FTSE 100 is on an attractive yield, but do any blue chips pass our dividend checks?
October 7, 2019

The UK’s FTSE 100 index is on an attractive trailing 12 month yield of around five per cent but none of the blue chips are passing all our dividend yield tests. Does this mean that the supposedly cheap FTSE 100 is a value trap? Our screen places great emphasis on dividend cover, earnings growth and operating cash conversion. The criteria may be strict but as global economic growth slows, investors should pay attention to these metrics when assessing income bargains.

  • Smaller companies fair better on our FTSE All Share screen, with the same firms as last month getting full marks. These are SSP Group (SSPG) who operate food and beverage concessions at travel outlets; home consumer products company Norcros (NXR); and equipment rental business VP (VP.).
  • The value factor has had some bad years on Aim, so dividend yield is a measure to be treated with caution. Our stringent dividend safety metrics do provide some reassurance but as ever, the screen results are a helpful starting point for further research before investing in riskier smaller companies.
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