Dividends are a massively important reason to own shares but a high yield can be a red flag. Our screen tests for sustainability as well as enticing pay-outs. In several cases, the companies that rank highly could more accurately be described as value propositions. It's also interesting to look at tests failed by larger firms, because this can offer hints as to whether past income stalwarts may need to pay out less generously in future.
- Sirius Real Estate (SRE), which focusses on German property still tops our FTSE All Share dividend screen. Share price momentum has continued, and earnings growth forecasts are roughly where they were a month ago.
- Entertainment group Hollywood Bowl (BOWL) also gets top marks against our criteria.
- The type of business should be a consideration when assessing tests failed. Comparison site Moneysupermarket.com (MONY) fails our strict dividend cover test, but as it has no long-term debt and requires little long-term capital expenditure, it can afford to pay out a higher proportion of its earnings.
- The biggest companies don’t tend to score well against our screen and those that do could be flashing warning signals. For example, the market is clearly signalling scepticism about the sustainability of tobacco giant Imperial Brands’ (IMB) dividend policy.
