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Important checks to make on dividend quality

Our screen highlights questions income investors should be asking about companies.
Important checks to make on dividend quality
  • Dividends have taken a battering in 2020 but some companies still offer a reasonable yield
  • Investors need to make checks on dividend quality and sustainability

Precious metals miner Polymetal International (POLY) is top of the pile in this month’s FTSE All Share quality dividend screen, passing all our screen’s 8 tests. It is joined in getting full marks by German industrial landlord Sirius Real Estate (SRE), which has a very high rent collection rate and a rising portfolio valuation despite the pandemic.

Looking further down the list of high-ranking companies from the FTSE All Share index and there are several big names who are still offering an attractive yield. As ever, screens are just a mechanical starting point for further research, but the tests failed by the likes of mining giants Rio Tinto (RIO) and BHP Group (BHP), investment platform Hargreaves Lansdown (HL), pharmaceutical behemoth GlaxoSmithKline (GSK) and defence firm BAE Systems (BA), should give investors a clue where to start looking.

Another question to ask is whether the investment trusts on the list are supporting their dividend out of income from the holdings, or if they are drawing down capital reserves.

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