The second launch of the week is a new annual feature, Income Majors, completing the set of company-by-company index round-ups we publish. Where our FTSE 350 feature delves into the big issues affecting sectors, Income Majors will focus on the market’s very biggest dividend payers and their ability to keep churning out the income so many of us rely on.
These companies are responsible for around two-thirds of all dividends paid by the 1,000 or so companies listed on the main market, so are a vital component of the nation’s investment wealth – as David Henry of Quilter Cheviot points out in this week’s portfolio clinic, the likes of Royal Dutch Shell (RDSB) – the market’s biggest payer churning out £15bn of dividends a year – is a core holding in many of the portfolios he sees.
As a result of the twists of past government policy and energy market M&A it’s now a core holding of mine, so I too am very interested in how safe our expert writers believe its dividend is. The same is true of National Grid, also featured in the feature as the ninth largest payer. Even those in the top 10 I don’t hold directly will influence my wealth through the pooled vehicles that make up my pension pot. Specifically, though, a cold, hard assessment of how a company like Shell can survive the coming end of the oil age is most useful.
Observing the growing momentum behind electric vehicles and renewable energy storage has indeed led me to wonder how much longer I should hang on to Shell’s shares as the company enters an inevitable period of managed decline. 45 per cent of global oil distribution finds its way into road transportation, so a shift to electric cars could have profound implications for the industry. But the income is good, and Alex Newman’s shrewd analysis suggests that although Shell may have passed its zenith, it is strong enough to survive – along with its dividend – for a long time as the world’s energy mix shifts, which will take time. So I will hang on for now, and to National Grid, too, a share over which I haven’t yet had the same existential doubts... not, I hope, famous last words!
