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The wonderful thing about being a UK-based earnings investor is that there’s no scarcity of dividend shares in our residence market to select from. Even so, it’s a good suggestion to have a number of strategies for sorting the wheat from the chaff.
One factor I at all times search for is proof that an organization has been returning additional cash to holders each (or practically each) 12 months.
Amongst those who spring to thoughts from the FTSE 100 are:
- Halma
- Diploma
- British American Tobacco (LSE: BATS)
All three have many years of consecutive annual dividend raises behind them. So, certainly they’re ‘no-brainer’ buys for somebody with a juicy £3,000 to take a position, proper?
Effectively, let’s have a look at considered one of these in additional element.
Smoking sizzling!
Because of better-than-expected buying and selling and an undemanding valuation, British American Tobacco shares have been performing brilliantly in 2025. A acquire of 30% on the time of writing is just about double that achieved by the index as a complete. And it’s price declaring that this has already been an exceptionally good 12 months for the usually-pedestrian FTSE 100.
However, after all, we’re right here to have a look at dividends.
Regardless of a galloping share value, the earnings stream from the £83bn cap beast stays compelling.
At 6.4% for FY25, the yield is double that of the common among the many UK’s greatest firms. And analysts have already got forecasted one other 2% rise to the entire dividend in 2026.
Harder instances forward?
As at all times, it’s essential to consider what could go unsuitable. No funding is free from danger and all three of these recognized above have their fair proportion of vulnerabilities.
Extremely-reliable dividend hikers like well being and security tech agency Halma and value-add distribution firm Diploma have each been super-successful at rising by acquisition. However each shares commerce at excessive valuations because of this. This arguably makes them weak to massive falls if that development slows, they overpay for smaller firms, and/or when traders get scared in regards to the wider financial local weather.
However British American Tobacco is arguably essentially the most dangerous of the bunch.
Regulation incoming
As conventional cigarette gross sales proceed to slowly decline, the corporate is turning into more and more depending on subsequent era merchandise like vapes, nicotine pouches, and heated tobacco to compensate. As issues stand, this transition goes effectively. This vary now accounts for nearly 20% of group income.
However there’s no assure that this proportion will proceed rising. And one probably enormous catalyst for this not occurring would be the gradual involvement of regulators. The passing of the Tobacco and Vapes Invoice within the UK may very well be simply the beginning.
Backside line
Taking all this under consideration, I don’t assume any inventory — together with British American Tobacco — could be described as a ‘no-brainer’ purchase. In spite of everything, dividends can by no means be assured.
And I actually don’t assume traders ought to take into account throwing their cash at any firm with out doing the right due diligence first. The extent to which money distributions have grown over time is only one method of judging a agency’s high quality amongst many. Name me choosy however I would like a number of extra causes.
Even so, I’d somewhat a enterprise boasted an excellent file of elevating dividends than not. And that’s why these three would possibly stand likelihood of creating my very own shortlist of income-bearing shares to contemplate shopping for.
