Of the 97 companies on the FTSE 100 that paid a dividend in the last year, only eight of them paid a quarterly dividend. Receiving a dividend like this, in four payments a year rather than two or one, has its advantages.
For one, it offers a more regular cash flow for investors. The broken down payments mean slightly faster compounding too, if reinvested. A quarterly payment is also a sign of a blue-chip company with stable earnings, often prized by dividend investors.
The eight companies themselves are – in no particular order – Unilever, Games Workshop, British American Tobacco (LSE: BATS), HSBC, GSK, Imperial, BP and Shell. A few big names in there, but which one is ‘the best’? Which Footsie quarterly dividend should investors be looking at for steady and long-lasting dividend payments? I have to say that ‘best’ can be very subjective, but here’s my take.
The eight
Let’s get one thing out the way. Each of the eight are worth considering for any budding investors. The rough dividend yields are in the 4%-6% range at present although good investing requires looking at a longer time horizon than any given year.
The two oil majors and the two cigarette firms have something in common: products that are being phased out. Earnings and dividends might be good for now, but there could be risks further down the line.
HSBC is one of the ‘big four’ British banks. With its focus on Asia, it could be a terrific stock to consider for anyone bullish on China. Games Workshop is by far the smallest firm on the list. That could make more room for growth in the future. GSK in pharmaceuticals and Unilever in consumer goods are both leaders in their sectors too.
So which of them am I choosing?
Number one
My top choice (and a stock I hold) is British American Tobacco. The numbers behind this quarterly dividend simply make a very strong case, in my view.
The stock has paid consecutive dividends for over 25 years, putting it in a very select group. The share price has ballooned along the way. In fact, the £80bn market cap tobacco giant has been the most financially rewarding of any of the original FTSE 100 members from its origins in 1984.
Question marks on its future do surround the business. How much longer will the world keep buying tobacco products? Western countries have seen a big decline, partly down to regulation and legislation (but also due to consumers realising how unhealthy the products are), although developing countries are still seeing increases in the number of smokers.
The firm does have a growing non-combustibles division (like vapes and pouches). And on the cigarettes side, it’s worth pointing out tobacco firms have barriers to entry that resemble the Great Wall of China. No one is running a cigarette start-up these days.
British American Tobacco is certainly a company facing challenges. But, for me, the combination of the strength of its dividend history, above-average yield makes it my favourite quarterly dividend on the FTSE 100. I’d say it’s one for investors to take a look at.
