Dividend Barometer Report
Barometer (n.) Showing how a particular situation is developing, or how people’s opinions on a particular matter are changing.
The Dividend Barometer is a report, compiled by the Quoted Funds team at Octopus Investments, which champions the lesser-known dividend credentials of small and mid-cap income stocks.
Headlines
Large cap lag and FTSE 100 forecast to continue to pay out a total cash dividend in 2025 below pre-covid levels.
Smaller companies to outperform with the FTSE Small Cap and FTSE 20 ex Investment Trusts both set to exceed the FTSE 100 by dividend yield.
The financial sector is the largest dividend payer across all indices. But the exposure to specific sub-sectors varies by index.
AIM dividend yield is due to progress and benefit from excellent cover.
Dividend Diamonds
Here are two current stocks held in our portfolios, that we believe have shone over the last six months.
Kitwave
A leading independent wholesale business.
Sector: Consumer Services
Index: FTSE AIM Index
Since listing in 2021, Kitwave has delivered fantastic dividend performance. From its first full year dividend in October 2022 of 20p, the stock is expected to generate growth of over 50% in dividend payouts in the financial year to October 2025
In the latest update for the full year to end October 2023, the group delivered revenue growth of 20% in the year, and profit growth of 40%.
Despite this performance, the stock remains attractively valued. It is trading on a price/earnings multiple of 11.4x and is expected to deliver an attractive dividend yield of 4%.
Galliford Try
A leading UK construction group
Sector: Industrial Services
Index: FTSE Small Cap Index
Since the group reset earnings in 2021 under the tenure of the current management, the business has seen excellent progressing in profits and dividends over the period.
Payouts are expected to climb from the 4.7p per share paid in the year to June 2021 to 14.66p in the year to June 2024.
Considering the fantastic operational and dividend performance, the stock remains attractively valued on c11x price/earnings multiple.
These companies are for illustrative purposes only and are not an investment recommendation.
Discrete 1-year performance % return to February 2024
| 2024 | 2023 | 2022 | 2021 | 2020 | |
|---|---|---|---|---|---|
| FTSE 100 TR GBP | 0.8 | 9.6 | 19.2 | 1.4 | -2.7 |
| FTSE 250 TR | -0.9 | -2.8 | 2.9 | 10.2 | 3.8 |
| FTSE AIM TR | -12.9 | -16.1 | -11.3 | 39.3 | -4.4 |
| FTSE Small Cap TR | 0.5 | -2.9 | 8.9 | 23.3 | 2.7 |
| Kitwave | 30.3 | 52.9 | 0.7 | n/a | n/a |
| Galliford Try | 37.1 | -0.2 | 28.4 | -11.7 | -79.1 |
Past performance is not a reliable indicator of future results. Source: Lipper to 29/02/2024. Returns are based on published dealing prices, single price mid to mid with net income reinvested, net of fees, in sterling.
Register for our upcoming webinar to learn more about where to look for long term growth in dividends
Hear from Chris McVey, Lead Fund Manager of the FP Octopus UK Multi Cap Income Fund.
In this webinar Chris explores where to look for long term growth in dividends, how dividend cover and concentration varies across the market cap spectrum and the double discount opportunity in the UK stock market.
Risks to bear in mind
- The value of an investment can fall or rise and you may not get back the full amount you invest. Smaller company shares are also likely to fall and rise in value more than shares in larger, more established companies listed on the main market of the London Stock Exchange. They may also be harder to sell.
- Our investment products put capital at risk. The value of an investment can fall or rise and you may not get back the full amount you invest.
- The shares of smaller companies are likely to fall and rise in value more than shares listed on the main market of the London Stock Exchange. They may also be harder to sell.
- For the FP Octopus UK Multi Cap Income, fees will be deducted from capital, which will increase the amount of income available for distribution. However, this will erode capital and may hinder capital growth. Yield is not guaranteed.