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Securing a gradual stream of passive revenue isn’t a once-off job. It takes time to establish the shares that may hold delivering returns far into the long run. Dividend shares purpose to fulfil this dream with a daily circulate of revenue that requires little consideration. Nevertheless it’s not assured.
To really feel snug dumping money right into a inventory, traders want some assurance of future efficiency. The businesses are ideally well-established with an extended historical past of creating dependable funds. Plus a good yield, after all!
So are there any shares like that on the FTSE 100? I believe I’ve discovered two potential candidates.
Phoenix Group
My knee-jerk response once I see a excessive dividend yield like 10.8% is scepticism. Why is it so excessive and, extra importantly, will it keep that method? With Phoenix Group (LSE: PHNX) I used to be pleasantly stunned to discover a 13-year monitor report of steady or rising dividends.
Though the model isn’t well-known, it’s the father or mother firm of main insurance coverage suppliers Sunlife and Customary Life. It’s additionally been in enterprise for nearly 170 years and sports activities a weighty £4.86bn market-cap. Even the share worth is doing okay for a worth inventory. It’s down a bit in 5 years however has held fairly regular round 600p for many of the previous decade.
Nonetheless, there are some downsides. The latest spike in UK unemployment coupled with financial uncertainty heading right into a tumultuous election presents dangers for the agency. Insurance coverage is a dependable trade however cash-strapped customers nonetheless are likely to prioritise instant wants over it. Moreso, in its newest earnings, income missed expectations by 27%, which was an enormous shock.
Thankfully, earnings-per-share (EPS) did higher than anticipated however nonetheless got here in a lack of 14p per share. If the group’s EPS continues to say no, it may threaten dividend funds.
Wanting on the agency’s monitor report, I don’t assume that’ll occur however it’s price keeping track of. Lengthy-term, I believe the constant fee historical past mixed with large-cap stability provides it quite a lot of promise.
DCC
DCC (LSE:DCC) flew largely beneath my radar the previous few years. It supplies third-party help companies and assets for companies within the vitality, healthcare, and know-how sectors. The model identify isn’t seen plastered round city, which can be why it eluded my consideration till now.
Nevertheless it has two very spectacular statistics: 25 years of consecutive dividend development with a 10-year compound annual development fee (CAGR) of 9.85%. So whereas the three.5% yield could seem small for now, it suggests a promising future. With that sort of development, DCC may very well be a future dividend hero!
What’s extra, the share worth appears prefer it’s in restoration mode. It suffered within the years following the 2020 market collapse however has regained 20% prior to now 12 months. And between 2012 and 2018 it shot up 400%, suggesting it performs nicely in a robust financial system.
Nonetheless, it has some room for enchancment. Within the newest earnings report, income and EPS missed analyst expectations by 3.7% and 6.7% respectively. Web revenue was down 2.3% whereas revenue margins elevated barely.
With a share worth lagging behind earnings, it’s estimated to be undervalued by 37% primarily based on future money flows. That provides the value first rate room to develop. Together with the rising yield, it may equate to spectacular returns.
