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The UK stock market offers a wealth of dividend shares that haven’t missed a payment in over two decades. In many cases, these reliable income heroes have not only paid consistently but actually increased each payout.
As of 5 December, I can find as many as 22 stocks across the FTSE 100 and FTSE 250 that have raised dividends for 20+ years in a row.
From those, I’ve picked the top five that I feel offer the best combination of high yields and long-term reliability. They are:
| Stock | Yield | Payout ratio |
|---|---|---|
| British America Tobacco | 5.5% | 170% |
| Bunzl | 3.5% | 50% |
| Croda International | 4.2% | 110% |
| City of London Investment Trust (LSE: CTY) | 4.1% | 30.7% |
| Schroder Oriental Income Fund | 3.7% | 30% |
Despite my faith in these strong dividend stocks, I’ll concede some caveats. Being a tobacco stock, BAT’s future hinges largely on its ability to successfully market less-harmful products. And with a share price down 56% in the past five years, Croda’s at risk of losing favour if it can’t turn around.
But barring those minor exceptions, it would be hard to find five more provenly-consistent income stocks in the UK.
Let’s take a closer look at City of London Investment Trust and discover why it has long been a favourite among income investors.
Stability in diversity
City of London Investment Trust leads the pack with an incredible 59-year-long track record of increasing dividends. Since 1977, it’s raised its dividend from less than 1p per share to 21.6p per share today, equating to annualised growth of 6.6% a year.
What’s more, with a stock price up 42.6% in five years, it offers more than just income. The fund’s managers do an excellent job of balancing the top growth and dividend stocks on the FTSE 100.
Some of its top holdings include HSBC, Shell, Unilever, NatWest, BAE Systems, Tesco and Imperial Brands. Achieving a total return of 21.7% so far this year, it’s outpaced both the FTSE 100 and S&P 500.
But while the focus on income has helped drive growth this year, it adds risk at other times. Regulatory changes affecting the dividend-heavy finance and consumables sectors could lead to cuts, limiting the stock’s returns. Moreover, it’s entirely concentrated in the UK, so any trouble at home would hurt the fund’s overall performance.
The bottom line
It’s not easy to keep raising dividends consistently for decades on end. To do so, a company must have a strong foundation supported by excellent management and built around a sustainable business model. That’s why I think City of London Investment Trust is a stock worth considering, along with other four in this list.
But no matter the foundation, circumstances change constantly, leaving no stock without risk. Aside from those already mentioned, Schroder Oriental Income Fund faces concentration risk in Asia and Bunzl’s growth strategy relies heavily on successful acquisitions.
So while these incredible track records leave little to question, it’s always wise to do a full assessment before diving in. Most importantly, identify any emerging risks that may have been absent in previous years.
Catching new developments as they happen is key to picking the right stocks at the right time. So while these are my favourite ‘no-brainer’ dividend shares today, who knows what tomorrow may bring?
