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Where to find the next generation of ‘dividend heroes’?

1 August 2018

People who invested in “dividend hero” companies 10 years will be reaping the rewards, with one stock rising as much as 48%, according to analysis by AJ Bell.

Russ Mould, investment director, AJ Bell, said: “We often take dividend yield as a snapshot, looking at investors buying the stock at today’s price. However, investing is a long term game, and many investors have had their money in these companies for a number of years.”

Industrial equipment rental company Ashtead offered the highest yield of 48% for those who invested in the stock 10 years ago, while Micro Focus International provided investors with a 28.4% yield and Hargreaves Lansdown a 22% yield.

When comparing the 2008 price with the forecast 2018 dividend across 26 companies, AJ Bell said the average yield was almost 12%.

Mould said: “These 26 firms are ‘dividend heroes’, so called because they have increased their dividend in each and every of the past 10 years. Taking a look at the total return of this group – growth and income reinvested – shows the importance of dividends in boosting the share price.”

He added: “For this year, the average dividend yield for the 26 ‘dividend heroes’ is forecast to be 3.2% – while respectable, that is below the 4.1% average for the FTSE 100. However, only 13 of the 26 were actually in the FTSE 100 index a decade ago, so investors may need to dig through the FTSE 250 listing of smaller companies to find the next generation of dividend growth champions to buy today.”

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