Signals of intent

By Kevin Murphy.

As we go through results season, dividends on the whole continue to move in the right direction.

Some have not, as we saw in Downsizing dividends, but it is fair to say the majority of businesses are making meaningful dividend increases while other companies that have not been willing to pay a dividend in recent years are returning to the dividend register.

So, for example, Rentokil, which for the last couple of years has not been able to pay a dividend due to excessive debt and underlying issues in its business, now feels confident enough to return to the register. It is only a ‘token’ of a dividend but it is at least a signal of intent and it will grow from here.

Ditto house-builder Taylor Wimpey, which has not paid a dividend in five years and indeed in recent times has been held out as having one of the more stressed balance sheets in the market as a whole. If we are now at a point where even these sorts of companies, having done a reasonable amount of hard work and being well-run over the last few years, are in a position where they feel able to return some cash, that can only be good news for income-seeking investors.

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