Stock market

These were the top 3 performing stocks in my dividend portfolio last month.

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When building a portfolio of dividend stocks, price performance is usually not a factor. Still, it doesn’t hurt to see that my income stocks perform like growth stocks.

This month I got a big surprise from a dividend stock that made very little profit compared to last year.

Keeping the nation together

The country’s leading telecom company, BT Group (LSE:BT.), is up 25% over the past month. This makes it the most performing part on it. FTSE 100 in May. Combined with a decent 6.3% dividend yield, that equates to some very nice returns.

Naturally, the price is unlikely to increase that much every month. So what caused the sudden jump?

A huge debt cloud has been hanging over BT’s head for some time now. At £18.5bn, this is almost 50% higher than the company’s market cap of £12bn. The plunging share price didn’t help the situation. But it is close to completing its expensive fiber broadband rollout and last month announced positive results for FY 2023. Adjusted earnings and earnings before interest, taxes, depreciation, and amortization (EBITDA) rose slightly, along with net cash flow and earnings per share (EPS).

With profits well covering earnings, there is little chance of a break in payments even during a break in performance. However, despite the good coverage, analysts predict that yields will fall to 6.1% in the coming years. This could be due to sluggish revenue and earnings growth, which is forecast to remain low for the next three years.

Top British telly

ITV (LSE: ITV) is up just 11.8% this month but has a slightly higher yield than BT, at 6.5%. It also sports a similar payout ratio of less than 100%, providing ample earnings coverage to support payouts. Like BT, payments were suspended during Covid but have returned to the same permanent credit. But unlike BT, yields are expected to rise above 7% in the coming years. This speaks to analysts’ confidence in the broadcaster’s future.

But the increase is minimal compared to the 28 percent price drop over the past five years. While it is on the right track, it has a way to go before it can regain its 2015 highs. Top British shows like Love Island And the sound are growing revenues but still face stiff competition from on-demand video platforms. Netflix.

An industry under fire

UK’s largest tobacco firm Imperial Brands (LSE: IMB) has the highest yield on the list at 7.72% but is only up 5% this month. Still, that’s more growth than other dividend stocks I own.

The downside is that tobacco is a risky industry, with global regulations cracking down on cigarette sales. Although it is making some progress with its next-generation products (NGP), there is also the risk of them being regulated in the future. So I am wary of how long its business model can remain profitable.

But for now, it’s going to pay a nice dividend. It currently pays an annual dividend of £1.46 which is well covered by EPS of £.244. Production is also predicted to increase by 9 percent in the coming years. So while the industry may eventually die out, I’m hoping to enjoy the comeback for at least a few more years.


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