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The wonderful thing about being a UK-based earnings investor is that there’s no scarcity of dividend shares in our dwelling market to select from. Even so, it’s a good suggestion to have just a few strategies for sorting the wheat from the chaff.
One factor I at all times search for is proof that an organization has been returning additional cash to holders each (or almost each) yr.
Amongst those who spring to thoughts from the FTSE 100 are:
- Halma
- Diploma
- British American Tobacco (LSE: BATS)
All three have a long time of consecutive annual dividend raises behind them. So, absolutely they’re ‘no-brainer’ buys for somebody with a juicy £3,000 to speculate, proper?
Properly, let’s have a look at one among these in additional element.
Smoking sizzling!
Due to better-than-expected buying and selling and an undemanding valuation, British American Tobacco shares have been performing brilliantly in 2025. A achieve of 30% on the time of writing is just about double that achieved by the index as a complete. And it’s price declaring that this has already been an exceptionally good yr for the usually-pedestrian FTSE 100.
However, in fact, we’re right here to take a look at dividends.
Regardless of a galloping share value, the earnings stream from the £83bn cap beast stays compelling.
At 6.4% for FY25, the yield is double that of the common among the many UK’s greatest firms. And analysts have already got forecasted one other 2% rise to the overall dividend in 2026.
Harder instances forward?
As at all times, it’s essential to consider what might go fallacious. No funding is free from threat and all three of these recognized above have their justifiable share of vulnerabilities.
Extremely-reliable dividend hikers like well being and security tech agency Halma and value-add distribution firm Diploma have each been super-successful at rising by acquisition. However each shares commerce at excessive valuations in consequence. This arguably makes them weak to massive falls if that progress slows, they overpay for smaller firms, and/or when buyers get scared in regards to the wider financial local weather.
However British American Tobacco is arguably essentially the most dangerous of the bunch.
Regulation incoming
As conventional cigarette gross sales proceed to slowly decline, the corporate is turning into more and more depending on subsequent technology merchandise like vapes, nicotine pouches, and heated tobacco to compensate. As issues stand, this transition goes properly. This vary now accounts for nearly 20% of group income.
However there’s no assure that this share will proceed rising. And one doubtlessly enormous catalyst for this not taking place would be the gradual involvement of regulators. The passing of the Tobacco and Vapes Invoice within the UK might be simply the beginning.
Backside line
Taking all this into consideration, I don’t assume any inventory — together with British American Tobacco — may be described as a ‘no-brainer’ purchase. In spite of everything, dividends can by no means be assured.
And I definitely don’t assume buyers ought to contemplate throwing their cash at any firm with out doing the right due diligence first. The extent to which money distributions have grown over time is only one method of judging a agency’s high quality amongst many. Name me choosy however I would like just a few extra causes.
Even so, I’d relatively a enterprise boasted a superb file of elevating dividends than not. And that’s why these three would possibly stand probability of creating my very own shortlist of income-bearing shares to think about shopping for.
