Picture supply: Getty Photographs
The wonderful thing about being a UK-based earnings investor is that there’s no scarcity of dividend shares in our house 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 more money to holders each (or practically each) 12 months.
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 take a position, proper?
Properly, let’s take a look at one in every of these in additional element.
Smoking sizzling!
Because of 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 an entire. And it’s value mentioning that this has already been an exceptionally good 12 months for the usually-pedestrian FTSE 100.
However, after all, we’re right here to have 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 largest corporations. And analysts have already got forecasted one other 2% rise to the whole dividend in 2026.
More durable instances forward?
As at all times, it’s necessary to consider what could 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 consequently. This arguably makes them susceptible to huge falls if that development slows, they overpay for smaller corporations, and/or when buyers get scared concerning the wider financial local weather.
However British American Tobacco is arguably probably 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 era 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 probably 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 under consideration, I don’t suppose any inventory — together with British American Tobacco — will be described as a ‘no-brainer’ purchase. In spite of everything, dividends can by no means be assured.
And I definitely don’t suppose buyers ought to take into account 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 want just a few extra causes.
Even so, I’d relatively a enterprise boasted an excellent document of elevating dividends than not. And that’s why these three may stand a very good likelihood of constructing my very own shortlist of income-bearing shares to contemplate shopping for.
