Hungry For Yield? All Roads Lead To The UK (And Australia)

Hungry For Yield? All Roads Lead To The UK (And Australia)
Andrew Rummer

over 2 years ago1 min

Mentioned in story

In a time when bank accounts in the rich world are paying an interest rate somewhere close to zero, the dividends paid by some blue chip stocks look incredibly enticing. 

The chart shows the aggregate dividend yields paid by companies in some of the world’s top stock markets. The UK’s benchmark FTSE 100 and Australia’s S&P/ASX 200 stand head and shoulders above the pack: each pay about 4% of any money invested back to shareholders. America’s S&P 500, by contrast, returns less than 1.5% in dividends.

The difference is explained by the makeup of each market. The S&P 500 has a heavy weighting of tech stocks like Apple and Amazon that tend to have low or non-existent payouts. The UK market, meanwhile, is dominated by more mature sectors like tobacco, mining, and oil that distribute generous dividends – but are less likely to see future growth. 

Both the UK and Australian markets get a huge boost from hosting mining giants Rio Tinto and BHP and their massive 10%-plus payouts. (The pair have listings in both London and Sydney). Britain’s FTSE 100 also features Imperial Brands, the maker of Gauloises cigarettes, with a 9.2% dividend yield and British American Tobacco on 8.1%.

If you’re queasy about funding mining or tobacco firms, how about telecoms provider Vodafone with its 6.7% yield? Or investment firms M&G and Legal & General on 8.4% and 7.2%, respectively? All are currently much more rewarding than hoarding cash in the bank – although, of course, cash is risk free whereas the value of all these stocks could potentially drop. 

(Note: all dividend yields mentioned refer to analysts’ estimated yields for the next 12 months, as compiled by Bloomberg).

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