Best dividend shares

grubby23

Hi all,

Just came across the following article on thisismoney.com:
"Six of the best dividend shares that deliver 5% or more"

The companies named here are: Centrica. Vodafone, Shell, FirstGroup, NationalGrid, GlaxoSmithKline.

I would like to pick three companies that yield a good dividend and would like to invest £2000 in each case. I guess Shell seems to be safe bet, any other favorites that the people here have.

What about Tescos, do they also pay dividends, if so I would definitely consider them too.

Thank you very much!

Thrugelmir

Look international as well. The choice in the FTSE is very restricted.

oldvicar

grubby23 wrote: »

I guess Shell seems to be safe bet, any other favorites that the people here have.

What about Tescos, do they also pay dividends, if so I would definitely consider them too.

Shell: What do you mean by "safe"? A similar firm called BP took a knock when a lot of its oil escaped onto American shores.

Tesco: Yes they have paid dividends in the past. Whether they will afford to do so in future will depend on future profitability. They are having a rather rough time in UK supermarkets at the moment, and the UK director is (being forced) to 'step down' due to miserable sales.

le_loup

As you appear to be a relatively small player (£6,000), have you thought about using a fund to spread your risk?
Many UK Equity Income funds are paying a yield of between 3.5% - 4.5%

gadgetmind

I'm afraid that I have to agree with le loup.

At the barest minimum, you need to hold 10 shares, and ideally 15, with a good sector spread.

If you intend to continue adding, then the risk is limited to the portfolio construction phase, but choosing just three shares would be very risky.

A fund or investment trust would probably work better for you.

qpop

Funds may well be a good choice. HL (or similar) will wrap your investments in an ISA with no explicit costs, and some examples of equity income funds with good yields:

http://www.trustnet.com/Investments/Perf.aspx?ctr=QS&univ=U&Pf_Sector=U:UEI&Pf_sortedColumn=Yield&Pf_sortedDirection=DESC

or global equity income funds:

http://www.trustnet.com/Investments/Perf.aspx?ctr=QS&univ=U&Pf_Sector=U:GEI&Pf_sortedColumn=Yield&Pf_sortedDirection=DESC

or there's an emerging markets equity income fund yielding 4.5% currently:

http://www.trustnet.com/Factsheets/Factsheet.aspx?fundCode=MJFR2&univ=U

(always do your own research)

C_Mababejive

National Grid,also have a look at Cable and wireless comms and Cable and wireless worldwide. Both companies are cheap at the moment and pay good divis.

Another tip have a look at VOG. This company is into oil and gas exploration. Last year they struck gas big time and are in the final stages of running pipelines to customers to generate long term sales..cheap as chips at about 10p a go at the moment.

BLB53

I agree with others that 3 shares is risky no matter how big the companies.
With 6K I would look at the likes of City of London IT, Murray Income and Temple Bar in the UK sector and possibly Murray International for global diversification.
There was o good book I downloaded 'Slow & Steady Steps...' mentioned by Monevator last weekend which covers generating income from higher yield shares and investment trusts. Well worth a read imo.
Good luck

BLB53

Many UK Equity Income funds are paying a yield of between 3.5% - 4.5%

I have found the problem with using funds for income is they are obliged to pay out 100%, so when a lot of companies cut dividends in 2009/10 investors who were relying on income received a substantial reduction.
For that reason (and others) I prefer ITs who can hold back some of the dividends in good years and pay it out in poorer years - much smoother.

gadgetmind

BLB53 wrote: »

For that reason (and others) I prefer ITs who can hold back some of the dividends in good years and pay it out in poorer years - much smoother.

Yup. Many wiser than me reckon that you need a good three years of required income available as cash if you're going to use equities or funds for retirement income. If you instead use ITs, some claim you don't need a buffer, but I'd still prefer a year "on hand".

grubby23

Thanks gents for all your input, quite some feedback. I have already invested £8000 last year into funds, here is the list into which ones I invested:

Aberdeen Latin American Equity
Artemis Global Energy
Baring ASEAN Frontiers
JPMorgan Natural Resources

A little amount has been invested in shares of SSE plc.

In order to limit the fund fee, I would like to invest in specific shares that pay dividends.

How about I invest my £6000 as follows:

£1000 Vodafone
£1000 Shell
£1000 Tesco
£1000 National Grid
£500 VOG
£1500 UBS Emerging Markets Equity Income

Thanks!