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Dividend dogs vs diamonds: Part 2 – paying the price of quality

23/05/2019 · AstraZeneca (AZN)  · Compass (CPG)  · Diageo PLC (DGE)  · GlaxoSmithKline (GSK)  · Next (NXT)  · Persimmon (PSN)  · Relx (RELX)  · Unilever (ULVR) 

Dividends FTSE 100 Investment Ideas UK

Relx logo on board in headquarters

With seven FTSE 100 dividend stalwarts currently yielding over 8%, investors are starting to ditch companies which might follow Vodafone’s lead and cut their pay-outs. But the stocks whose dividends you can rely on come with an added valuation risk which investors might want to avoid.


In part one of our mini-series on dividends, we looked at the FTSE 100 companies which are likely to follow Vodafone’s lead and cut their dividends in 2019. We suggested that a yield of over 8% is a major red flag for investors considering the future of their income.

But if you’re going to dump the dividend dogs out of fear of a cut, where should you re-invest your money if you want to continue to receive a generous income?

That’s a tricky question to answer because many of the UK’s more reliable dividend stocks are very expensive, meaning the yield barely offers you any more than what you would get from putting your money into government bonds.

Take Relx (LON: REL)Diageo (LON: DGE) and Compass (LON: CPG) for example. These quality companies have forecast dividend yields of 2.5%, 2.1% and 2.3% respectively. That compares to current 10-year yields on government bonds of 1.1% in the UK and 2.4% in…

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