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Hikma: Delivering inflation-proof income

05/02/2019 · Hikma (HIK) 

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Income investors need growth as well as yield. This FTSE 100 dividend stock promises to deliver both for its shareholders.

When investing for income, it's easy to focus on high yield and lose sight of the other magic ingredient that's required – dividend growth. The real value of a dividend payout which is kept flat every year, is eroded each year by the rising cost of living. With inflation at its current level of 2.1%, a dividend that remains the same for five years would be worth 10.9% less in real terms at the end of that period.

In contrast, a dividend that rises faster than inflation can provide shareholders with a real terms pay rise every year. Although fast-growing dividends often provide a lower initial yield, this disadvantage can be outweighed by gains in future years.

We believe an income portfolio needs a mix of yield and growth to perform well over longer periods. This week we're focusing on a company that's delivered average dividend growth of 16% over the last 10 years. Hikma Pharmaceuticals (HIK) hasn't cut its dividend since…

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