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As the FTSE's earnings season winds down, shareholders can now look forward to earnings reported by firms. Happy days.
As these payments were announced, each one came with an important date: the 'ex-dividend' date. The word literally means 'without profit'. It marks the point (usually Thursday) when a stock starts trading without the price of the next dividend included in its price.
As such, it is common for a stock's price to decrease by approximately the amount of profit per day. Therefore, when a stock goes dividend, the buyer of the stock will not receive a future payment. The budget goes to the stockbroker.
This is a normal practice and nothing to worry about. Indeed, in low-yielding stocks, this reduction may be so small as to be imperceptible.
FTSE 100 shares will be dividend
A total of 11 Footsie shares will be ex-dividend in September. That's right:
| Company | Ex-Dividend Date | Payment Date |
|---|---|---|
| DS Smith | 5 September | 4 October |
| Croda International | 5 September | 8 October |
| International Consolidated Airlines | 5 September | 9 September |
| Aviva | 5 September | 17 October |
| The Admiral | 5 September | 4 October |
| Antofagasta | 5 September | 30 September |
| Try Mine | 12 September | 10 October |
| EUR | 12 September | 8 October |
| Get involved | 19 September | 1 November |
| British American cigars (LSE: BATS) | 26 September | 1 November |
| Rightmove | 26 September | 25 October |
These are short-term shares with the exception of those from packaging company DS Smith and British American Tobacco.
Although future benefits can never be guaranteed, certain ones are authorized and scheduled to be paid.
A mouth-watering harvest
Unlike the usual biannual budget schedule, British American Tobacco pays quarterly, making it unusual FTSE 100. The dividend to be paid on 1 November will be 58.8p per share.
At the current share price of 2,777p, the dividend yield has reached 8.4%. Even better, analysts expect the payout to rise next year, resulting in a forward dividend of 9%.
The tobacco giant has a decade-long record of increasing dividends to shareholders.
High yield income
However, it must be said that the yield is very high for a reason. Investors are exposed to a myriad of risks, from stricter tobacco regulations to the collapse of tobacco sales in some developed countries.
In emerging markets, where smoking rates are still relatively high, competition is fierce and profit margins can be low. At that time, its flagship vaping brand Wake up you are facing pressure from other illegal means.
Despite these challenges, the company continues to generate significant revenue. In the six months to the end of June, it generated nearly £3bn in free cash flow, enough to cover a large dividend.
Adjusted diluted earnings per share came in at 169p, beating analyst expectations of 166p.
British American Tobacco is the owner Lucky Strikeincreasing volume while maintaining its position as the fastest growing cigarette brand in the US (down market).
To break away from tobacco, the company continues to build its non-smoking division. Revenue there grew by 7.4% to £1.7bn in H1. Both Wake up again Velo (its nicotine pouch product) is profitable, while smokeless brands now account for 17.9% of the group's revenue.
The stock is very cheap, trading at just 7.6 times forecast earnings. That's lower than both the FTSE 100 average and US tobacco rivals.
So, it's good to see the company buying back shares. It will buy back £700m worth in 2024 and £900m in 2025.
If that dividend forecast proves accurate, then investors can expect more than £1,000 in income each year on an investment of £11,500. Good.
I could buy the stock today for big gains if I didn't already.
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