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Dividend Munchers list: great stuff from ITV, some trimming and a new entrant.

By Nigel Somerville | Sunday 8 July 2018

Disclosure: I own shares in one or more of the stocks mentioned. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from ShareProphets). I have no business relationship with any company whose stock is mentioned in this article.

My little portfolio of big dividend payers seems to be doing quite nicely. Hurrah! It seems that all three are up, and the first tasty dividend has arrived. But I want to trim some holdings and buy a new share.

BT (BT.A) has, for a FTSE100 company, been a bit of a wild ride since I bought at 225p back in March, having traded up to 250p on the back of a tip in the Telegraph and then slumping down almost to 200p after its FY results to March 2018, when the previously “progressive” dividend was frozen. But since then there have been rumours that it is looking at disposals, the CEO has walked and the shares have picked up again, closing last week at 231.5p.

My suspicion is that the new-ish chairman, Mr Jan du Plessis, is quietly but effectively wielding a bit of influence, the end result of which will see a much improved balance sheet. We shall see, but so far it is playing out quite well. Better still, the final dividend goes ex- in a month – a useful 10.55p per share into the coffers a month further on.

ITV (ITV) has been the star of the show. I picked up the stock in April at 143.7p (having missed the ex-dividend date) and the shares seem to have been a one-way bet ever since, closing last week at 180.4p. That is a heck of a rise for a FTSE100 company in just three (ish) months – 25.5%.

On the plus side, England are still in the World Cup and ITV is scheduled to carry England’s semi-final. But this party will be over in a week (regardless of how Eng-er-land get on) and the focus will quickly return to balance sheet matters as the company has its interims to June on Wednesday 25th July. At that point we should get a view on how good a world cup ITV had but, more importantly, the “strategic refresh” will be laid out.

My natural inclination is to say that a 25% gain in under three months is a bit steep for a FTSE100 company. After all, these outfits are pored over by armies of experts every second of the day. I do not claim to be cleverer than them, which suggests that perhaps it might be a good time to slice out some profits.

Don’t get me wrong, I think there are plenty of reasons to hold on to my ITV shares but I fancy now may be a good time to trim the holding a little.

Centrica (CNA) has paid out its first dividend – keeping me nicely in beer and popcorn whilst enjoying watching things play out at Stobart (STOB) and Tungsten (TUNG). I bought in 143p in April and the shares are now up to 163.1p despite having paid out 8.4p in dividends. Add that all together and we have a (less than) three month gain of 20%. My thought turn to my comments regarding ITV – time to get the knife out and trim the holding a little.

In addition, the political landscape looks set for some change as Theresa May seems to have opted for a non-exit Brexit which could give Labour enough of a boost to bring a regulatory threat more into focus. I shall consider that more over the coming weeks, but for now I think it is time to at least cash in the gains if not sell out completely.

So with a bit of trimming to do, where should I put my cash instead?

Looking down my list of 30 big dividends as listed back in February (see HERE) I note that Vodafone (VOD) was paying out 6.6%. At the time I rejected it because it just looked a bit expensive, but the shares have come down pretty sharply since then to just 191p. Even if Vodafone keeps its dividend on hold, it will now be coughing up 7.9%.

There are some questions, such as the retiring of the CEO but his replacement by the FD would suggest that the dividend is safe enough at least for now even if the targets offered are a bit of a fantasy.

But with a 7.9% yield I’ll take my chances, so Vodafone joins the portfolio.

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