Email of the day (1)
“Have been a subscriber to Fullermoney for a few years. As a very inexperienced investor I have found you very helpful although the jargon is sometimes difficult.
“ I have a modest sum to invest in Dividend Aristocrats. Can you tell me where I can find Eoin's latest reviews of those available on the London Market, please?"
Eoin Treacy's view Thank you for your support and this email which others may also have an interest in. I pointed out the commonality of UK companies in the service sector on September 26th and most are S&P Europe 350 dividend aristocrats. UK listed companies represent more than half of the constituents of the S&P Europe 350 Dividend Aristocrats Index and a considerable number offer highly competitive yields.
For a company to gain entry to the S&P Europe 350 Dividend Aristocrats Index it must raise its dividend for 10 consecutive years. This results in quite a bit of movement compared to the S&P 500 Dividend Aristocrats which need to increase dividends for 25 consecutive years. I updated the section in my Favourites devoted to the S&P 350 Dividend Aristocrats this morning and here is a PDF of the constituents sorted by currency of issue. Some of the more notable UK listed constituents include:
Aggreko (1.07%) has been trending relatively consistently since early 2009 and was among the companies to benefit most from the Japanese tsunami as a result of its focus on industrial sized portable generators. The share has returned to test the region of the 200-day MA and will need to continue to find support in this area if the medium-term uptrend is to continue to be given the benefit of the doubt.
In the food sector, Associated British Foods (2.07%) continues to hit new highs and is becoming somewhat overbought in the very short-term. A clear downward dynamic would be required to check momentum while a sustained move below the 200-day MA, currently near 1240p would be needed to question medium-term uptrend consistency.
In the tobacco sector British American Tobacco (4.49%) has found support in the region of the 200-day MA on successive occasions since early 2009 and would need to sustain a move below it to begin to question medium-term potential for additional upside. British American Tobacco's performance contrasts sharply with Imperial Tobacco (4.76%) which is also a dividend aristocrat. The latter dropped below its MA and has held the decline for more than a month. While its competitive yield may offer a cushion, a sustained move above 2400p will be required to offset current scope for a further test of underlying trading.
In the catering sector, Compass Group (3.25%) has almost closed the overextension relative to the 200-day MA and appears to be in the process of building support. A sustained move below the trend mean would be required to question medium-term scope for continued upside.
In the pharmaceuticals sector, Astra Zeneca (6.9% continues to hold in the region of the 200-day MA. A sustained move above 3100p would confirm a return to medium-term demand dominance. GlaxoSmithKline (5.98%) broke out of a three-year base in September 2011 and has been consolidating mostly above 1400p since January. A sustained move below that level would be required to question medium-term recovery potential.
In the resources sector BHP Billiton continues to hold a progression of higher reaction lows since retesting the 1650p area in June. The sector is currently exhibiting a high degree of commonality and a sustained move below 1900p would be required to begin to question medium-term scope for additional upside. Johnson Matthey just paid an impressive special dividend, flattering its yield which would otherwise by 2.61%. The share has returned to the region of the 200-day MA and the upside can continue to be given the benefit of the doubt provided it continues to hold in this region.
In the defence sector BAE Systems (5.94%) has rallied to break the 5-year progression of lower rally highs and a sustained move below the 200-day MA, currently near 310p, would be required to question medium-term recovery potential.
In the technology sector, Sage Group (3.81%) broke upwards to new all-time highs six weeks ago and has since pulled back to test the psychological 300p area. The upside can be given the benefit of the doubt provided it finds support in the current area. ARM Holdings (0.91%) dropped out of the Index in the last year but is worthy of mention, not least because of its impressive bounce from the lower side of its 18-month range.
In the beverages sector Diageo (2.73%) is becoming increasingly overbought relative to the 200-day MA but continues to hold a progression of higher reaction lows which would need to be broken in order to question uptrend potential.
In the distribution and outsourcing sector Bunzl (2.66%) has been ranging in a steady reversion towards the mean since early August. A sustained move below the 200-day MA, currently near 1025p, would be required to question the consistency of the medium-term uptrend.
In the media sector, Pearson (3.91%) continues to hold a progression of higher reaction lows and a sustained move below 1150p would be required to question potential for continued higher to lateral ranging.
In the utilities sector Scottish & Southern Energy (6.24%) broke out of a 15-month range this week and a clear downward dynamic would be required to check potential for additional upside. Centrica (5.21%) retested the 2011 peak over the last month and a sustained move below 330p would be required to question potential for a successful upward break.
In the insurance sector, RSA (8.88%) broke back above the 200-day MA in July and found support near it earlier this month. A sustained move below 110p would be required to question recovery potential.
While no longer a dividend aristocrat Reckitt Benckiser (3.52%) is worthy of mention because it appears to be in the process of completing a 30-month range and hit a new closing high yesterday. A clear downward dynamic would be required to delay medium-term potential for additional upside.
Other former members of the Index which exhibit medium-term patterns of demand dominance include Tate & Lyle, Unilever, WPP Group, Reed Elsevier, Next Plc and Severn Trent.
A casual perusal of the charts of the above shares demonstrates that while the media representation of the financial environment remains grim, there is significant evidence of demand for competitive yields with the opportunity for capital appreciation.