The FTSE 100 (INDEXFTSE:UKX) index has put in a remarkable performance since last June’s Brexit vote, rising from below 6,000 points to touch 7,599 points on the 2nd June. However, the UK’s blue-chip index has pulled back a little in the last month or so, and closed on Friday at a level of 7,351 points.
While that pullback is only around 3.3%, I’ve found that many popular dividend stocks have fallen significantly further than that. As a result I’m starting to see a little bit of value emerge from a dividend investing point of view.
Dividend yield boosts
For example, tobacco giant British American Tobacco (LON:BATS) (BATS.L) has fallen from around 5,640p to 5,219p, a decline of 7.4%. With the company paying dividends of 169.4p per share last year, that means the stock’s trailing yield has been boosted from 3.0% to 3.2%.
Similarly, Lloyds Banking Group (LON:LLOY) (LLOY.L) has seen its share price fall from as high as 73p back to around 66.5p, a pullback of approximately 9%. The bank paid dividends of 2.55p per share last year, meaning that its trailing yield has been boosted from 3.5% to 3.8%.
National Grid (LON:NG) (NG.L) has had a rough month, falling from 1,090p to 935p, a correction of 14%. The utility giant paid regular dividends of 44.3p for FY2017, meaning that its trailing yield has climbed from 4.1% to 4.7%, a significant increase.
Advertising behemoth WPP (LON:WPP) (WPP.L) has fallen from 1750p to 1569p, a drop of 10%. The company has increased its dividend significant in recent years and last year paid out 56.6p per share. The 10% drop in the share price has boosted the trailing yield from 3.2% to 3.6%.
Lastly, BAE Systems (LON:BAE) (BAE.L) is another stock that has suffered, pulling back from 675p to 618p, a fall of 9%. That’s lifted BAE’s trailing yield from 3.2% to over 3.4%.
So from a dividend investing point of view, opportunities to pick up higher yields are starting to emerge. Of course, the FTSE 100 could continue to fall further, but in my view, picking up high-quality dividend growth stocks when they’re slightly out of favour is a strategy that should reward investors over the long term.
Disclosure: Edward Sheldon, CFA owns shares in BAE Systems.
This article is provided for general information only and is not intended to be investment advice. The value of an investment may fall. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.