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Searching for passive income stocks, it’s easy for our eyes to fall on the biggest dividend yields. We might see M&G with a 9.1% forecast yield and Legal & General on 8.8%, and look no further. And I do rate both as worthy of serious consideration.
But to build up the best retirement pot we can manage, we might want to add some with the best track records of rises. I’ve been digging some out.
British American Tobacco
British American Tobacco (LSE: BATS) has increased its dividend for 28 years in a row. The most recent rise of 2% for 2024 might not stack up brilliantly against inflation. But it still represents one of the FTSE 100‘s top yields with a forecast 7.3%.
Revenue in 2024 fell 5.2%, though that was due to the sale of the company’s businesses in Russia and Belarus in 2023. And it suffered some damage from exchange rates.
The main threat to the future of British American dividends is suggested by the words of CEO Tadeu Marroco: “We are committed to building a smokeless world and becoming a predominantly smokeless business by 2035.”
Whether it can achieve that while still raking in the cash to pay the same big dividends is a key question. But the company has already managed to shift 17.5% of its revenue to smokeless products. It remains a passive income consideration in my books.
DCC
DCC (LSE: DCC) offers a forecast yield of a more modest 4.3%. But with FY 2024 results released on 13 May, the company announced a “proposed increase of 5.0% in annual dividend, marking 31 consecutive years of dividend growth“. That rise is nicely ahead of inflation.
The services company has agreed the disposal of DCC Healthcare, expected to complete in the third quarter of the current year. The board says that will release £800m that it intends to return to shareholders, “commencing shortly with £100 million share buyback programme“.
The price for the healthcare division was lower than expected. And I fear we could see a disappointing price for the technology business, which the board also intends to offload.
Then we’ll have focus just on energy, which reduces diversification. I’m not thrilled by that aspect. But even with the risks, it’s on my list of passive income stocks to consider.
Croda
Croda (LSE: CRDA) offers a modest forward yield of 3.5%. But if it can keep boosting it the way it’s been doing for the past 33 years, I think it’s one that passive income investors could do well to consider.
Annual rises for the past couple of years have been behind inflation. But the speciality chemicals manufacturer has a habit of paying big special dividends when it has surplus capital.
That happened in the 2018 year with a 115p special, well ahead of the 87p ordinary dividend paid that year. And 2015 brought a 100p special dividend.
The main fear for me is that the business can be cyclical. And since a pandemic boost from chemical sales to vaccine manufacturers ended, the share price has slumped. But I’m eyeing up a potential recovery.
