UK stocks paid out an eye-watering £100 billion in dividends last year, and the bulk of that cash came from the biggest and best known companies in the FTSE 350 - including the banking giant, HSBC Holdings (LON:HSBA) (LON:HSBA).
Given the unsettled market conditions, those record-breaking payouts were more important than ever. They were proof that solid, high yielding dividend stocks are a strong source of investment profits in both good times and bad.
These kinds of dependable returns are a major reason why high yielding FTSE 350 shares are so popular. So how do you find them?
Well, there are various ways of finding blue chip dividends, but I’ll show you a strategy with some basic rules to put you on the right path to finding some of the best dividend stocks in the FTSE 350. Let’s look at the HSBC dividend as an example of how it works.
Four rules for finding dividend shares
1. High (but not excessive) dividend yieldYield is an important dividend metric because it tells you the percentage of how much a company pays out in dividends each year relative to its share price. High yields are obviously appealing, but caution is needed. When the market anticipates a dividend cut, the share price will fall, which actually pushes the yield higher - but this can be a trap. So it pays to be wary of excessive yields.- HSBC has an eye-catching dividend yield of 6.65%.
- HSBC is an conservative, large cap in the Banking Services industry and has a market cap of £126,470m.
- HSBC has increased its dividend payout 7 times over the past 10 years.
- HSBC has dividend cover of 1.41.
Next steps
With these four dividend rules, you can track down high yield shares with a record of growth and safety. On this basis, Hsbc Holdings could be worth a closer look.
Disclaimer: These articles are provided for information purposes only. The content is not intended to be a personal recommendation. 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. The author has no position in the stocks mentioned, unless otherwise stated.