The FTSE 100’s Hottest Dividend Picks: British Sky Broadcasting Group Plc

Royston Wild explains why British Sky Broadcasting plc (LON: BSY) is a great all-round stock choice.

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

Today I am explaining why I consider British Sky Broadcasting (LSE: BSY) to be a stellar dividend selection.

Chunky dividend growth expected to roll on

British Sky Broadcasting has remained a favoured pick for both income and growth hunters for many years now. Full-year results this month revealed that the effect of higher capital expenditure kept earnings per share remained on hold at 60p per share in fiscal 2014 — slowing skydown from the solid double-digit advances of previous years — but this did not prevent the firm from rewarding investors with yet another hefty dividend rise.

This broadly resilient earnings strength has enabled the business to lift full-year dividend at a blistering compound annual growth rate of 13.3% since 2010, culminating in a payout of 32p per share for the year concluding June 2014, up from 30p in 2013.

And an anticipated return to earnings growth is expected to underpin another advance this year — indeed, a 9% earnings improvement is expected to produce a 9% dividend rise, to 34.7p.

This forecast means that Sky currently offers a dividend yield of 4% for fiscal 2015, comfortably above a forward average of 3.2% for the FTSE 100 and usurping a relative readout of 3.4% for the complete media sector.

Solid cash flows boost payout prospects

On top of its bubbly earnings performance, Sky’s ability to churn out oodles of cash has enabled it to maintain an ultra-progressive dividend policy as well as generous share repurchase programme. Adjusted free cash flow registered at £1.01bn last year, down marginally from £1.04bn in 2013 but still a colossal reading.

On top of this, the satellite specialist’s predicted dividend for 2015 is also well protected by forecasted earnings, with dividend coverage of 1.9 times just below the widely-regarded safety standard of 2 times or above.

Despite the recent charge of BT Group and TalkTalk, Sky saw adjusted revenues rise 7% to £7.6bn last year due to a strong performance at its core operations. The number of new retail customers, at 342,000, represented the strongest growth rate for three years, while the number of new pay-TV subscriptions almost doubled from the previous year, to 264,000.

And the company is investing heavily in other areas to boost its customer base, from boosting its Sky Store movie rental service through to enhancing its Sky Go watch-as-you-move facility.

With the firm also shelling out almost £5bn to acquire Sky Italia and Sky Germany in recent days, a decision that should give the group improved financial clout and access to customers across the continent, I believe that the firm is well positioned to offer up improved earnings and dividend prospects to its shareholders.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Royston Wild has no position in any shares mentioned. The Motley Fool recommends British Sky Broadcasting.

More on Investing Articles

Investing Articles

Are these the best stocks to buy on the FTSE right now?

With the UK stock market on the way to hitting new highs, this Fool is considering which are the best…

Read more »

Petrochemical engineer working at night with digital tablet inside oil and gas refinery plant
Investing Articles

Can the Centrica dividend keep on growing?

Christopher Ruane considers some positive factors that might see continued growth in the Centrica dividend -- as well as some…

Read more »

Smiling family of four enjoying breakfast at sunrise while camping
Investing Articles

How I’d turn my £12,000 of savings into passive income of £1,275 a month

This Fool is considering a strategy that he believes can help him achieve a stable passive income stream with a…

Read more »

Person holding magnifying glass over important document, reading the small print
Investing Articles

2 top FTSE 250 investment trusts trading at attractive discounts!

This pair of discounted FTSE 250 trusts appear to be on sale right now. Here's why I'd scoop up their…

Read more »

Smiling young man sitting in cafe and checking messages, with his laptop in front of him.
Investing Articles

3 things that could push the Lloyds share price to 60p and beyond

The Lloyds share price has broken through 50p. Next step 60p? And then what? Here are some thoughts on what…

Read more »

Young female business analyst looking at a graph chart while working from home
Investing Articles

£1,000 in Rolls-Royce shares a year ago would be worth this much now

Rolls-Royce shares have posted one of the best stock market gains of the past 12 months. But what might the…

Read more »

Investing Articles

Are HSBC shares a FTSE bargain? Here’s what the charts say!

There are plenty of dirt-cheap FTSE 100 banking stocks for investors to choose from today. Our writer Royston Wild believes…

Read more »

Three signposts pointing in different directions, with 'Buy' 'Sell' and 'Hold' on
Investing Articles

Just released: Share Advisor’s latest ‘Hold’ recommendation [PREMIUM PICKS]

In our Share Advisor newsletter service, we provide buy, sell, and hold guidance for our universe of recommendations.

Read more »