Which Of These 5 Stocks Could Transform Your Income In 2015? Wm. Morrison Supermarkets plc, Vodafone Group plc, Amlin plc, Debenhams Plc Or Berkeley Group Holdings PLC

Can Wm. Morrison Supermarkets plc (LON:MRW), Vodafone Group plc (LON:VOD), Amlin plc (LON:AML), Debenhams Plc (LON:DEB) or Berkeley Group Holdings PLC (LON:BKG) make a real difference in 2015?

| More on:

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.

Wm. Morrison Supermarkets

Clearly, the present time is extremely challenging for Morrisons (LSE: MRW), with sales tumbling, profit due to fall by a half in the current year, and dividends set to be cut by 16.5% next year.

Despite this, Morrisons is still set to yield 5.6% in 2015 and, impressively, dividends are due to be covered 1.3 times by profit. This means that dividends are relatively sustainable at their current level – especially if the supermarket sector enjoys an economic tailwind from real terms rises in wages over the medium term.

As a result, and despite enduring a hugely challenging period, Morrisons remains a top dividend play for me that could give your income a major boost next year.

Vodafone

Also experiencing challenging market conditions is Vodafone (LSE: VOD), with its large exposure to Europe holding back sales and profitability growth.

However, with the ECB on the brink of starting their own QE programme, Vodafone could see an uplift in performance due to a more stable Eurozone in 2015. This could help it to grow its bottom line and improve its earnings outlook over the medium term.

Despite this, dividends per share are currently significantly higher than earnings per share (11.3p versus 6.2p) and, as a result, the current payout ratio appears to be unsustainable. As such, Vodafone’s 5% yield could come under pressure unless its bottom line moves higher at a brisk pace.

Amlin

With a yield of 6.4%, Amlin (LSE: AML) is a star income stock. Certainly, its bottom line is hugely volatile but, being an insurer, it is never going to be the most stable of stocks, as claims values vary significantly from one year to the next.

However, dividend cover is relatively high at 1.7 times and this means that Amlin has considerable headroom when making shareholder payouts. Should income fall substantially, for example, dividends are unlikely to come under threat in the short term.

With Amlin having a price to earnings (P/E) ratio of just 9.4, it seems to offer great value for money, as well as a top notch, well-covered yield.

Debenhams

Part of the reason for Debenhams (LSE: DEB) having a yield of 4.8% is disappointing share price performance during 2014. Indeed, shares in the department store have fallen by 3% this year, with sentiment declining due to a 20% fall in the company’s bottom line.

Although earnings are forecast to rise by just 2% next year, Debenhams has considerable appeal as a value and income play. For example, it trades on a P/E ratio of just 9.3 and, with dividends being covered 2.2 times by profit, its shareholder payouts could rise at a rapid rate moving forward.

Therefore, it could be a much stronger performer in 2015 than it has been thus far in 2014.

Berkeley

For long-term investors seeking a yield, the commitment from Berkeley (LSE: BKG) to pay out around £10.46 per share in dividends over the next seven years is difficult to beat. This equates to a yield of around 6.1% per annum at the current share price, although dividends are likely to be somewhat lumpy over the period and not paid out in equal amounts over the next seven years, as market conditions inevitably change.

While not a guarantee, a commitment by a firm to pay out such a generous dividend over such a long period indicates confidence in their ability to deliver on it. And, with shares in the housebuilder trading on a P/E ratio of just 10.5, they seem to offer superb value as well as stunning income potential.

So, while all five stocks could give your income a major boost next year, Amlin, Debenhams and Berkeley seem to be ahead of Vodafone and Morrisons owing to their higher yield, higher payout ratio and long-term commitment, respectively.

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.

Peter Stephens owns shares of Amlin, Debenhams, Berkeley Group and Morrisons. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Passive income text with pin graph chart on business table
Investing Articles

Yields of up to 7%! I’d consider boosting my income with these FTSE dividend stocks

The London market has some decent-looking dividend stocks right now, and I’m tempted by these two for growing income streams.

Read more »

Young mixed-race couple sat on the beach looking out over the sea
Investing Articles

I’d put £20K in an ISA now to target a £1,900 monthly second income in future!

Christopher Ruane shares why he thinks a long-term approach to investing and careful selection of shares could help him build…

Read more »

Mature couple at the beach
Investing Articles

6 stocks that Fools have been buying!

Our Foolish freelancers are putting their money where their mouths are and buying these stocks in recent weeks.

Read more »

Black woman using loudspeaker to be heard
Investing Articles

I was right about the Barclays share price! Here’s what I think happens next

Jon Smith explains why he still feels the Barclays share price is undervalued and flags up why updates on its…

Read more »

Investing Articles

Where I’d start investing £8,000 in April 2024

Writer Ben McPoland highlights two areas of the stock market that he would target if he were to start investing…

Read more »

View of Tower Bridge in Autumn
Investing Articles

Ahead of the ISA deadline, here are 3 FTSE 100 stocks I’d consider

Jon Smith notes down some FTSE 100 stocks in sectors ranging from property to retail that he thinks could offer…

Read more »

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

Why I think Rolls-Royce shares will pay a dividend in 2024

Stephen Wright thinks Rolls-Royce shares are about to pay a dividend again. But he isn’t convinced this is something investors…

Read more »

Investing Articles

1 of the best UK shares to consider buying in April

Higher gold prices and a falling share price have put this FTSE 250 stock on Stephen Wright's list of UK…

Read more »