3 Stunning Dividend Stars: ARM Holdings plc, Mitie Group PLC & Aviva plc

Royston Wild explains why income seekers need to check out ARM Holdings plc (LON: ARM), Mitie Group PLC (LON: MTO) and Aviva plc (LON: AV).

| 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.

Today I am looking at the dividend prospects of three London-quoted stock giants.

Payments pounding higher

Dividend yields over at microchip manufacturer ARM Holdings (LSE: ARM) have long lagged the wider average of Britain’s blue-chip index. The Cambridge-headquartered business has long been a terrific earnings generator, while cash coming into the business has also stomped relentlessly higher for donkey’s years now.

Still, these qualities have failed to translate into white-hot dividends thanks to the gargantuan investment ARM Holdings needs to keep it at the cutting edge of chip design, a critical discipline for the business to remain a favoured supply with the likes of Apple and Samsung.

With earnings expected to have surged a further 67% in 2015, City expects ARM Holdings to hike the dividend by an exceptional 18%, to 8.3p per share. And dividends are predicted to rev 22% higher in the current 12-month period, to 10.1p, driven by an extra 14% bottom-line boost.

I fully expect many short-term investors to give the tech giant short shrift as this year’s figure still produces a paltry 0.9%, some way short of the FTSE 100 average around 3.5%.

But for patient stock seekers I reckon ARM Holdings is certainly one to keep an eye on. Such stratospheric hikes in the annual dividend should not be given scant regard, particularly as demand for the firm’s chips in established markets like smartphones, as well as new product areas like servers, continues to march higher. I fully expect shareholder rewards to continue to surge along with profits.

Supporting stellar returns

Unlike ARM Holdings, support services specialists Mitie Group (LSE: MTO) have long offered up chunky dividends to income-hungry investors. The wide and indispensable nature of the firm’s operations — from pest control and cleaning right through to insurance claims management — has provided the business with the terrific earnings visibility to keep payouts marching northwards.

So even though the bottom line at Mitie Group is expected to flatline in the year to March 2016, the company’s impressive long-term prospects are expected to drive the dividend from 11.7p per share last year to 12.2p in the present period. And a further raise is anticipated for fiscal 2017, to 13p, accompanied by a meaty 7% earnings rise.

As a consequence Mitie Group carries chunky yields of 4% and 4.2% for 2016 and 2017 correspondingly. With a chunky order book underlining the company’s enviable ability to grind out contract wins, I fully expect dividends to continue rising at a decent rate.

Hold on for stonking yields

Helped by the splendid cash flows delivered by Friends Life, I believe life insurance giant Aviva (LSE: AV) is a terrific selection for those seeking brilliant dividends in the near-term and beyond.

Aviva is expected to raise 2014’s dividend of 18.1p per share to 21p in the year just passed, shrugging off an anticipated 8% earnings decline. And a 11% recovery is expected to thrust the payment to 24.2p in 2016. Consequently Aviva’s yield leaps to a stunning 4.8% for the current period.

And I believe the company has plenty of levers to keep payouts surging higher — its operations in Europe continue to throw up plenty of cash, while its Polish, Turkish and Asian units provide exciting opportunities for earnings expansion. As a consequence I believe Aviva is one of the more solid income picks amongst Britain’s listed insurers, particularly as Solvency II capital directives hit the sector.

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 UK has recommended ARM Holdings. 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

Investing Articles

Could the JD Sports Fashion share price double in the next five years?

The JD Sports Fashion share price has nearly halved in the past five years. Our writer thinks a proven business…

Read more »

Bus waiting in front of the London Stock Exchange on a sunny day.
Investing Articles

If interest rate cuts are coming, I think these UK growth stocks could soar!

Falling interest could be great news for UK growth stocks, especially those that have been under the cosh recently. Paul…

Read more »

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 »