Shares paying high dividends are normally thought of as low-growth businesses, but could BAE Systems (LSE: BA), Vodafone (LSE: VOD) and AstraZeneca (LSE: AZN) reward shareholders with dividends paying over 4% and appreciate in value by 50% or more?

Winning bet?

BAE shareholders will welcome with open arms the increasing defence budgets in the UK, US, and Saudi Arabia, which together account for over 75% of sales. Due to these increased budgets, BAE may finally reverse five straight years of declining revenues when full-year results are announced next week. During this rebuilding phase management did well to cut costs and increase margins, which allowed earnings per share to remain level from 2010 to 2015 even as revenue fell 25%.

With major business lines much more profitable than they were prior to 2010 and year-on-year revenue finally due to increase, BAE shares could be in for significant upward rerating. Trading at a forward price/earnings multiple of 11.7, there’s room for the shares to grow to reach the levels of major US competitors Boeing and Lockheed Martin, which trade at 14 and 18 times earnings, respectively. This growth potential may not reach a full 50% over the medium term, but with a healthy 4.1% yielding dividend and better days ahead I believe BAE could be a winning bet for income investors.

One to watch

Vodafone’s £20bn infrastructure investment programme, Project Spring, is finally coming to a close this year and has already begun to bear fruit for the mobile phone operator. 4G coverage has expanded from 32% to 80% of Europeans, opening up wide swathes of the continent to Vodafone’s highly profitable data packages.

Analysts are forecasting the possibility of 5% annual organic growth over the next five years. When combined with substantially lower capital expenditure, this is forecast to increase earnings by 19% next year alone. Furthermore, the 5.3% yielding dividend is now covered by earnings and holds the potential to rise alongside profits over the medium term. The bad news for intrigued investors is that much of this growth is baked into share prices already as they’re trading at 34 times projected 2017 earnings. Given current valuations, I don’t foresee the shares increasing in value by 50% over the medium term although Vodafone is still a share to watch.

Patent problems

Drug maker AstraZeneca was knocked back last week on poor guidance for 2016 after blockbuster cholesterol drug Crestor’s patent expired. With heartburn treatment Nexium losing its own patent later this year, AstraZeneca was forced to go on a $10bn buying spree last year to restock its drug pipeline. While the long-term prospects may be very good for AstraZeneca, as management is increasing R&D spending as well as M&A, I believe there will be further pain in the short term for prices.

It’s the nature of the pharmaceuticals industry that drugs take many years to develop before coming to market, and it could be years before AstraZeneca finds a replacement for Nexium and Crestor, which provided more than 35% of revenues last year. Share prices have been mostly flat for the past two years, allowing the P/E ratio to settle at a relatively attractive 15 times forward earnings. Shares may not skyrocket 50% anytime soon, but offer a 4.2% yield and are worth following over the next few years as more drugs go to trial.

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Ian Pierce has no position in any shares mentioned. The Motley Fool UK has recommended AstraZeneca. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.