3 dividend darlings: HSBC Holdings plc, Next plc & InterContinental Hotels Group plc

Today I’ll be taking a closer look at banking giant HSBC (LSE: HSBA), clothing retailer Next (LSE: NXT), and global hotel business Intercontinental Hotels Group (LSE: IHG). Can we expect these FTSE 100 blue-chips to raise their dividend payouts in the future?

Fat cat income

Like most banks HSBC has been under considerable pressure since the financial crisis, with revenues and earnings both nose-diving. But unlike its rivals, HSBC has continued to reward its shareholders with surprisingly healthy dividend income. In fact, investors have been treated to yields of between 4.8% and 6.5% over the last five years, not bad for a company under tremendous pressure.

But can this continue? Analysts expect a 3% fall in earnings to 43.53p per share this year, followed by an 8% rebound to 46.9p in the year to 31 December 2017. Dividends are forecast at 35.25p per share this year, rising slightly to 35.66p next year, giving prospective yields of 7.6% for the next couple of years. For me, HSBC remains a strong income play.

Still in fashion?

Fashion and interiors retailer Next has been a great British success story for many years, with revenues and earnings growing year-on-year. But despite being a growth stock, the company has had a progressive dividend policy for a number of years, with the annual payout rising from just over 20p per share in 2001 to 158p for the year to 30 January. With yields between 2% and 4%, Next is certainly not a pure income play, but the company has been happy to increase its payout each and every year.

So can we expect healthy dividend growth to continue in the coming years? Well, not quite. Our friends in the City are expecting the dividend to be increased from 158p per share to 190.30p for the current year, then dropping slightly to 183.65p for fiscal 2018. This will give the shares a prospective yield of 3.7% and 3.6% for this year and next.

So the market is expecting an uncharacteristic dividend cut from the retailer in 2018, largely due to difficult trading conditions and uncertainty in the global economy. It seems that investors can no longer be certain of rapidly rising dividend payouts. Next has seen a slowdown in growth in recent years, and investors might want to stay on the sidelines until the outlook improves.

Get a room! 

As with Next, InterContinental Hotels Group has achieved excellent earnings growth for well over a decade, and although not a classic income stock, has rewarded shareholders with rising dividends. In fact long-term investors will have seen their dividends grow from below 20p per share a decade ago, to 58p in 2015.

Dividend payouts are expected to increase further this year to 66.5p per share, and again next year to 72.8p, but recent share price gains translate into average-looking prospective yields of around 2.5%. Furthermore, with the shares trading on 21 and 18 times forecast earnings for this year and next, it seems the company’s growth is already reflected in the price, and the shares don’t offer much upside potential in the medium term.

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Bilaal Mohamed has no position in any shares mentioned. The Motley Fool UK has recommended HSBC 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.