Carburton Street, London -- Scottish & Newcastle (LSE: SCTN) is a candidate for anybody's high yield portfolio. At 513p, the shares presently offer a prospective dividend yield of 5.7%. The stable nature of the group's brewing activities mean there's unlikely to be a sudden profit or dividend upset. Indeed, within today's interim results, S&N expressed confidence in meeting the stock market's expectations for the full year.
S&N has undergone somewhat of a transformation of late. Out has gone a hoard of underperforming pubs, in has come a focus on beer. However, the company has received criticism from some quarters after keeping some of its branded pub, restaurant and budget accommodation chains. But the recent restructure does appear to be bearing fruit.
Today's figures showed how the group's UK brewing subsidiary improved operating profits from £103m to £108m. Elsewhere, acquisitions helped international operating profits jump 66% to £68m. Meanwhile, S&N's retained leisure interests improved operating profits by 7% to £106m.
However, most of the company's overall 5% profit growth came from improved efficiency. Although domestic volumes of S&N's major brands improved 1.8%, group UK beer sales fell 1%. French beer sales fell 1.1%. While super steady and recession proof, beer just isn't a high growth industry.
But a lack of organic growth opportunities shouldn't sway investors from what is a decent, predictable, high yield company. Perhaps the only worry for prospective shareholders would be the company's dividend cover, it being a slightly low 1.5. Earnings per share of 44.8p are expected for the full year, with a full year dividend of 29.2p also being pencilled in.
That said, the company has commendably continued to improve its dividend in recent years, even though earnings have declined following the recent disposals. That alone should underpin shareholders' faith in S&N as a top-notch high yield share.
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