Over the past year, the FTSE 100 has gained a little under 15%. That’s not a bad result, especially in low-interest times like these. But what a lot of people miss is that it has also returned an average 3% dividend yield, with forecasts suggesting that will rise to 3.2% over the next 12 months. With a number of the FTSE’s constituents reinvesting in growth and paying low dividends, at the other end there are some handsome payouts to be had.
Here are three of my favourite dividend prospects for 2014:
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SSE
Utilities companies are always good for reliable dividend payments. They have a captive customer base, excellent business transparencey, and they can afford to hand out the bulk of their earnings in dividend payments. I reckon SSE (LSE: SSE) is one of the best.
The share price has fallen of late, partly in response to politicians jumping on the “bash the utilities” electioneering bandwagon, but that’s actually improved the dividend yield prospects if you buy now. With SSE shares currently trading at 1,344p, the forecast dividend for the year ending March 2014 of around 88p would yield 6.4%.
A year further out and the City has penciled in a 6.7% yield, so there’s even room for a cut while still leaving a good amount of cash.
GlaxoSmithKline
The big pharmaceuticals companies are generally regarded as good for dividends too, and even though the so-called patent cliff has ended some of their blockbuster profits in recent years, payments are still looking steady.
For the year ending December 2013, GlaxoSmithKline (LSE: GSK) (NYSE: GSK.US) is forecast to pay around 78p per share, which would give us a 4.8% yield on today’s 1,604p share price. That dividend should be covered approximately 1.4 times, which is perhaps a bit low, but cover rises slightly to 1.5 times for 2014’s forecast 5.1% yield.
And a forecast return to earnings growth in 2014 should provide some confidence.
Wm. Morrison Supermarkets
Wm. Morrison Supermarkets (LSE: MRW) (NASDAQOTH: MRWSY.US) shares have had a poor year, gaining barely a couple of percent, and over two years the price has fallen.
But coupled with four years of rising earnings, that’s helped boost the dividend yield — from only 2.1% in 2009, it has risen steadily to 4.7% for the year to February 2013 and there’s a 4.8% payment predicted for the current year. Sure, the City is expecting a 10% drop in EPS, but the predicted dividend should still be nearly twice-covered and the shares are on a forward P/E of under 11.
With a return to earnings growth predicted for 2015 along with an even bigger dividend, that makes Morrisons look like a good income pick to me, with a possibility of a share price recovery as a bonus.
