Renowned fund manager Neil Woodford has been thrashing the market for a quarter of a century. Woodford is a very selective stockpicker. Fewer than 1 in 10 of the UK’s top 350 companies earn a place in his funds.
Hence, I always keep an eye on his holdings for promising investment ideas.
The following three FTSE 100 firms all currently offer prospective dividend yields of above 5.5%, compared with the FTSE 100 average of 3.3%:
| Recent share price | Forecast yield | |
| GlaxoSmithKline (LSE: GSK) (NYSE: GSK.US) | 1,417p | 5.6% |
| Centrica (LSE: CNA) (NASDAQOTH: CPYYY) | 307p | 5.7% |
| SSE (LSE: SSE) | 1,438 | 6.2% |
GlaxoSmithKline
GSK’s shares are trading close to a 52-week low. Allegations of bribery in China, which have hurt sentiment, were already in the public domain when Woodford loaded up on GSK stock for his new fund towards the end of June.
However, the UK’s top pharma company has since released disappointing half-year results, with competition from generic drugs, some supply-chain problems and adverse currency movements all playing a part. Core earnings are now expected to be flat for the full year (at constant exchange rates).
Nevertheless, management said “we remain confident in GSK’s medium and long-term growth prospects”. The Board lifted the Q2 dividend (the ex-dividend date is 6 August) by 6%, and analysts’ full-year expectations give a prospective yield of 5.6%.
Centrica
Just as GSK’s China troubles didn’t stop Woodford from investing in the pharma firm, so the political and regulatory headwinds currently buffeting the UK’s energy utilities didn’t stop him backing Centrica, the owner of British Gas. As with GSK, Centrica’s shares are currently trading close to a 52-week low.
Also like GSK, Centrica has recently released disappointing first-half results. Abnormal weather conditions played a big part, and management said full-year earnings will be lower than last year.
However, the company expects a return to growth in 2015 and the Board reaffirmed its “commitment to real dividend growth”. The half-year payout was lifted 4% (ex-dividend date of 24 September), and analysts’ full-year forecasts give a prospective yield of 5.7%.
SSE
SSE faces the same challenging political and regulatory environment as Centrica. But again, Woodford has backed the previously named Scottish & Southern Energy for his new fund.
SSE told shareholders at its AGM last month that despite tough energy market conditions, “we are on course to give shareholders a return on their investment through a dividend increase that at least keeps pace with inflation”.
Analysts are forecasting a rise of 3% or so on last year’s payout, which gives a prospective top-of-the-tree yield of 6.2%.
