Wm. Morrison Supermarkets
Clearly, the present time is extremely challenging for Morrisons (LSE: MRW), with sales tumbling, profit due to fall by a half in the current year, and dividends set to be cut by 16.5% next year.
Despite this, Morrisons is still set to yield 5.6% in 2015 and, impressively, dividends are due to be covered 1.3 times by profit. This means that dividends are relatively sustainable at their current level – especially if the supermarket sector enjoys an economic tailwind from real terms rises in wages over the medium term.
As a result, and despite enduring a hugely challenging period, Morrisons remains a top dividend play for me that could give your income a major boost next year.
Also experiencing challenging market conditions is Vodafone (LSE: VOD), with its large exposure to Europe holding back sales and profitability growth.
However, with the ECB on the brink of starting their own QE programme, Vodafone could see an uplift in performance due to a more stable Eurozone in 2015. This could help it to grow its bottom line and improve its earnings outlook over the medium term.
Despite this, dividends per share are currently significantly higher than earnings per share (11.3p versus 6.2p) and, as a result, the current payout ratio appears to be unsustainable. As such, Vodafone’s 5% yield could come under pressure unless its bottom line moves higher at a brisk pace.
With a yield of 6.4%, Amlin (LSE: AML) is a star income stock. Certainly, its bottom line is hugely volatile but, being an insurer, it is never going to be the most stable of stocks, as claims values vary significantly from one year to the next.
However, dividend cover is relatively high at 1.7 times and this means that Amlin has considerable headroom when making shareholder payouts. Should income fall substantially, for example, dividends are unlikely to come under threat in the short term.
With Amlin having a price to earnings (P/E) ratio of just 9.4, it seems to offer great value for money, as well as a top notch, well-covered yield.
Part of the reason for Debenhams (LSE: DEB) having a yield of 4.8% is disappointing share price performance during 2014. Indeed, shares in the department store have fallen by 3% this year, with sentiment declining due to a 20% fall in the company’s bottom line.
Although earnings are forecast to rise by just 2% next year, Debenhams has considerable appeal as a value and income play. For example, it trades on a P/E ratio of just 9.3 and, with dividends being covered 2.2 times by profit, its shareholder payouts could rise at a rapid rate moving forward.
Therefore, it could be a much stronger performer in 2015 than it has been thus far in 2014.
For long-term investors seeking a yield, the commitment from Berkeley (LSE: BKG) to pay out around £10.46 per share in dividends over the next seven years is difficult to beat. This equates to a yield of around 6.1% per annum at the current share price, although dividends are likely to be somewhat lumpy over the period and not paid out in equal amounts over the next seven years, as market conditions inevitably change.
While not a guarantee, a commitment by a firm to pay out such a generous dividend over such a long period indicates confidence in their ability to deliver on it. And, with shares in the housebuilder trading on a P/E ratio of just 10.5, they seem to offer superb value as well as stunning income potential.
So, while all five stocks could give your income a major boost next year, Amlin, Debenhams and Berkeley seem to be ahead of Vodafone and Morrisons owing to their higher yield, higher payout ratio and long-term commitment, respectively.