Today I am looking at three blue-chip winners set to deliver stunning returns in 2015.
GlaxoSmithKline
The effect of revenues-sapping patent losses has weighed heavily on GlaxoSmithKline’s (LSE: GSK) (NYSE: GSK.US) bottom line in recent years, and the firm has failed to punch two consecutive years of growth for what seems an age now. And City analysts expect this trend to continue during the medium term at least, with a 17% earnings slide pencilled in for this year.
Despite these travails, the pharma giant’s ability to throw up plenty of cash has enabled it to continue raising the full-year dividend during this time — GlaxoSmithKline has lifted the payment at a compound annual growth rate of 6.3% during the past five years alone.
And the number crunchers expect the dividends to continue rolling higher as a result, and GlaxoSmithKline is anticipated to raise the payout 3% in 2014, to 80.1p per share, and a further 1% next year to 81p. Consequently the Brentford firm boasts a chunky yield of 5.4% for this year — comfortably above the 3.3% FTSE 100 average — and which advances to 5.5% for 2015.
Earnings are expected to flip 1% higher next year as the company’s promising drug pipeline begins to deliver the next generation of sales-boosting drugs, a promising omen for future payout growth. And with GlaxoSmithKline embarking on a new £1bn cost-saving initiative, I believe that the firm’s already-attractive dividend outlook should improve considerably in coming years.
Legal & General Group
Backed up by an aggressive acquisition policy and emphasis on developing its brand in emerging markets, Legal & General (LSE: LGEN) (NASDAQOTH: LGGNY.US) has seen growth spurt skywards during the past couple years. When combined with the firm’s terrific cash-generative qualities, boosted by surging business inflows, dividends are expected to keep marching higher though to the end of 2015.
Indeed, an 11% earnings advance in 2014 is anticipated to push the full-year dividend 19% higher this year to 11.1p per share. And an additional 9% increase in 2015 will drive the payout 13% northwards to 12.5p, according to City analysts. As a result Legal & General’s chunky yield of 4.5% for this year shoots to a wallet-busting 5.1% for 2015.
Legal & General has seen the value of its international assets treble during the past four years, and I believe that a backcloth of rising affluence levels and low product penetration in key growth markets should keep the sales column ticking higher. Meanwhile a diversified product base spanning the insurance, savings and investment spheres should guard against earnings weakness and keep dividends flowing.
Old Mutual
Life insurance giant Old Mutual (LSE: OML) has maintained an ultra-progressive dividend policy in recent years despite the effect of wavering earnings growth, a phenomenon which the abacus bashers expect to continue during the next 12 months at least.
A 9% advance in the full-year payout is currently pencilled in for 2014, to 8.75p per share, despite an anticipated 10% earnings drop. And with the bottom line predicted to expand 16% in 2015, Old Mutual will push the dividend 13% higher to 9.9p, according to current forecasts.
Accordingly, yields at the business rise from 4.3% this year to a far more appetising 4.9% for 2015.
The firm’s huge reliance on the South African market has seen group sales slow more recently owing to weak consumer trends there. Still, I believe that once current cyclical woes in its critical African markets abate — boosted by improvements in its product distribution infrastructure — Old Mutual should see earnings and dividends continue to surge beyond next year.
