Today I am looking at three blue-chip superstars expected to deliver spectacular returns this year and beyond.
Admiral Group
The impact of galloping competition across the insurance sector — an issue worsened by the growing popularity of price comparison websites — is expected to have finally put paid to Admiral’s (LSE: ADM) proud record of earnings growth.
Indeed, the Cardiff-based business is expected to clock up an earnings decline of 3% when it reports its results for 2014, a figure that’s expected to worsen to 9% in 2015. As a result, Admiral is widely expected to take the hatchet to the full-year dividend this year, and speculation of a reduction to 91.2p per share, from an estimated 98.5p for 2014, is currently doing the rounds.
Still, investors should not lose sight of the fact that this year’s estimate still produces a hefty yield of 6.3%. And City analysts expect the company to get the dividend moving higher again from next year as earnings tick modestly higher — current projections indicate that Admiral will lift the total payment to 91.6p, maintaining the yield at 2015 levels.
Although the motor insurance sector looks set to remain challenging, the AA told the BBC this week that premiums could rise 10% in 2015, confirming Admiral’s comments in November that prices appear to have stabilised. With the insurer also boasting impressive customer retention rates and expanding abroad, shareholders could see dividends continue to head higher past 2016.
Standard Life
Fellow insurance leviathan Standard Life (LSE: SL) has forged a reputation as a terrific stock selection for those seeking perky dividend prospects, the company having kept the payout rolling in recent years even as earnings have oscillated wildly.
And the abacus bashers expect Standard Life to maintain its rampant popularity with income chasers, with the company lifting its total payout from an estimated 16.9p per share in 2014 to 18p in 2015. This projection produces a meaty yield of 4.6%. And expectations of a further dividend rise in 2016, to 19.3p, drives the readout to an eye-watering 4.9%.
These figures are copper-bottomed by forecasts of terrific earnings growth this year and next, with expansion to the tune of 19% and 17% pencilled in for 2015 and 2016 correspondingly.
Standard Life’s terrific product portfolio across the savings, investment and pensions markets leaves the firm in great shape to enjoy strong earnings, and thus dividend, growth, in coming years in my opinion — indeed, the firm has captured 500,000 corporate pension customers since auto-enrolment began, and is looking to hit the magic 1 million mark by 2017. The firm also seeing activity surge at its asset management arm, while cost inflation is also expected to rumble along at low levels, an additional boost to earnings.
Marks and Spencer Group
Embattled retailer Marks and Spencer (LSE: MKS) worried the market again this month by announcing that like-for-like general merchandise sales slumped 5.8% during October-December. The company said that enduring problems with its new website and unseasonal weather patterns significantly hampered performance during the period.
Even though these issues are expected to prompt earnings stagnation in the year concluding March 2015, the City expects Marks and Spencer to lift the dividend to 17.7p per share this year from 17p in fiscal 2014, in turn creating a sizeable yield of 3.9%.
And with earnings projected to take off once again from next year — growth of 9% and 8% is estimated for 2016 and 2017 correspondingly — Marks and Spencer will accordingly drive the annual payment to 18.7p and 20.1p for these years. As a consequence the yield rises to a lip-smacking 4.1% for 2016 and 4.4% for 2017.
And I believe that supportive economic factors in the UK should boost British shoppers’ spending power, and in turn bolster investor confidence in these projections — low petrol prices look set to persist for some time yet, as do nosediving grocery prices, while improving wage packets are also filtering through. On top of this, I reckon that Marks and Spencer’s multi-pronged expansion in hot Asian growth markets such as China and India should drive shareholder returns higher.
