On The Lookout For Delicious Dividends? Search No Further Than GlaxoSmithKline plc, Imperial Tobacco Group PLC And Royal Mail PLC

Royston Wild explains why I consider GlaxoSmithKline plc (LON: GSK), Imperial Tobacco Group PLC (LON: IMT) and Royal Mail PLC (LON: RMG) to be top-drawer dividend selections.

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Today I am highlighting the investment case for three of the best income stocks to be found on the London bourses.

GlaxoSmithKline

Drugs leviathan GlaxoSmithKline (LSE: GSK) (NYSE: GSK.US) has seen earnings whacked in recent times as the enduring issue of patent expirations across key products drags on, while recent misconduct in China has also smacked its performance in developing markets.

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Still, with the Cambridge company investing vast sums into its organic R&D pipeline — not to mention engaging in acquisitions and synergies with industry peers like Novartis — I reckon that the firm has what it takes to continue offering market-busting dividends for some time to come.

GlaxoSmithKline is anticipated to record its fourth annual earnings decline in 2015 due to ongoing sales woes, even though an anticipated 4% dip would mark a vast improvement from the 12% drop punched last year. With the company aiming to kick-start its revenues profile GlaxoSmithKline has vowed to keep the total payout locked at 80p per share in 2015, matching that of the previous year.

But investors should be aware that this forecast still creates a sizeable yield of 5.1%. And with the pharma play’s heavy lifting at the lab bench expected to pay off from next year onwards — a 4% earnings improvement is currently chalked in for 2016 — I expect dividends to march higher again in the coming years.

Imperial Tobacco Group

I have long been a holder of Imperial Tobacco Group (LSE: IMT) shares owing to the defensive nature of its operations, an attractive facet for investors seeking reliable dividend growth. It is true that changing social attitudes towards smoking, exacerbated by regulatory moves to constrain the usage and marketing of traditional tobacco products, has dented sales in recent years.

But I believe that rising consumer spending power in critical emerging markets; increased investment in growth brands like West and John Player Special; and aggressive entry into the white-hot e-cigarette sector, particularly in the US, should drive earnings and consequently dividends sky high looking further ahead.

Despite expectations of a marginal earnings uptick during the year ending September 2015, Imperial Tobacco is predicted to drive the total dividend to 140.4p per share from 128.1p last year. And a further payment hike, to 157.3p, is estimated for 2016, underpinned by a solid 5% earnings improvement.

As a result Imperial Tobacco sports a mouth-watering yield of 4.5% for this year, and which explodes to an eye-popping 5.1% for 2016.

Royal Mail

I believe that a backcloth of surging parcels traffic, combined with the results of aggressive restructuring, should keep payouts at Royal Mail (LSE: RMG) ticking steadily higher in coming years. Not only do I expect Britain’s premier courier to make waves at home, particularly on the back of accelerating e-commerce, but the firm’s GLS continental operations also offers terrific potential — volumes and revenues here leapt 8% in April-December.

Royal Mail is anticipated to have delivered a 23% earnings advance in the year concluding March 2015, and although a 7% slip is anticipated in 2016, this is expected to be a temporary setback as the bottom line swells 13% the following year.

Consequently the company is predicted to lift a full-year payout of 20.3p per share for the outgoing year to 20.9p in 2016, and again to 21.3p in 2017. These projections drive a chunky yield of 4.6% for last year to an even-better 4.7% for this year and to 4.8% in 2017.

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Royston Wild owns shares of Imperial Tobacco Group. The Motley Fool UK has recommended GlaxoSmithKline. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

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