Despite recently cutting dividends by 30%, Centrica (LSE: CNA) remains a great dividend play. For starters, it currently yields 4.7% and, despite its bottom line coming under pressure due to a lower oil price, it still has scope to increase dividends over the medium to long term.
For example, Centrica currently pays out around two-thirds of profit as a dividend and, while it is undergoing a transitional period with a new management team set to update its strategy, the company’s payout ratio could move upwards over the medium term. This, combined with a bottom line that is forecast to rise next year, shows that Centrica remains a top notch yield play.
While Unilever (LSE: ULVR) is better known for its vast exposure to emerging markets (from where around 60% of its revenue is derived) as well as its strong growth potential, its dividend prospects are equally appealing.
For example, Unilever currently yields 3% at the present time and, when you consider that it is expected to increase its bottom line by 10% this year and 8% next year, dividends per share could be all set to head northwards at a rapid rate. Furthermore, investor sentiment in Unilever appears to be strong, with shares in the consumer goods company posting gains of 11% in the last year. This could help to push them upwards, with investors being attracted by Unilever’s income prospects as well as its growth potential.
With a yield of 4.4%, Imperial Tobacco’s (LSE: IMT) appeal as an income stock is clear. However, things could get much better for investors in the company, with growth in dividends of 12% forecast for next year. This puts Imperial on a forward yield of 4.9%, with more growth to come over the medium term as the company’s bottom line moves upwards at a similar pace to the wider index.
And, while Imperial’s payout ratio is set to be 73% next year, it could go much higher due to the stability and consistency offered by the company’s revenue stream. As such, and while cigarette volumes are falling, Imperial remains a great dividend play with long term growth potential via e-cigarettes.
Having increased dividends per share at an annualised rate of 5.9% during the last four years, United Utilities (LSE: UU) remains one of the most consistent dividend stocks on the FTSE 100. And, allied to that, the water services company has seen its share price rise by 53% during the period, with total returns of 75% showing that there is more to the utility sector than just great yields.
And, looking ahead, United Utilities offers a great defensive option in case market sentiment declines. Its beta of 0.85 provides reduced volatility for its investors, while a yield of 4% highlights that despite its aforementioned price rise, United Utilities still offers one of the higher yields among FTSE 100 stocks.
Although Drax (LSE: DRX) is also a utility stock, with it operating a coal/biomass fuelled power station in Yorkshire, its performance is much more volatile than you would expect of a company sitting in such a stable sector. That’s at least partly because Drax is undergoing a major change as it shifts away from using coal to becoming a greener, biomass electricity generator.
And, with Drax’s profit set to fall by 33% this year, investor sentiment could come under more pressure in the short run and boost its forward yield of 2.7%. However, in the medium to long term, Drax appears to have a bright future, with net profit forecast to rise by 21% next year and provide scope for a dividend increase, with dividends set to be covered a very healthy 1.8 times by profit.