4 Shares Yielding More Than 5%: GlaxoSmithKline plc, SSE plc, Infinis Energy plc & John Laing Environmental Assets Group Lt

GlaxoSmithKline plc (LON:GSK), SSE plc (LON:SSE), Infinis Energy plc (LON:INFI) and John Laing Environmental Assets Group Lt (LON:JLEN) have dividend yields above 5%

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

GSK

GlaxoSmithKline (LSE: GSK) is struggling with the increase in generic competition, as its major blockbuster drugs lose patent protection. Advair, GSK’s best selling respiratory drug, saw revenues fall 21% to £392 million in the first quarter of 2015, as it faced a fall in market share and pricing pressures.

Although its consumer healthcare and vaccines business is doing better, weakness from its pharmaceutical business continues to act as a drag on earnings. With adjusted EPS expected to fall another 16% this year, GSK can no longer afford to sustain further dividend increases. Management has said that it intends to keep its dividend at 80 pence annually until 2018.

They also expect adjusted EPS will grow in the mid-to-high single digits over in the five years from 2016 onwards. But, intensifying competition for Advair could offset the gains from the sales of new respiratory products. So, despite its 5.9% dividend yield, GSK is relatively unattractive.

SSE

Weaker wholesale electricity prices had weakened the margins of SSE’s (LSE: SSE) wholesale electricity generation business, and this trend is likely to continue as lower fuel prices will continue to exert downward pressure on wholesale electricity prices. But, it’s diversified generation mix should dampen the effect of lower wholesale prices, because its renewable capacity depends more significantly on government subsidies. In addition, it is set to benefit from the introduction of the capacity market in 2018/9.

SSE’s sizeable regulated networks business means that its earnings are generally more stable than other power generators. With a regulated asset value of £7.35 billion, its regulated networks business now accounts for just over half of the utility company’s operating profits. Its regulated asset base is also growing rapidly with the need for more investment to connect generation from renewable sources. This should enable SSE to deliver sustainable dividend growth. Its shares currently yield 5.6%

Infinis Energy

Renewable energy generator, Infinis Energy (LSE: INFI) has an impressive dividend yield of 9.3%. Lower wholesale electricity prices and less windy conditions last summer caused adjusted net income to fall 7.6% to 36.3 million.

As the business is highly cash generative, the company had sufficient free cash flow to fund its dividend payments and its capital investment needs in 2014. Its strong pipeline of new wind projects should mean that Infinis Energy’s dividend yield is sustainable in the medium term.

Infinis Energy has 43 MW of new wind plant capacity currently in construction, which will be mostly be unaffected by the withdrawal of the government’s Renewables Obligation subsidy for onshore wind farms. Even under the new contract for difference (CfD) regime, returns are still attractive; and Infinis Energy plans to continue to meet its 700 MW of renewable generation capacity target by 2017.

With a dividend yield of over 9%, Infinis Energy is an attractive income stock.

John Laing Environmental Assets

Structured in a similar way as John Laing Infrastructure Fund (LSE: JLIF), John Laing Environmental Assets (LSE: JLEN) invests primarily in in renewable energy, water treatment and waste management projects.

The fund targets an internal rate of return (IRR) of between 7.5% to 8.5%, and its fund manager currently charges a 1.0% management fee of the fund’s adjusted portfolio value. Even with the end of Renewables Obligation subsidy for onshore wind farms, the fund still has an attractive investment pipeline.

Its shares currently trade at a 4.3% premium to its net asset value (NAV), and yields 5.6%. The fund’s dividend is expected to grow in line with RPI inflation, but NAV growth is likely to be limited. This should mean that capital appreciation for the fund is also going to be limited.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Jack Tang has no position in any shares mentioned. 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.

More on Investing Articles

Young black female footballer training on stadium pitch
Investing Articles

Why has this penny stock exploded 130% higher this year?

This AIM-listed penny stock started the year below 12p but now trades for 27p. Charlie Carman delves into the reasons…

Read more »

Investing Articles

This FTSE 100 giant is going through the mire! Should I buy the dip?

Sumayya Mansoor explains why this FTSE 100 consumer goods giant is currently on her radar. But is it one for…

Read more »

Silhouette of a bull standing on top of a landscape with the sun setting behind it
Investing Articles

Here’s 1 UK stock that I think will soar in the next FTSE bull market

This investor in AIM-listed hVIVO (LON:HVO) reckons the UK stock could continue rising higher after today's strong interim results.

Read more »

Man writing 'now' having crossed out 'later', 'tomorrow' and 'next week'
Investing Articles

After jumping 12% in a month, is this overlooked FTSE dividend stock a buy?

Harvey Jones tipped this FTSE 100 dividend share to do well a couple of months ago, but he didn't expect…

Read more »

Investing Articles

Investing in FTSE stocks could earn me a 5-figure passive income stream!

This Fool explains how investing in dividend stocks could mean she’s able to earn and enjoy a passive income stream…

Read more »

Investing Articles

Here’s where I think the boohoo share price goes next

The last few years have been difficult for those watching the boohoo share price, but is there hope the retail…

Read more »

Investing Articles

2 FTSE shares that could benefit from falling interest rates

Could more interest rate cuts send FTSE shares soaring again? Our writer thinks so and details two real estate stocks…

Read more »

Investing Articles

With self-driving coming to Europe and China, I’m watching the Tesla share price

The Tesla share price is always an interesting watch, but with its self-driving technology going global, I'm paying closer attention.

Read more »