Today I am looking at the dividend prospects of four terrific FTSE favourites.
Lloyds Banking Group
All eyes are on banking behemoth Lloyds (LSE: LLOY) this week, as brokers speculate whether the firm will unveil its plans for returning cash to shareholders at Friday’s interims.
After much anticipation Lloyds started out churning dividends again earlier this year, facilitated by a massive improvement in the balance sheet — the firm’s core tier 1 ratio currently stands around a healthy 13.4%. As a consequence a dividend of 2.7p per share is pencilled in for 2015 by the City, a figure that produces a decent yield of 3.1%. And this readout darts to 4.8% next year amid estimates of a 4.1p reward.
Lloyds has worked tirelessly to cut costs across the business, including the sale of non-core assets and massive expense-slashing through headcount reductions and branch closures. So although the business still faces the threat of mounting legal bills, the ongoing fruits of these measures — not to mention the positive impact of a recovering UK economy on its retail operations — should drive dividends steadily higher in the coming years, in my opinion.
Esure Group
Despite intense competition, car insurance giant Esure (LSE: ESUR) is anticipated to keep churning out market-beating dividends as revenues move steadily northwards. Motoring group AA advised last week that the average car premium jumped to more than £549 during April-June, the first quarterly advance for more than three years. The numbers prompted the group to announce that “the days of cheap car insurance premiums are over” as insurers finally curtail their race to the bottom.
Even though earnings are not anticipated to explode just yet, Esure’s strong capital position is expected to produce a full-year dividend of 15p per share in 2015, yielding an impressive 5.4%. And the payment forecast sprints to 15.5p for 2016, producing a terrific yield of 5.7%.
N Brown Group
Clothes retailer N Brown (LSE: BWNG) was forced to can its progressive dividend policy last year as the colossal cost of its transformation plan weighed. But with the Manchester firm’s move from mail order to online retailing now paying off handsomely, and a doubling-down on ‘Power Brands’ like Jacamo and Simply Be driving sales through the roof, all signs point towards an imminent resumption of dividend growth.
The City expects N Brown to lift the frozen payout of 14.23p per share for the year concluding February 2015 to 14.7p in the current year, and again to 15.4p in 2017. Consequently the retailer boasts yields of 4.5% for 2015 and 4.7% for the following period, and with consumer spending power continuing to improve, I fully expect earnings — and with it dividends — to continue rising.
Diageo
At face value Diageo (LSE: DGE) may not be the most electrifying dividend pick on a medium term basis. Don’t get me wrong: payment forecasts are far from terrible, although predicted dividends of 53.8p per share for the 12 months ending June 2015, and 57.4p for 2016 — resulting in yields of 2.9% and 3.1% respectively — are hardly figures to blow the average dividend hunter’s socks off.
Still, for more patient investors I reckon Diageo could prove to be a highly-lucrative stock selection as abating headwinds in crucial emerging regions drive revenues through the roof once again. Promisingly Diageo’s drive into far-flung territories shows no signs of slowing, while labels like Johnnie Walker and Smirnoff remain a popular pick for drinkers the world over. With disposable incomes galloping higher in both established and developing regions, I fully expect Diageo’s progressive payout policy to ignite in the years ahead.
