Today I am looking at the investment prospects of four big-cap dividend favourites.
Anglo American
Mining play Anglo American (LSE: AAL) has a long and distinguished history of offering above-average dividend yields as commodity demand has risen. And despite fears over worsening supply/demand imbalances across key markets, the City expects this trend to continue — indeed, the earth shifter is predicted to provide a dividend of 85 US cents per share in 2015, keeping the reward locked for a fourth consecutive year but still yielding a mammoth 7%.
But I believe this estimate could be considered extravagant at best. Firstly, an estimated 43% earnings slide this year leaves Anglo American’s dividend covered just 1.2 times, well below the safety benchmark of 2 times. And with coal and iron ore prices expected to worsen, and the firm’s debt pile creeping higher — this clocked in at $13.5bn as of June versus $12.9bn at the close of 2014 — it is difficult to see how the miner will even keep the dividend stagnant at the present time.
HSBC Holdings
A combination of fears have steadily driven shares in HSBC (LSE: HSBA) lower again since the spring, and the bank is now trading at levels not seen since late 2012. But while concerns over heavy regulatory fines, and more recently an accelerating slowdown in the key Chinese economy, is causing investors to give HSBC short shrift, I reckon this weakness represents a fresh buying opportunity.
Supported by a steadily-improving balance sheet — HSBC’s common tier equity 1 ratio rose to 11.6% in June from 11.1% in December — and the prospect of electric earnings growth this year and beyond, The World’s Local Bank is expected to raise the payment in 2015 to 51 US cents per share, yielding 5.8%. Although current headwinds in China are a worry, I reckon HSBC’s pan-global presence should deliver exceptional returns now and in the years ahead.
Ashmore Group
I reckon, like HSBC, financial services play Ashmore (LSE: ASHM) is another great way to play developing regions. The business announced in its latest update that these territories had ‘performed well‘ despite current mark concerns, and believes that once the rate-hiking intentions of the Federal Reserve become clearer that activity levels should improve still further.
And in the longer-term, I am convinced the fundamental strength of these new markets should punch asset growth at Ashmore steadily higher, too. This bubbly outlook is expected to keep the dividend marching northwards in spite of a predicted 8% earnings dip in the current period — a reward of 17p per share for the year concluding June 2016 produces a hefty yield of 6.4%.
GlaxoSmithKline
With GlaxoSmithKline’s (LSE: GSK) terrific drugs pipeline set to deliver the goods, I reckon the medicine giant should make good on its current dividend pledge. The Brentford firm has vowed to shell out a reward of 80p per share through to the conclusion of 2017, a promise that delivers a monster yield of 6.6%.
It is true that crushing patent losses continue to haunt the firm, a situation expected to result in a fourth consecutive earnings decline in 2015. But while GlaxoSmithKline has invested heavily in its R&D operations to deliver the next generation of sales drivers, and currently has 40 NMEs in mid-to-late-stage development, the company is also embarking on a huge divestment drive to streamline the business and generate extra cash. Meanwhile, plans to strip £3bn of annual costs are also rattling along nicely, further boosting the pills play’s financial clout.
