Should You Buy 5%+ Yielders Royal Dutch Shell Plc, TalkTalk Telecom Group PLC, Ashmore Group plc And Amec Foster Wheeler PLC?

Royston Wild describes the dividend outlook over at Royal Dutch Shell Plc (LON: RDSB), TalkTalk Telecom Group PLC (LON: TALK), Ashmore Group plc (LON: ASHM) and Amec Foster Wheeler PLC (LON: AMFW).

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Today I am looking at four London heavyweights expected to yield rich rewards.

Royal Dutch Shell

For the uninitiated, oil and gas goliath Royal Dutch Shell (LSE: RDSB) may prove an irresistible stock pick owing to its terrific dividend projections. Even the greenest investor will be aware of the massive upheaval facing the oil sector, so a slight dividend cut, to 185 cents per share for 2015 from 188 cents last time out, may not come as a surprise. Indeed, many eyes will be fixated on the subsequent yield of 7.8%.

But dig a little deeper and the picture at Shell is not all that rosy. Firstly, a predicted 34% earnings slide leaves the payout covered just 1.1 times, well below the safety standard of 2 times. On top of this, the firm’s vast capex cuts and job reductions underline the rate at which cash is flowing out of Shell — a particularly terrifying omen for dividend seekers — while prolonged oil price pressure threatens to keep earnings under the screw. I reckon current payout estimates could miss wildly.

TalkTalk Telecom Group

I am far more optimistic over the dividend potential of diversified entertainment services play TalkTalk (LSE: TALK), however. The ‘quad-play’ provider has struck back against rivals BT and Sky by offering unlimited broadband as standard on all of its internet packages, a move I believe should stem moderating uptake more recently.

Broadband is clearly a key battleground for the telecoms sector’s major players, so such a move — combined with the purchase of Tesco Broadband in January — is likely to boost its position in a very-profitable market. And with earnings expected to advance 66% in the 12 months ending March 2016 alone, TalkTalk is expected to hike the dividend to 15.7p per share from 13.8p in 2015, yielding a handsome 4.9%. I fully expect payouts to keep churning higher along with earnings.

Ashmore Group

Shares in financial services giant Ashmore (LSE: ASHM) have tracked relentlessly lower in recent months thanks to the firm’s strong emerging market bias. But while the threat of economic cooling in China still has some legs — not to mention fears over the timing of any Federal Reserve action — I reckon the long-term potential of these growth regions makes the business a terrific long-term bet.

And thanks to this bubbly outlook, the City believes Ashmore should keep its progressive dividend policy rolling. A reward of 16.65p per share for 2014 is expected to advance to 16.9p in the current period, even though a 16% earnings slide is currently slated, and yielding a monster 6.8%. While I believe such a payout could come under pressure if macroeconomic travails curb investor activity, I reckon dividends in the near term and beyond should still continue to outstrip those of the wider market.

Amec Foster Wheeler

Even though persistent bottom-line pressure across the oil industry is a blot on Amec Foster Wheeler’s (LSE: AMFW) earnings picture, I reckon the engineer’s expertise across a spectrum of industries should deliver solid dividend growth in the years ahead. Indeed, a healthy order book of £6.6bn as of June — up from £4.2bn a year earlier — underlines the company’s ability to grind out business even in times of wider industry pressure.

The number crunchers expect a 12% earnings decline in 2015 to have a detrimental impact on the dividend, however, and a predicted payment of 42.8p per share represents a downgrade from last year’s 43.1p. However, this figure still yields a market-busting 6%. And expectations of a bottom-line surge from next year is expected to get dividends trucking higher again, too. I believe Amec Foster Wheeler could prove a highly-lucrative stock selection for patient investors.

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.

Royston Wild has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. 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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