Prices of mining and commodities shares are plunging, but in many cases that’s pushing up their potential dividend yields. One of them is diversified miner Vedanta Resources (LSE: VED), whose currently-forecast dividend yield for the year to March 2016 stands at a massive 7.1%. For the following year, the City is predicting a small drop, but it would still yield 6.8% on today’s 578p share price.
The picture is clouded by Vedanta’s reported loss last year, largely due to impairment charges, and analysts are not expecting a return to profit until 2017. That means dividends would have to come from existing cash, and even by 2017 it wouldn’t be anything like covered by earnings, so there’s a huge risk that the dividend will have to be slashed. But production is rising, with records in some commodities, and if the firm does keep paying the dividend until it recovers its profitability, and if you have the stomach for such high risk — well, you could be locking in a very strong income stream.
Cash from phones
Telecoms companies are surely less risky than miners these days, and there are good dividends to be had from some of them. In fact, KCOM Group (LSE: KCOM) is forecast to deliver a yield of 6.5% in the current year, rising to 6.8% next year, on shares trading at 89p.
On a forward P/E of only around 11, KCOM shares don’t appear to be in great demand right now, and earnings growth stagnation is at least partly behind the pessimism — EPS has been in a rut for the past three years and it’s expected to continue the same for two more.
Having said that, reporting in June on the year just ended, chief executive Bill Halbert pointed out that “Last year we began the second stage of the transformation of our business“, and he reckoned that the firm is looking to accelerate its progress. Meanwhile, the dividend should be modestly covered, and that level of income is worth considering.
Strong as houses
Now, how about a prospective dividend yield of 4.8% (rising to 5.5%) from a share that has gained 73% in the past year and has more than eight-bagged in five years? That’s what Taylor Wimpey (LSE: TW) is offering, if you believe the current City forecasts.
The whole housebuilding business has stormed ahead in the past few years, and Taylor Wimpey has been growing its earnings at at least high double-digit rates since it started its post-recession recovery. Growth is expected to slow, but there’s still a 33% rise in EPS predicted for this year followed by another 16% next, with the 190p shares on a 2015 P/E of 13, dropping to 11 on 2016 estimates.
Even after the stunning share price performance of the past few years, Taylor Wimpey still looks cheap to me — and the punters seem mostly to agree, with four out of 10 sticking a Strong Buy rating on the shares and the other six remaining neutral.
