Today I am looking at the investment prospects of three British dividend stars.
Insurance giant on the rise
Despite fears of global economic cooling on many of the world’s biggest payout plays, I reckon Legal & General (LSE: LGEN) has what it takes to continue building dividends year after year.
Legal & General has invested vast sums into developing its suite of products in line with changing demographic and regulatory trends, work that continues to generate handsome returns. Meanwhile, Legal & General is also improving the digitalisation of its business as well as creating broader emerging market exposure to ensure solid long-term returns.
As a result, the City expects earnings to rise a further 7% rise this year, following on 2015’s projected 14% advance. And the company’s ongoing streamlining scheme — Legal & General added SIPP-specialist Suffolk Life to its divestment list this month — is helping to boost its already-plentiful cash coffers, another bullish sign for dividend chasers.
Consequently Legal & General is anticipated to raise a predicted dividend of 13.4p per share for 2015 to 14.3p this year, creating a jumbo yield of 5.4%. And I see no reason for the company’s progressive payout policy to run out of steam any time soon.
A defensive darling
In times of macroeconomic uncertainty, the defence sector has long proved to be a popular pick for both growth and income investors. The desire for countries to build their armies has been one of life’s constants for centuries now, a phenomenon I believe should make BAE Systems (LSE: BA) a lucrative stock selection in the years ahead.
BAE Systems’ expertise across a wide range of hardware sectors has made it a critical supplier to the US and UK militaries, and I am convinced a backdrop of rising geopolitical tension should continue to drive demand for the firm’s products. Om top of this, the strength of BAE Systems’ defence goods are making it an increasingly-popular supplier to developing markets, too.
The number crunchers expect BAE Systems to recover from recent earnings bumpiness and punch a 5% advance in 2016. As a consequence the arms builder is anticipated to hike the dividend to 21.5p per share from an estimated 20.8p last year, nudging the yield to 4.2%.
Ring up a fortune
Concerns over the colossal investment costs over at Vodafone (LSE: VOD) have led many to speculate whether the company will put paid to its positive dividend policy in the near future. I do not share these concerns, however, and believe the telecoms giant’s rapidly-improving sales outlook in both Europe and developing markets should continue to underpin plump payout growth.
This view is shared by the City’s army of analysts — Vodafone is expected to lift the dividend from 11.22p per share in the year to March 2015, to 11.5p in the current period, creating a chunky 5.2% dividend.
Even though earnings are expected to struggle a little longer thanks to previous sales problems, a gradual decline in Vodafone’s Project Spring capital drain — combined with a healthy cash position — should help keep dividends on an upward keel, particularly as earnings look set to shoot higher from 2017 onwards.
