Are Dividends From Aviva plc, PayPoint plc And Alternative Networks Plc Unbeatable?

Here’s how Aviva plc (LON: AV), PayPoint plc (LON: PAY) and Alternative Networks Plc (LON: AN) could help line your pocket.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

Dividends are great — I love dividends! They can go wrong, of course, when earnings contract and dividend payments have perhaps been made without sufficient foresight so have to be cut. That’s what happened to Aviva (LSE: AV) in the latter stages of the financial crisis. Over two years it had to slash its annual payment — from 26p per share in 2011 to just 15p by 2013.

But a good dividend provider shouldn’t be judged on a short-term hiccup. And in my view, Aviva has dealt with the blow in exemplary fashion by focusing hard on rebuilding its balance sheet. By 2015 results time, chief executive Mark Wilson could say:  “We have completed the fix phase of our transformation,” adding “…our balance sheet is one of the strongest and most resilient in the UK.

Aviva’s dividend was back up to 20.8p in 2015 for a 4% yield, with rises to 24p and 27p forecast for the next two years — to yield 5.3% and 6% at today’s 447p share price. I see Aviva as a great long-term dividend stock, and with the shares on P/E multiples of only around nine, I see a share price recovery coming too. That combination is why I bought some.

Cash from cash

The payment of bills and services is big business, though highly competitive. But PayPoint (LSE: PAY) has carved a niche as the country’s leading payment collection network — you’ll see its signs at newsagents and stores all over the country, where you can pay bills, and pre-pay mobile and energy meters.

Strong earnings growth resulted in an impressive share price rise until late 2014, but a slowdown (a 7% drop in EPS is forecast for the year to March) has led to a share price fall of 10% over the past 12 months, to 761p. But that’s helped boost the expected dividend yield, with this year’s predicted 42p amounting to 5.6%, and it would rise to 6.4% by 2018 if current forecasts prove accurate. And as PayPoint is a cash-generative company, cover by earnings of around 1.3 to 1.4 times looks safe enough.

On top of that, EPS should start picking up again in the coming year, with the shares’ P/E multiple dropping to 11 by 2018. Is this a smaller cap company that could become a multi-year cash cow? It’s worth a closer look.

Telecoms riches

Looking for even smaller companies, I’m intrigued by Alternative Networks (LSE: AN). It’s a firm with a market cap of around £170m that provides comprehensive communications and IT services to businesses — telephony, network provision, mobile and so on. The share price has been a bit erratic. It dropped sharply in February on a warning over pressures on its mobile business, with profit likely to be impacted for the year to September. At 347p, the shares are down 23% over 12 months, but have managed a 40% rise in five years — not the best in the market, but comfortably ahead of the FTSE 100.

Even with reduced forecasts suggesting a 7% drop in EPS this year, the shares are still on a relatively undemanding P/E of 13, dropping to under 12 on 2017 forecasts. More importantly in my view, with last year’s results the firm reiterated its “intention to progress dividend payments towards 15% annual growth in the medium term, anticipating growth of no less than 10% per annum.” That progressive dividend policy has seen payments rise from 10p in 2011 to 16.4p last year to yield 3.1%, with analysts expecting a boost to 5.4% this year followed by 6.2% in 2017.

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.

Alan Oscroft owns shares in Aviva. The Motley Fool UK owns shares of PayPoint. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Warren Buffett at a Berkshire Hathaway AGM
Investing Articles

1 overlooked reason Warren Buffett’s made so much money by investing in Apple

Being greedy when others are fearful is a big part of what makes Warren Buffett a great investor. But Stephen…

Read more »

Young black colleagues high-fiving each other at work
Investing Articles

Looking for a large passive income? Consider these REITs in a Stocks & Shares ISA!

Looking for top dividend-paying companies to add to a Stocks and Shares ISA? Here are two on Foolish writer Royston…

Read more »

Investing Articles

Next year’s forecast 10.7% yield makes this FTSE blue chip my ultimate second income stock

Harvey Jones thinks the second income he gets from top FTSE 100 dividend stocks puts his portfolio on solid ground.…

Read more »

New year resolutions 2025 on desk. 2025 resolutions list with notebook, coffee cup on table.
Investing Articles

Is the beaten down Lloyds share price set to soar after today’s good news?

The recent slump in the Lloyds share price has been a blow to Harvey Jones, because it's one of his…

Read more »

Storytelling image of a multiethnic senior couple in love - Elderly married couple dating outdoors, love emotions and feelings
Investing Articles

£5k in savings? Here’s a passive income ISA plan to consider

Interest rates from some cash investments might look good for passive income right now. But for the long term, I…

Read more »

Investing Articles

This major bank says the IAG share price is too cheap at 6.7x earnings

I believe the IAG share price will fly higher into 2025 and I’m certainly not the only one that thinks…

Read more »

Businessman use electronic pen writing rising colorful graph from 2023 to 2024 year of business planning and stock investment growth concept.
Investing Articles

If an investor put £5k in Nvidia stock just 3 months ago, here’s what they’d have now

Our writer takes a look at the extraordinary performance of Nvidia stock and considers whether he'd invest in the AI…

Read more »

photo of Union Jack flags bunting in local street party
Investing Articles

£1,000 invested in Persimmon shares before the UK election is worth this much now

The last few months have been a wild ride for Persimmon shares. Here's how our Foolish writer sees the state…

Read more »