The current market volatility has thrown up some great bargains for dividend investors. Here are just three dividend champions that could help boost your income stream.
Long-term income
As one of the UK’s largest pensions and savings companies, Standard Life (LSE: SL) is well-positioned to generate long-term growth no matter what the outcome of the EU referendum on 23 June.
The government’s raft of pension changes that have come into force over the past few years, coupled with the UK’s ageing population mean that Standard Life should see a steady increase in the demand for its savings services for the foreseeable future. As an ultra-long-term investment, it’s hard to think of a company that has brighter prospects.
However, despite Standard Life’s long-term outlook, investors have been dumping shares in the run-up to the referendum. And after recent declines the company’s shares trade at a forward P/E of only 11.8, despite the fact that City analysts expect Standard Life’s earnings per share to grow by 95% to 26.3p for the year ending 31 December 2016. What’s more, the shares currently support a dividend yield of 6.2% and based on current growth forecasts, the payout is covered 1.5 times by earnings per share.
Slow and steady
BAE Systems (LSE: BA) is another income champion that has fallen out of favour with the market over the past few weeks. Year-to-date shares in BAE have fallen by 4% excluding dividends, underperforming the FTSE 100 by 0.1%.
Nonetheless, after recent declines BAE has been able to regain its crown as one of the FTSE 100’s income champions. At present levels, the shares support a dividend yield of 4.4%, and City analysts expect the dividend payout to increase by around 5% per share next year, for a yield of 4.7% at current prices.
The payout is currently covered 1.8 times by earnings per share, so the company has plenty of room to manoeuvre if revenues fall. Shares in BAE currently trade at a forward P/E of 12.2 and City analysts expect the company’s earnings per share to grow by 6% for the year ending 31 December 2017.
A future income star?
Standard Chartered (LSE: STAN) used to be one of the FTSE 100’s top dividend stocks, but the company had to cut its payout last year as it looked to shore up its balance sheet following several profit warnings.
Since the dividend cut, the bank has made plenty of progress in cutting costs, raising capital and finding new areas of growth and City analysts expect this work to pay off over the next few years. After reporting a loss of around 4.5p per share last year, analysts are expecting Standard to return to profit this year with earnings per share of 15.1p pencilled-in for the year ending 31 December. Estimates also predict the bank will pay a dividend equal to a yield of 0.8% at current levels.
For 2017 Standard’s growth is projected to take off. Analysts are predicting earnings growth of 136% and a dividend payout of 13.2p, set to be covered more than twice by earnings per share. If the company meets this forecast, the shares will offer a yield of 2.6%. City analysts are predicting further earnings and dividend growth for 2018.
