Should you buy 6% yielders BP plc, TUI Travel plc, Kier Group plc and Aberdeen Asset Management plc?

Royston Wild considers the investment prospects of BP plc (LON: BP), TUI Travel plc (LON: TUI), Kier Group plc (LON: KIE) and Aberdeen Asset Management plc (LON: ADN).

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Today I’m running the rule over four of the Footsie’s ‘big yielders.’

Travel chaos

The result of last month’s Brexit referendum has forced me to reconsider my bullish take on travel operator TUI Travel (LSE: TUI). Indeed, an environment of plummeting consumer confidence is likely to take a hefty dent out of consumer’s enthusiasm to spend, and ‘big ticket’ items like package holidays are one of the first things to be cut in times of economic hardship.

Consequently I wouldn’t be tempted to invest in TUI at the current time, even though a predicted dividend of 61.4 euro cents per share yields a massive 5.7%.

Set to collapse?

Like TUI, I’ve also been singing the praises of construction giant Kier Group’s (LSE: KIE) outlook.

But a period of significant belt-tightening in the near term and beyond could have a significant impact on the prospects for Kier’s earnings, and consequently its dividends. News this week that the construction sector slipped back into contraction in June, at 46, gives plenty of reason to be concerned.

I therefore believe stock-pickers should stay away from Kier for the time being, even in spite of a predicted 63.5p-per-share dividend that yields a market-bashing 6.1%.

Money worries

Financial giant Aberdeen Asset Management (LSE: ADN) has endured its fair share of problems in recent times as fears over emerging markets prompted massive fund outflows.

And shaky investor confidence would hardly have been boosted by last week’s Brexit vote, a development that could lead to further heavy outflows at the likes of Aberdeen.

Indeed, Standard Life and Aviva’s decisions to halt redemptions at their property funds earlier this week is likely to smash investor activity across the asset management segment. Both Aviva and Standard Life have been whacked by a flurry of redemption requests in recent days.

Given these broad concerns, I reckon investors should disregard Aberdeen’s projected 2016 dividend of 19.5p per share — and its subsequent 6.7% yield — for the time being.

Driller dilemma

The City expects a period of low crude prices to have a significant impact on BP’s (LSE: BP) dividend outlook. Having said that, projections aren’t as bad as many investors had feared.

Sure, BP’s progressive dividend policy is expected to shudder to a halt. But predicted payouts of 40 US cents per share through to the close of 2017 — in line with last year’s dividend — still yield a handsome 6.2%.

However, I would give these forecasts scant regard. Dividends for this period comfortably outstrip expected earnings, with this year’s payment alone screaming ahead of estimated earnings of 19 cents.

And BP’s fragile balance sheet gives little scope to ride out these problems and keep shelling out monster dividends. Net debt surged to $30bn in March from $25.1bn a year earlier.

And with question marks remaining around the oil market’s long-term supply balance, I reckon those seeking solid dividend prospects should give BP a wide berth.

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 recommended Aberdeen Asset Management and BP. 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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