These 5% yielders are just too hot to ignore!

Royston Wild looks at two London stocks with dynamite dividend potential.

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The impressive earnings pedigree of Paypoint (LSE: PAY) has enabled the company to consistently provide lip-smacking dividend hikes in recent years.

And the launch of the company’s Paypoint One terminal in September — technology which provides EPOS functions, takes card payments and executes a variety of PayPoint services — injects a huge dose of jet fuel into its already-perky growth prospects.

As well as embedding Paypoint’s technology firmly inside the retail environment, the new terminals are ‘future proofed’ which should facilitate the control other shop functions further down the line and provide the company with additional revenue streams.

PayPoint has signed up around 2,000 outlets to adopt its new system already, and is hoping to at least double this number after the end of the current fiscal year. But this is not PayPoint’s only success story, with uptake of its MultiPay system — which enables customers to make payments via mobile app, online or text, for example — also ticking along nicely.

The City expects these factors to keep the annual dividend bubbling higher for some time yet. Indeed, a predicted 8% earnings bounce for the period to March 2017 is set to drive the dividend from 42.4p per share last year to 55.1p, at least according to current forecasts, creating a gigantic 5.1%.

And expectations of a further 6% bottom-line bounce in fiscal 2018 fuel an anticipated 57.3p dividend, pushing the yield to a colossal 5.4%.

Toast splendid returns

Shares in pub giant Marston’s (LSE: MARS) have tracked lower in recent months, as concern over a possible reduction in drinkers’ spending power has dominated investor thinking.

While the Brexit referendum may indeed have significant economic ramifications, I believe Marston’s has what it takes to ride out these troubles and keep on punching rich shareholder returns.

Indeed, Marston’s announced last month that like-for-like sales at its key Destination and Premium division had grown 1.8% during the final 10 weeks of the fiscal year to September, a terrific performance given the strong comparables of a year earlier and underlining the immense pulling power of its pub grub and speciality ales.

And this is not the only reason to be encouraged. The business, which operates some 1,700 outlets up and down the land, continues to build its real estate portfolio and is planning to unveil an additional 22 pubs and five lodges in the current year alone.

The number crunchers share my bullish take, and expect Marston’s to fork out a 7.3p dividend for the period to September 2016, up from 7p in the previous year and supported by an anticipated 7% earnings increase.

And resplendent payout growth is expected to persist in the near-term at least — a full-year reward of 7.6p per share is currently expected for fiscal 2017, resulting in a market-bashing 5.8% yield.

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 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.

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