Medicines giant GlaxoSmithKline (LSE: GSK) may not have raised the dividend in recent years — and isn’t expected to do so any time soon — but the stock still remains one of the FTSE 100’s most attractive dividend bets, certainly in my opinion.
GlaxoSmithKline has elected to keep the dividend locked at 80p per share through to the end of 2017, reflecting the hard work to transform its product pipeline via huge organic investment and nifty acquisitions. And the City expects the pharma giant to make good on this promise, meaning GlaxoSmithKline boasts a yield of 5.2% for the period.
Dividend coverage may not be the best, with readings of 1.3 times and 1.4 times falling below the safety benchmark of 2 times.
But predicted earnings rises of 33% and 10% in 2016 and 2017 respectively — snapping four successive annual slips, if realised — illustrate the hugely-improved bottom-line outlook created by GlaxoSmithKline’s revamped R&D operations and vast global reach. And I expect these factors to drive dividends skywards again beyond next year.
Build a fortune
The UK’s forthcoming battle against the economic implications of Brexit is expected to put the stellar earnings record of housebuilders under pressure in the months ahead.
Barratt Developments (LSE: BDEV), for one, is expected to post a rare 7% earnings slip in the period to June 2017 as home price growth moderates and construction costs rise.
But the number crunchers still expect Barratt Developments to remain a big-paying income stock, a dividend of 34.5p per share in the period currently predicted and resulting in a vast yield of 7.5%.
And while dividend coverage at Barratt Developments stands at just 1.5 times for fiscal 2017, the construction giant’s brilliant cash-generative qualities — net cash stormed to £592m in June from £186.5m a year earlier — is expected to keep shareholder rewards on an upward keel.
The long-term outlook for the housing market remains in very rude health, irrespective of any economic gyrations in 2017 as Britain’s embedded housing crunch keeps home values from collapsing through the floor. Meanwhile, ultra-supportive lending conditions and the government’s Help To Buy scheme should underpin homebuyer appetite.
Consequently I reckon the dividend outlook at Barratt Developments remains very attractive.
Phone favourite
I expect a strong sales bounceback in Europe, allied with soaring data demand in developing regions, to keep yields at Vodafone Group (LSE: VOD) sailing above the big-cap average of 3.5% long into the future.
While its £19bn Project Spring organic investment programme may be over, Vodafone’s operations are still massively cost-intensive, of course. And as well as forking out a fortune to keep its customers connected, the telecoms titan is also facing a huge bill as investment in 5G technology steadily rises.
As such, Vodafone is expected to pay a dividend of 12.5p per share in the period to March 2017 before trimming it back to 12.3p in the following period. Still, these figures yield a terrific 6.2% and 6.1%.
And although these figures soar above predicted earnings of 5.9p for this year and 7.3p for 2018, Vodafone has the cash might to finance bumper shareholder rewards, helped by the potential for further divestments.
On top of this, the prospect of electric earnings advances in the years ahead should bolster investor confidence in current forcecasts — rises of 16% and 24% for fiscal 2017 and 2018 alone. I believe Vodafone should remain a favourite for income seekers for years to come.
