Ace City investor Neil Woodford has thrashed the FTSE 100 over the last five, 10 and 15 years. Hence, I always keep an eye on his holdings for promising investment ideas.
Woodford is very selective in picking shares for his £20 billion funds. Fewer than one in five of the UK’s top 100 companies earn a place in his market-beating portfolios.
|Company||Share price||Average annual dividend growth (4 years) (%)||Forecast yield (%)|
|Legal & General||201p||18||4.5|
Legal & General
Woodford made a great call in dumping big financial stocks ahead of the global banking crisis. However, the master investor has now dipped his toe back into FTSE 100 financials, recently purchasing Legal & General.
This insurer has delivered average annual dividend growth of 18% over the last four years. The analyst consensus is for more strong growth to come. The City experts see a further 18% increase in the payout this year and a 13% rise for 2014. At a current share price of 201p, the forecasts give a yield of 4.5%, rising to 5.1%.
Woodford has been heavily invested in the tobacco sector for many years. The leading UK and US firms are among his largest holdings. Lately, he’s cranked up his stake in Imperial Tobacco.
This company has increased its annual dividend by an average of 14% over the last four years. The board upped this year’s interim payout by 11%, and the analyst consensus is for the rise to carry through to the full year, with a similar increase next year. At a current share price of 2,282p, the forecasts give a yield of 5.1%, rising to 5.6%.
Woodford’s bets on companies in the support services sector are currently experiencing mixed fortunes. G4S and Serco are both suffering a torrid time, but Capita — which operates across most industry sectors — continues to go from strength to strength.
This outsourcing group has rewarded shareholders with average annual dividend growth of 13% over the last four years. Analysts see growth of around 10% this year and next. Capita has been well supported by investors, and at a current share price of 1,002p the dividend yield is most definitely on the skinny side: 2.5% this year, rising to 2.8% for 2014.
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> G A Chester does not own any shares mentioned in this article.