Although there has been a lot of talk recently regarding interest rate rises, it seems clear that rates are unlikely to hit the ?historic norm? of 4%-5% for many years to come. Indeed, the Bank of England has even stated that 2%-3% could be the ?new normal?. With that in mind, high-yielding shares could continue to offer a realistic alternative to savers and income-seeking investors alike. Here are three companies that yield at least 5% and trade at an attractive price.
Although there has been a lot of talk recently regarding interest rate rises, it seems clear that rates are unlikely to hit the ‘historic norm’ of 4%-5% for many years to come. Indeed, the Bank of England has even stated that 2%-3% could be the ‘new normal’. With that in mind, high-yielding shares could continue to offer a realistic alternative to savers and income-seeking investors alike. Here are three companies that yield at least 5% and trade at an attractive price.
GlaxoSmithKline (LSE: GSK) continues to see its share price underperform due to weak sentiment rather than doubts surrounding its long term potential. The pharmaceutical giant is subject to various bribery allegations that have caused shares in the company to fall by 8% in the last three months alone.
However, with a highly diversified drugs pipeline that has huge potential, GlaxoSmithKline could see its share price rise over the longer term. In the meantime, a dividend yield of 5.5% is highly attractive, while a price to earnings (P/E) ratio of 13.1 highlights that the present time could be an opportunity to buy in at a low price.
As with GlaxoSmithKline, Centrica (LSE: CNA) is suffering from weak sentiment. It is set to change its management team in the near future (with BP’s Iain Conn replacing Sam Laidlaw on 1 January 2015) and is subject to continuing uncertainty regarding domestic energy prices post the 2015 general election.
However, the market seems to pricing in these risks, with shares in Centrica currently trading on a P/E ratio of just 12 (versus 13.7 for the FTSE 100). Furthermore, shares in the company currently yield a highly impressive 5.5%, with dividends per share forecast to increase by 3.2% next year. Overall, Centrica seems to offer good value and considerable income potential.
Vodafone’s (LSE: VOD) current yield of 5.5% has come under a degree of scrutiny in recent months. That’s because it currently pays out more money as a dividend than it makes as a profit. As a result, the current level of dividend is unsustainable in the long run.
Despite this, Vodafone could prove to be an attractive income play. That’s because it appears to have a sound long term strategy that could deliver strong growth in profitability moving forward. Indeed, Vodafone’s purchase of high-quality, undervalued assets in Europe may take time to come good, but should ensure that the company is able to sustain an impressive yield in future years. As a result, it remains an attractive income play at current price levels.
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Peter Stephens owns shares of Centrica and GlaxoSmithKline. The Motley Fool UK has recommended GlaxoSmithKline. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.