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Looking For A High Income? BAE Systems plc, Royal Dutch Shell Plc And Banco Santander SA Could Be Perfect!

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With Bank of England Governor Mark Carney hinting this week at an interest rate rise next year, you could be forgiven for thinking that life for savers will dramatically improve. After all, interest rates have been at historic lows and are now set to begin their climb to higher levels.

However, Mark Carney has also been at pains to point out that interest rates will rise only gradually and may settle at a ‘new normal’ of 2% – 3% over the medium term. This means that, while savings rates may improve, they are unlikely to be all that impressive for a good while yet.

With this in mind, here are three companies that offer top notch yields and lots of potential.

BAE

With most of the developed world cutting back on defence spending, BAE (LSE: BA) and its defence sector peers are enduring a challenging period. Indeed, net profit at the company is due to fall by 11% this year before rising by 4% next year.

However, cuts will not last indefinitely and, in the meantime, investors in BAE are being treated to a yield of 4.5%. Furthermore, current dividend payments are very sustainable, with dividends per share being covered 1.8 times by earnings per share (EPS). In addition dividends are set to rise by 2.5% next year, which currently equates to a real terms increase. With shares in BAE trading on a price to earnings (P/E) ratio of just 12.2, they appear to offer good value for money, too.

Shell

New management at Shell (LSE: RDSB) seems to be making excellent progress with their aim to make the company smaller, more efficient and, ultimately, more profitable. Indeed, recent results confirmed the strong progress being made, as well as the very strong cash flow that Shell currently has.

This allows it to pay out 49% of profit as a dividend, which currently equates to a dividend yield of 4.5%. Furthermore, dividends per share have the scope to increase due to a higher payout ratio, as well as through improvements to the company’s bottom line that are being aided by a vast efficiency and cost cutting drive. With Shell trading on a P/E of just 10.8, it offers great value and the scope for an upward revision to its rating, too.

Santander

With the passing of its Chairman, Emilio Botin, this week, sentiment in Santander (LSE: BNC) weakened somewhat. After all, this was the man who had built the company from a small regional bank to a global player. However, the bank he leaves behind offers income-seeking investors huge potential.

That’s because Santander currently yields a hugely impressive 7.5% and, although dividends per share are set to fall next year, Santander is expected to still yield 6.8% (assuming a constant share price). Indeed, with shares trading on a price to earnings growth (PEG) ratio of just 0.7, Santander seems to offer a potent mix of income, value and growth potential.

Of course, while Shell, BAE and Santander are well-worth holding as income stocks, they're not the only ones. That's why we've put together a free and without obligation guide to 5 Shares To Retire On.

The guide is simple, clear and actionable - you can put it to use right away. It could help to bring you a big step closer to retirement and make 2014 and beyond an even more prosperous period for your investments.

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Peter Stephens owns shares of BAE Systems and Royal Dutch Shell. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.