3 Stock Superstars Yielding Above 7% In 2015: Banco Santander SA, Admiral Group plc and Direct Line Insurance Group PLC

Royston Wild explains why Banco Santander SA (LON: BNC), Admiral Group plc (LON: ADM) and Direct Line Insurance Group PLC (LON: DLG) are set to produce terrific income flows next year.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

Today I am looking at three blue-chip stars ready to deliver smashing returns in 2015.

Banco Santander

In a bid to produce a healthier correlation between earnings and dividends, Banco Santander (LSE: BNC) (NYSE: SAN.US) has elected to rein in its previously ultra-generous — and ultimately unsustainable — payout policy from this year onwards.

As a result, the bank is anticipated to fork out a payment of 58 euro cents per share in 2014, down 3% from last year’s levels. And this is expected to dive still in 2015 to 50.4 cents, a hefty 13% drop.

But investors should not lose sight that these projections still produce eye-watering dividend yields — indeed, next year’s payout still produces a sizeable 7.3% yield, albeit down from a figure of 8.4% for 2014.

And with the firm’s terrific exposure to increasingly lucrative emerging markets, and in particular those of Latin America, expected to power earnings higher — growth of 20% is pencilled in for 2015 alone — I expect dividends to continue to outstrip the opposition.

Admiral Group

Of course, a backcloth of rising competition continues to dent investor sentiment towards the motor insurance providers. Against this backcloth Admiral (LSE: ADM) has seen revenues dip lower in recent times, a factor which is likely to result in earnings dips to the tune of 2% and 8% in 2014 and 2015 correspondingly.

In the face of this pressure, the Welsh firm is anticipated to slash a predicted 99.2p per share dividend for this year by 7% in 2015, to 92.4p. Despite expectations of a large downgrade, however, the business still carries a monster yield of 7.5% for 2015, smashing a forward average of 5.6% for the rest of the non-life insurance sector.

Investors should of course be aware that further premium pressure could threaten dividends beyond next year. However, Admiral’s ability to maintain a loyal customer base — total customers rose 10% during July-September to just over 4 million — combined with rising exposure to overseas markets bodes well for future earnings and payout growth.

Direct Line Insurance Group

Like Admiral, Direct Line Insurance (LSE: DLG) also faces intensifying competitive pressures across its core markets. Still, the business is expected to flip from a 3% earnings dip this year to a 7% increase in 2015, helped by its portfolio of blue ribbon brands including Churchill and Privilege.

The result of special dividends bloat the final payout figure for 2014, and a total payment of 48.6p per share has been touted by the City’s number crunchers. Although a subsequent fall is somewhat inevitable, the 2015 figure remains impressive at 22.2p, in turn creating a stonking 7.8% yield.

Direct Line is undergoing a significant transformation programme to strip out costs and improve technological innovation across the business, a promising precursor for future growth. With the firm also ramping up its exposure to fast-growing sectors like landlord and pet insurance, I believe that Direct Line should continue offering delicious dividend yields.

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 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.

More on Investing Articles

Investing Articles

Could the JD Sports Fashion share price double in the next five years?

The JD Sports Fashion share price has nearly halved in the past five years. Our writer thinks a proven business…

Read more »

Bus waiting in front of the London Stock Exchange on a sunny day.
Investing Articles

If interest rate cuts are coming, I think these UK growth stocks could soar!

Falling interest could be great news for UK growth stocks, especially those that have been under the cosh recently. Paul…

Read more »

Investing Articles

Are these the best stocks to buy on the FTSE right now?

With the UK stock market on the way to hitting new highs, this Fool is considering which are the best…

Read more »

Petrochemical engineer working at night with digital tablet inside oil and gas refinery plant
Investing Articles

Can the Centrica dividend keep on growing?

Christopher Ruane considers some positive factors that might see continued growth in the Centrica dividend -- as well as some…

Read more »

Smiling family of four enjoying breakfast at sunrise while camping
Investing Articles

How I’d turn my £12,000 of savings into passive income of £1,275 a month

This Fool is considering a strategy that he believes can help him achieve a stable passive income stream with a…

Read more »

Person holding magnifying glass over important document, reading the small print
Investing Articles

2 top FTSE 250 investment trusts trading at attractive discounts!

This pair of discounted FTSE 250 trusts appear to be on sale right now. Here's why I'd scoop up their…

Read more »

Smiling young man sitting in cafe and checking messages, with his laptop in front of him.
Investing Articles

3 things that could push the Lloyds share price to 60p and beyond

The Lloyds share price has broken through 50p. Next step 60p? And then what? Here are some thoughts on what…

Read more »

Young female business analyst looking at a graph chart while working from home
Investing Articles

£1,000 in Rolls-Royce shares a year ago would be worth this much now

Rolls-Royce shares have posted one of the best stock market gains of the past 12 months. But what might the…

Read more »