Today I am looking at three stock market superstars set to deliver market-smashing returns.
Drugs giant GlaxoSmithKline (LSE: GSK) (NYSE: GSK.US) has long been a magnet for those seeking access to reliable year-on-year dividend growth, the firm’s ability to throw up shedloads of cash enabling it to lift shareholder payouts even in spite of persistent revenues pressure.
The crippling effect of exclusivity losses across key products is expected to cause earnings to flatline this year, although a modest 6% bottom line improvement is pencilled in for 2016. As a result, the City’s number crunchers expect GlaxoSmithKline to lift the dividend just 1% this year, to 81.1p per share, and an extra 2% in 2016 to 82.5p per share.
Still, investors should not lose sight of the fact that these payments still create a barnstorming 5.8% yield through to the close of next year. Although GlaxoSmithKline faces the prospect of further patent erosions this year and next, I believe that the company’s bubbly R&D pipeline — the business currently has around 18 products at the late-stage testing phase — combined with surging demand from emerging markets should keep dividends chugging higher.
Although life insurance giant Aviva (LSE: AV) (NYSE: AV.US) has fallen foul of dividend hunters more recently — the company cut the full-year dividend in 2012 and again in 2013 — a backcloth of extensive restructuring and surging business volumes is expected to see payouts pounding higher once more.
Following estimates of a meaty increase for fiscal 2014, Aviva is expected to increase the dividend 17% this year to 20.1p per share, supported by a 3% earnings advance. And an additional 13% improvement in the bottom line next year is anticipated to drive the payout 21% higher, to 24.4p.
As a result, a meaty yield of 4.1% for this year surges to an even-more impressive 5.1% for 2016. With the firm’s cost cutting and asset shedding drive still to deliver plenty of upside, and activity levels surging across the globe — total new business values rose 15% during July-September, to £690m — I believe that Aviva should continue to dole out market-beating dividends.
Defence leviathan BAE Systems (LSE: BA) has been able to shrug off the effect of persistent earnings choppiness in recent years and keep dividends moving higher at a rate of knots. This resilience has been prompted by the company’s sizeable cash reserves, a quality which the City expects to keep delivering payout growth well into the future.
Indeed, BAE Systems is widely expected to push the total payout 4% higher in 2015 to 20.9p per share, helped by a 6% earnings uplift. And an extra 5% earnings advance is estimated for 2016, in turn driving the dividend 3% higher to 21.6p.
These numbers may not be spectacular, but they keep the yield at a more than appetising 4.5% for this year and 4.6% for 2016. And I believe that dividends should ignite from next year onwards as a backcloth of improving economic conditions in the key customer bases of the UK and US, allied to galloping sales in emerging regions like Saudi Arabia, should boost demand for the company’s cutting edge technology — and with it the prospect of sizeable dividend increases — in the coming years.
Royston Wild has no position in any shares mentioned. 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.