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Grab A 5.4% Yield With Centrica PLC, AstraZeneca plc And Direct Line Insurance Group PLC


Although it feels like investing in a domestic energy supplier such as Centrica (LSE: CNA) (NASDAQOTH: CPYYY.US) is not a particularly good idea at the present time, the figures say otherwise. Certainly, the next few months are likely to be somewhat volatile for the likes of Centrica as energy suppliers are in the news for contributing to a so-called cost of living ‘crisis’ in the run-up to the General Election. However, with a yield of 6.1% and a price to earnings (P/E) ratio of 14.3, there seems to be a sufficient margin of safety included in its share price that makes now a good time to buy.

Furthermore, Centrica is expected to increase dividends per share by 3.4% next year, which is almost seven times the current rate of inflation and means that it could be yielding as much as 6.3% in 2016. As a result, it looks like a top notch income play at the present time.

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While AstraZeneca’s (LSE: AZN) (NYSE: AZN.US) bottom line is undoubtedly in a period of decline, with it being forecast to be 48% lower in 2016 than it was in 2011, it remains a great income play. That’s because it yields 3.8% and, although profits are lower, dividends remain well-covered and sustainable, being covered 1.5 times by profit in 2014.

In addition, AstraZeneca has a beta of just 0.85, which means that its share price should move by just 0.85% for every 1% move in the wider index. This highlights its defensive qualities and, for many income-seeking investors, a low beta and less volatile share price experience can prove to be very desirable attributes in the long run. As a result, AstraZeneca appears to be a sound income stock and could be worth buying at the present time.

Direct Line

2015 is set to be a bumper year when it comes to dividends for investors in Direct Line (LSE: DLG). That’s because the insurer is expected to pay out dividends of 19.8p per share this year, which equates to a yield of 6.3%. That’s among the highest yields on the FTSE 100 and highlights Direct Line’s appeal as an income play in the short run.

However, it’s longer term prospects regarding shareholder payouts are also bright. Certainly, Direct Line is forecast to cut dividends next year, but will still yield 5.7% at its current share price. And, with dividends being well-covered by profit at 1.35 times, Direct Line appears to be a very appealing and sustainable income play for the long run. Therefore, it could be worth buying at the present time and, when bought alongside AstraZeneca and Centrica, could mean that you enjoy a combined average yield of 5.4% this year.

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Peter Stephens owns shares of AstraZeneca and Centrica. The Motley Fool UK has recommended Centrica. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

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