In these days of low inflation and low interest rates, where can income-seekers go to get a decent annual supply of cash? You might be surprised to hear of the yields available from some of our big FTSE 100 companies:
The banks are back to offering attractive annual returns, with HSBC Holdings (LSE: HSBA)(NYSE: HSBC.US) having kept its dividends growing nicely. For the year just ended in December 2014, analysts are expecting a 5.2% yield on the current 613p share price, and they have rises to 5.6% and 6.1% marked in for the next two years.
That should be well covered by earnings, with a P/E ratio of 11 currently, dropping to under 10 by 2016. Cheap income? It looks tempting to me.
The aerospace and defence business is a bit patchy, but BAE Systems (LSE: BA) has been motoring along nicely and has kept its dividends growing too. The share price has put on an impressive 18% over the past 12 months, but even after that we’re expecting a pretty decent 2014 yield of 3.9%.
That’s better than the index average from shares on a very average P/E of under 14, but there’s more as the yield is predicted to continue growing, to 4% in 2015 and 4.2% in 2016.
Insurance companies are looking good for income too, with Aviva (LSE: AV)(NYSE: AV.US) expected to yield a relatively modest 3.3% for the year just ended. But forecasts have that rising to 3.8% for 2015 followed by 4.6%. Aviva famously slashed its dividend in 2012 after it became overstretched, but the annual payment is recovering — and being very nicely covered now, it’s looking sustainable.
What about the share valuation? Even after a two-year rise of 46%, we still have a P/E ratio of only 11.3 and dropping as far as 9.5 based on 2016 forecasts.
But why am I looking for shares specifically for February? Well, the low price of oil has spooked a lot of investors, and sentiment has been further damaged by the latest struggles in the eurozone as the European Central Bank tries to fight off deflation.
That’s led to a flight for safety, as investors seek companies paying decent dividends and looking like they’re in a good shape to see off the oil crisis and any cracks in the euro. Some shares have already been pushed upwards, so if you want good-value income investments, now could be the time to start doing your homework.
Alan Oscroft has no position in any shares mentioned. The Motley Fool UK has recommended HSBC Holdings. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.