Regular income from dividends can revolutionise a portfolio. They can provide income when the stock market is falling or add the icing on the cake when it’s hitting a new high.
With that in mind, here are five of the best dividend yields on offer.
At present, BHP Billiton’s (LSE: BLT) shares support a dividend yield of 4.8%. The company’s payout ratio is just over 60% so there’s plenty of room for additional payout growth. As if to prove this point, the company just announced a 6% increase in its interim dividend payout to $0.62 per share.
City analysts expect BHP’s dividend payout to rise by an inflation-busting total of 13.5% this year and another 10% during 2016. BHP’s management has commented in the past that a well-covered, attractive dividend payout is a key priority for the company. On that basis I don’t believe that this payout will be cut any time soon, despite the company’s falling profits.
Connect (LSE: CNCT) is a misunderstood and undervalued dividend champion. At present, the company’s shares support a dividend yield of 5.6% and the payout is covered two-and-a-half times by earnings per share. Further, Connect is currently trading at a forward P/E of 7.9 as the market struggles to understand the company’s changing business model.
Connect is predominantly a UK-focused newspaper and magazine distribution business — considered by many to be a dying industry. But the company is rapidly expanding non-print related revenue and profits. 50% of revenue will be non-print by 2016, which should push the market to re-rating Connect’s shares.
Tate & Lyle (LSE: TATE) produces an estimated 4m tonnes of cereal sweeteners and refines over 2m tonnes of sugar each year but the company has recently been having supply chain issues.
As a result, the group has issued multiple profit warnings over the past 12 months.
Nevertheless, these supply issues should work themselves out over time and management is working to ensure that they won’t affect the company again. After recent declines, Tate’s shares support a dividend yield of 4.7%, the dividend payout is covered 1.3 times by earnings per share. The payout is set to rise around 3% per annum for the next three years.
At first glance, Lloyd’s of London insurer Hiscox (LSE: HSX) may not look like a dividend champion. Indeed, according to City analysts the company’s regular dividend payout will only amount to 22.6p per share for the 2014 financial year, a yield of around 3.2%. However, Hiscox has a history of returning excess capital to investors.
For the last two years the company has issued special dividends of approximately 37p per share, in addition to regular payouts. Some analyst expect that the company will issue a special dividend this year to bring the total annual cash return up to 40p per share, jacking the dividend yield up to 5.1%.
Admiral (LSE: ADM) is another insurer with a history of looking after shareholders with regular special dividend payouts. City analysts expect this to continue.
The company has yet to announce its final dividend for the 2014 financial year but analysts expect the payout to be around 49p per share, giving a total payout of 98.4p for 2014, a yield of 6.7%.
This trend is set to continue on into 2015 and 2016. Analysts expect Admiral’s dividend payouts to total 90p per share for 2015 and 91.4p for 2016, equal to a yield of 6.1% and 6.2% respectively.
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Rupert Hargreaves 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.