Today I am looking at three London-listed lovelies with terrific dividend potential.
Drinks giant Diageo (LSE: DGE) has continued to steadily lift the dividend in recent years, even in spite of slowing sales in emerging markets causing earnings growth to slow, and even prompting a rare bottom-line dip in fiscal 2014.
Even though Diageo is expected to punch a further 4% earnings dip for the year concluding June 2015, a robust balance sheet is anticipated to push the full-year reward from 51.7p per share last year to 54.2p in the current 12 months. And an extra payout lift in 2016, to 58.2p, is currently pencilled in by City brokers, predicted alongside an 8% earnings bounce.
It is certainly true that these projections still create yields which trail the market average — predicted dividends for this year and next carry respectable-if-unspectacular readings of 2.9% and 3.1% for 2015 and 2016 correspondingly.
Still, I believe that Diageo’s massive exposure to developing regions — combined with its portfolio of market-leading products such as Johnnie Walker whiskey and Guinness stout — should underpin strong earnings and dividend growth once current macroeconomic turbulence in key markets abates.
On the back of the UK’s chronic housing shortage, I believe that Bovis Homes (LSE: BVS) is an exceptional selection for those seeking meaty dividends. And supported by ultra-low Bank of England interest rates, improving lending conditions, and government initiatives to help first-time buyers enter the housing market, I expect revenues to keep ticking higher across the homes sector.
Britain’s insatiable housing needs has enabled Bovis Homes to record many years of breakneck, double-digit earnings growth, and further advances to the tune of 28% and 20% are currently chalked in by the City for 2015 and 2016 respectively. As a result the construction specialists are expected to drive last year’s total payment of 35p per share to 39.9p this year, and again to 45p in 2015.
Payments for this year produce massive yields of 4.2% and 4.8% respectively, and I believe Bovis Homes’ exceptional earnings outlook — not to mention tremendous cash-generative qualities — to keep blast payouts higher for many years to come.
Even in spite of persistent earnings weakness — the company has clocked up three consecutive, double-digit earnings dips in recent history — Pearson (LSE: PSON) has proved a resilient customer when it comes to lifting the dividend. And with the company having undergone a period of severe restructuring, I fully expect its revitalised operations to underpin shareholder confidence that payouts should continue rattling higher.
Indeed, the number crunchers expect Pearson’s bottom line to bounce back from this year onwards, and have pencilled in earnings improvements of 16% and 8% for 2015 and 2016 correspondingly. As a result the education specialists are predicted to hike last year’s 51p per share dividend to 54p this year and to 55.8p in 2016.
Such figures create attractive yields of 3.7% for 2015 and 3.8% for 2016. Pearson has undertaken a huge amount of heavy lifting to adapt to a changing world, but with a rising emphasis on digitalisation, not to mention the growing importance of emerging territories, I fully expect payouts to march higher in line with profits.
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