Today I am looking at three firms poised carrying tantalising dividend prospects.
At face value chipbuilder ARM Holdings (LSE: ARM) (NASDAQ: ARMH.US) may not be the most attractive income selection on the market. Concerns over slowing smartphone and tablet PC demand, combined with a lower royalty outlook as users switch to cheaper devices, continue to cast doubts over the Cambridge company’s earnings outlook.
These issues do not seem to worry the City, however, with hardware sales to emerging markets and ARM Holdings’ diversification into servers and networks expected to mitigate these problems. Indeed, the business is expected to record robust earnings growth to the tune of 69% and 20% in 2015 and 2016 correspondingly, driving the full-year dividend from 7.02p per share last year to 8.54p this year and 10.3p in 2016.
It is true that these figures create yields well below the market average, with a readout of 0.7% for 2015 rising to just 0.9% next year. Still, investors should remember that payouts are expected to be hiked by more than 20% both this year and next, continuing the trend of recent years. And I expect dividends to keep on surging should earnings keep on impressing, as is widely anticipated.
Like its peers across the housing sector, I believe that Barratt Developments (LSE: BDEV) is in rude shape to continue churning out delicious dividends. The market remains favourable for the UK’s major construction plays, exemplified by Centre for Economics and Business Research (CEBR) numbers today which projected average house price growth to accelerate from 1.5% this year to 2.3% in 2016.
Accordingly the number crunchers expect Barratt Developments to record earnings expansion in the region of 39% and 18% for the years concluding June 2015 and 2016 respectively. Against this backcloth Barratt is expected to churn out huge payouts of 23.1p per share for this year and 28.6p in 2016, resulting in monster yields of 4.1% and 5.1% for these years.
With Britain’s housing crunch appearing set to last, and favourable lending conditions helping new buyers get onto the market, I fully expect earnings and payouts to keep marching higher at Barratt Developments.
Car accessory and bike emporium Halfords (LSE: HFD) was in the headlines this week after it was announced chief financial officer Andrew Findlay would be departing for easyJet. With long-standing chief executive having already jumped ship to Tesco, incoming head Jill McDonald — formerly of McDonald’s — will have to preside over a boardroom in a state of uncertainty.
Still, with demand for bicycles continuing to boom, and success of its Halfords Autocentres arm supplementing strong sales of car parts, the City expects growth at Halfords to keep on trucking. Indeed, an estimated 9% rise for the year ending March 2015 is expected to advance an extra 8% in 2016 and 6% in 2017.
Consequently Halfords is anticipated to lift a full-year dividend of 15.5p per share for fiscal 2015 to 16.9p in the current year, and again to 18.2p in 2017. These projections produce juicy yields of 3.6% for 2016 and 3.9% for the following 12-month period.
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Royston Wild owns shares of Barratt Developments. The Motley Fool UK has recommended ARM Holdings and owns shares of Tesco. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.