Even though AstraZeneca (LSE: AZN) is set to maintain dividends per share over the next two years (rather than grow them), it continues to be a highly appealing income stock. That’s because it is rebuilding its pipeline and, with a strong balance sheet and excellent cash flow, it looks set to make many more acquisitions and deliver bottom line growth from 2017, with impressive growth prospects being pencilled in thereafter.
As such, the company’s yield of 3.8% should improve over the medium to long term, with the potential for a bid also likely to offer capital gains in 2015 and beyond.
Although there is a degree of political risk from investing in Imperial Tobacco (LSE: IMT), it remains a top-notch income stock for the long term. Certainly, its shares are likely to come under pressure if the Labour party win the election, since they are proposing a tobacco tax based on market share. And, with Imperial being a major player in the UK, it could hit investor sentiment in the stock in the short run.
However, looking further ahead, the outlook for investors in Imperial remains positive. For example, it currently yields 4.3% and, with dividends forecast to rise by a hugely enticing 12% next year, it is expected to yield 4.8% in 2016. As such, it continues to be a superb income play even though its short term share price performance could be weaker than its investors are hoping for.
Unlike Imperial Tobacco, water services company, Pennon (LSE: PNN), suffers from little political risk. In fact, even though water remains a significant cost to a large proportion of the population, there is surprisingly little interest in the space from politicians.
This, of course, is great news for Pennon and for its investors. And, with a number of its sector peers either having been taken over or being the subject of bid approaches in the past, a bid for Pennon is at least a distinct possibility over the medium term. As such, it could post impressive capital gains to go alongside a great yield of 4.1%.
With its shares having risen by 26% since the turn of the year, many investors may feel that Old Mutual (LSE: OML) is due a pullback. However, with the outlook for the South African economy being relatively sound (Old Mutual has a large exposure to South Africa) and it still offering good value, now could be a great time to buy a slice of it.
For example, Old Mutual trades on a price to book (P/B) ratio of just 1.55, which indicates that its shares have further yet to rise. And, with a yield of 4.1%, the company’s total return could prove to be very impressive in the medium to long term.
Aberdeen Asset Management
With the FTSE 100 having reached record highs this year, it is of little surprise that shares in Aberdeen Asset Management (LSE: ADN) have risen by an impressive 13% since the turn of the year. That’s because its fees are largely dependent upon the index’s level. And, with a beta of 1.24, any further gains in the FTSE 100 are likely to push its share price upwards at a faster rate than the wider index.
Despite its strong start to the year, though, Aberdeen Asset Management still yields a very appealing 4.1% and, with a price to earnings (P/E) ratio of 14.5, it seems to offer good value alongside a great dividend.
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Peter Stephens owns shares of AstraZeneca, Imperial Tobacco Group, and Old Mutual. 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.