Today I am looking at three London-listed stars poised to deliver spectacular dividend growth.
Banco Santander
Spanish banking colossus Santander (LSE: BNC) shocked the market back in January when it took the hammer to its ultra-generous dividend policy in order to bolster its capital reserves. Combined with introducing a colossal €7.5bn rights issue, the bank advised that it would limit the full-year payout for 2015 to just 20 euro cents per share, a huge reduction from dividends around 60 cents during the past five years.
Although share prices have still to recoup their losses since January’s statement, I believe that Santander remains a highly-attractive stock selection, particularly now that new chairperson Ana Botín’s cash-building exercise has calmed doubts over the bank’s financial robustness.
With the firm expanding its footprint and product ranges in the promising territories of Latin America — Santander already generates 38% of all profits from the region, and half of those from Brazil alone — and Santander enjoying the fruits of a recovering UK economy, I expect dividends to march higher again in line with earnings.
And investors should note that even a dividend of 20 cents for this year creates a handy yield of 3%. With the bottom line expected to keep on expanding — growth of 14% and 13% is predicted for 2015 and 2016 respectively — I fully expect dividends to move back towards lip-smacking levels sooner rather than later.
RSA Insurance Group
Like Santander, RSA Insurance (LSE: RSA) has fallen out of favour with income hunters in recent times as pressure on the balance sheet has mounted. Indeed, the company elected to cease paying dividends at all last February and completed a mammoth £773m cash call a few months later.
But with profits back on the march again, costs coming down and a swathe of divestments having been completed, RSA Insurance felt confident enough to get payments moving again with a final dividend of 2p per share for 2014.
With the firm’s payout policy now back in full flow, the City predicts RSA Insurance will provide a total dividend of 13.2p for 2015, producing a decent yield of 3%. And this is anticipated to rise to 15.3p the following year, catapulting the yield to a much-improved 3.5%. I fully expect shareholder rewards to keep in rising at a heady rate in the coming years as revenues from the insurer’s streamlined operations across UK and Ireland, Scandinavia, Canada and Latin America pick up.
N Brown Group
In the face of persistent earnings woes, internet and catalogue retailer N Brown (LSE: BWNG) is expected to disappoint its own shareholders in the coming weeks. Indeed, the business — which operates the Jacomo and Simply Be brands amongst others — is expected to cut the dividend for the year concluding February 2015 to 13.7p per share, down from 14.23p in 2014.
N Brown has had to invest vast sums to transform itself from a ‘mail order’ business to a digital-orientated one, while steady sales decline in recent quarters — caused by huge competition and unfavourable weather conditions — has also smacked the business. But with turnover having bounced 3.6% higher during December-February, and N Brown’s transformation plan leaving it better prepared to accommodate surging e-commerce in the future, things are looking up for the Manchester-based firm.
Consequently the number crunchers expect both earnings and dividends to surge again from this year onwards, and a payment of 14p is currently slated for fiscal 2016, creating a hefty yield of 4.2%. And a further chunky hike in the following year, to 14.9p, propels the yield to an even-better 4.5%.
