With a new management team in place, Centrica (LSE: CNA) could have a challenging year. That’s because they are likely to make significant changes to the company in order to improve its long term growth outlook, with Centrica’s bottom line forecast to fall by as much as 6% in the current year. And, with a potential Labour victory in the election, investor sentiment in the company could get worse if price freezes and a new regulator become a reality.
However, for longer term income investors, now could be a great time to buy. Certainly, dividends are less generous at Centrica now than this time last year and, looking ahead, they are set to flat line next year. However, with a yield of 4.5%, Centrica remains a top notch income play.
While Centrica may have a somewhat uncertain future, Glencore (LSE: GLEN) is expected to turn around three years of disappointment with strong earnings growth over the next two years. This, in turn, should allow it to raise dividends at a brisk pace, with them set to increase by 5.5% next year, for example.
This puts Glencore on a forward yield of 4.1%, which is considerably more appealing than the FTSE 100’s yield of 3.5%. And, with shares in the resources company having risen by 21% in the last three months, it appears as though investor sentiment has improved dramatically and this could bode well for the company’s share price performance in future, too.
Over the last four years, Vodafone (LSE: VOD) has increased dividends per share at an annualised rate of 6.6%. That’s a very impressive rate of growth and, with the company’s bottom line set to show signs of life as the outlook for the European economy improves, its dividend growth prospects could gain a real boost.
Of course, Vodafone’s yield of 5.2% is still relatively high, but what really appeals to income investors is the company’s stability. In fact, even with a slowdown in Europe in recent years, Vodafone has still been able to deliver the aforementioned dividend growth which, given the uncertain outlook for the wider index, is a major asset for the company’s investors.
British American Tobacco
When it comes to stability, though, Vodafone is easily beaten by British American Tobacco (LSE: BATS). Clearly, demand for its products is relatively stable, although there is currently a transition taking place in the developed world, with people switching to e-cigarettes and away from traditional tobacco products. As such, the next few years could see British American Tobacco be less stable than it has been in previous years.
Still, it offers excellent income potential, with British American Tobacco currently yielding 4.3%. And, with it having increased dividends per share at an annualised rate of 6.4%, it has an excellent track record of real terms growth, which bodes well for medium to long term investors.
As with Glencore, Anglo American (LSE: AAL) offers far less stability than the likes of Vodafone, British American Tobacco and Centrica. However, this doesn’t necessarily mean that it lacks appeal as an income stock, since Anglo American now offers a great yield of 5% after a share price fall of 25% in the last year.
And, while commodity markets may experience another challenging period moving forward, Anglo American’s dividends are well covered at 1.3 times. This means that, while its bottom line is due to fall this year, the company appears to have sufficient headroom to maintain shareholder payouts, with growth potential as Anglo American’s bottom line is forecast to return to growth next year.
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Peter Stephens owns shares of British American Tobacco and Centrica. The Motley Fool UK has recommended Centrica. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.