Today I am laying out the investment case for three London-listed lovelies.
In my opinion National Grid (LSE: NG) (NYSE: NGG.US) is a great way for dividend hunters to gain access to reliable, meaty dividend growth year after year. Power providers are terrific ways to benefit from electricity’s role as an essential commodity in the West, and National Grid is seeking to cotton onto surging power demand in the coming years via its extensive asset-building programme in its critical UK market as well as in North America.
And unlike Centrica and SSE, National Grid’s vertically-integrated operations means that it does not face the same pressure from regulators and therefore has greater earnings visibility, a critical quality for those looking for solid dividend expansion. So anticipated bottom-line bounces of 4% and 3% for the years concluding April 2016 and 2017 correspondingly bodes extremely well for payout growth in the near future at least.
Indeed, the City has pencilled in a payout of 44.6p per share for this year, up from an estimated 43.4p for fiscal 2016. And this is expected to rise further next year, to 45.3p, driving a tasty yield of 4.9% for 2015 to 5%.
British American Tobacco
The addictive nature of smoking has long made the tobacco sector’s big hitters like British American Tobacco (LSE: BATS) popular picks for dividend chasers. But more recently a backcloth of growing regulatory measures across the globe, combined with pressure on smokers’ wallets and a rising black market, have all conspired to dent earnings.
Still, the likes of British American Tobacco have managed to keep shareholder payments rolling forth despite these issues. And I believe that once cyclical woes in key emerging regions abate, and the cigarette giant’s position in the vapouriser market improves, dividends should keep stomping higher in line with profits.
More immediately, the number crunchers expect a modest earnings uptick in 2015 to drive the dividend from 148.1p per share last year to 155.9p in 2015, producing a sizeable yield of 4.2%. And an estimated payment of 160.1p for 2016 creates a 4.3% yield.
The outcome of the UK general election next week has prompted jitters across much of the stock market during the past few months. And it was the turn of the housebuilders like Taylor Wimpey (LSE: TW) to take a whack this week after Labour leader Ed Miliband vowed to prevent private landlords from increasing rents by more than inflation should his party secure power in the forthcoming polls.
Still, Taylor Wimpey’s latest trading statement last week affirmed the underlying strength of the housing market — indeed, the firm noted that “the strong start to the spring selling season has continued, with high levels of customer confidence and an affordable mortgage environment contributing to a positive trading environment.” As a result the City expects earnings and cash generation to keep spiral higher during the medium term at least.
Consequently Taylor Wimpey is anticipated to produce a dividend of 9.2p per share this year, providing an eye-watering yield of 5.4%. And expectations of a further chunky hike in 2015, to 9.9p, shoves this readout to an even-better 5.9%. With the housing market’s supply/demand crunch set to persist, I reckon the long-term earnings and dividend picture for Taylor Wimpey and its peers remains compelling.
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