5 Dividend Darlings Delivering Jaw-Dropping Returns: GlaxoSmithKline plc, BAE Systems plc, Persimmon plc, British American Tobacco plc And Admiral Group plc

Today I am looking at a cluster of hot stocks primed to deliver spectacular income flows.


Fears over the financial robustness of GlaxoSmithKline (LSE: GSK) (NYSE: GSK.US) were fanned in Wednesday business after it announced it was scrapping plans to return £4bn worth of cash to shareholders following its asset-swap with Novartis. Instead the business plans to return just £1bn, although the firm vowed to keep the full-year dividend in the region of 80p per share through to 2017.

Such payments mean that Glaxo’s shares carry a market-mashing yield of 5.3%, a figure that I believe is hard to ignore. It’s true that the heavy capital drain of Glaxo’s R&D operations, not to mention the possible impact of further revenues travails, could put the balance sheet under further pressure. But I believe that the strength of the pharma play’s product pipeline — allied with surging demand from developing regions — should mitigate these problems and keep dividends at lip-smacking levels.

BAE Systems

With critical Western economies back on the mend, I expect sales at weapons builder BAE Systems (LSE: BA) to move steadily higher in the coming years, as defence budgets improve — a promising precursor for dividend growth. In addition, the company is also courting new business in exciting emerging markets to boost revenues, particularly from the likes of Saudi Arabia where it has undergone significant restructuring in recent times.

With cash generation continuing to rattle along nicely, the City expects BAE Systems to hike last year’s payment of 20.5p per share to 20.9p in 2015, and again to 21.6p next year. As a result the arms colossus boasts yields of 4.1% and 4.3% for 2015 and 2016 respectively.


The lead-up to tomorrow’s UK general election is playing havoc with investor appetite for housebuilders such as Persimmon (LSE: PSN). Still, I am convinced that whatever the make-up of the incoming government, legislative initiatives will remain supportive to those attempting to get onto the housing ladder. And in any case, the country’s housing shortage is not going to go away regardless of the result of tomorrow’s run-off, keeping house prices and sales volumes rattling higher.

As a result, earnings at Persimmon are anticipated to skyrocket, dragging the dividend with it as it goes. So a payment of 98.4p per share is pencilled in for 2015, creating a yield of 5.8%, while an estimated reward of 111.5p for next year drives the reading to an astounding 6.6%.

British American Tobacco

I am convinced that the defensive nature of British American Tobacco’s (LSE: BATS) operations should keep dividends charging higher in the coming years — indeed, the business has been able to consistently lift the payment even in times of recent earnings pressures. And with industry-leading labels like Lucky Strike giving the firm terrific pricing-power to mitigate stagnating volumes, and the business increasing its e-cigarette proposition, I reckon the future is bright for dividend seekers.

This view is shared by the City, and British American Tobacco is anticipated to raise the total payment from 148.1p per share last year to 156.1p in 2015, creating a tasty 4.3% yield. And expectations of a further advance in 2016, to 160.6p, pushes the readout to 4.4%.

Admiral Group

Car insurance specialist Admiral (LSE: ADM) looks set to reap the rewards of recovering premiums in its critical UK markets, a welcome boost given the pressure the firm has been under in recent years. The company has also proved itself adept at maintaining strong customer retention rates, while its expansion into overseas territories — such as the launch of its price comparison site in the States — also gives the insurer’s earnings outlook a leg-up.

Consequently the number crunchers expect Admiral to dole out an 87.9p per share full-year dividend in 2015, providing a delicious yield of 5.5%. And this leaps to 6% for 2016 as the payment is expected to come in at 95.8p.

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Royston Wild has no position in any shares mentioned. The Motley Fool UK has recommended GlaxoSmithKline. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.