The Motley Fool

Should You Invest In 6%+ Yielders HSBC Holdings plc, SSE PLC And Redefine International PLC?

Today I am looking at three London stalwarts expected to provide pukka shareholder returns.

HSBC Holdings

Investors in banking giant HSBC (LSE: HSBA) will have been dismayed by the steady share price slump that kicked off back in the spring. Investor sentiment has eroded thanks to concerns over the size of financial penalties relating to its disgraced Swiss unit; the future of its UK headquarters; and more recently, the economic health of its key Chinese marketplace.

Still, I believe that this weakness presents a brilliant buying opportunity for those seeking out tasty dividend prospects. Underpinned by expectations of solid earnings growth, the City expects HSBC to lift last year’s reward of 50 US cents per share to 51 cents in 2015 and to 52 cents next year, figures that yield a mightily-impressive 6.6% and 6.8% correspondingly.

Although of course investors should be watchful of economic conditions in Asia, I believe HSBC has the expertise to keep revenues from the region chugging higher — despite current strain, profits from Hong Kong rose 6% during April-June, to $3.46bn, thanks to broad strength across all of its local divisions. With HSBC’s cost-cutting also gathering momentum, providing a further boost to its healthy capital base, I believe income investors can expect bountiful returns in the years ahead.


Conversely, I believe stock pickers cannot be as giddy over the dividend outlook over at SSE (LSE: SSE). The energy provider continues to be haunted by the spectre of sweeping action by regulator Ofgem, egged on by negative comments from the Competition and Markets Authority (CMA) over how much the ‘Big Six’ suppliers charge customers, not to mention enduring criticism from consumer groups, the media and politicians.

Indeed, the weekend coronation of ‘leftist’ Labour leader Jeremy Corbyn is likely to encourage Prime Minister David Cameron to turn up the heat on SSE et al as the Westminster set attempt to curry favour with voters. With customers continuing to abandon SSE in their droves in search of cheaper tariffs — the company shed a further 90,000 accounts during April-June — the pressure to cut prices remains as strong as ever, a worrying sign for future profitability.

The number crunchers expect SSE to churn out dividends of 90.4p per share in the 12 months to March 2016, up from 88.4p last year and yielding an impressive 6.3%. And predictions of a 93.1p reward in fiscal 2017 drives the readout to an even-better 6.5%. But with SSE’s earnings outlook expected to remain patchy for some time to come, and the business nursing a colossal debt pile, I reckon dividend investors should be prepared for disappointment.

Redefine International

I believe that real estate investment trust (or REIT) Redefine International (LSE: RDI) should deliver resplendent returns in the years ahead as the UK and German economies steam higher. And the company’s recent moves to expand the size of its operations bodes well for its earnings and consequently dividend prospects, too.

Redefine announced last week that it had acquired the AUK Portfolio of Aegon UK Property Fund for £437.2m, leading chief executive Mike Watters to herald the move as “a transformational deal… which rapidly improves the quality and scale of our overall portfolio.” The business has also exchanged contracts to acquire Banbury Cross Retail Park for £52.5m, while the steady disposal of non-core assets bulks up Redefine’s financial firepower, a positive signal for fresh asset purchases as well as dividend payments.

A chunky earnings uptick in the year ending August 2015 is expected to drive the full-year dividend at Redefine to 3.3p per share from 3.2p in the previous period, lighting up the boards with a terrific 6% dividend yield. And predictions of a further bottom-line rise in fiscal 2017 is forecast to push the payment to 3.4p, creating an excellent yield of 6.2%.

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