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Do Super Dividends Turn Aviva plc, NEXT plc And Anglo American plc Into Screaming Buys?

The insurance sector had a rough ride in the banking meltdown, and though some like Prudential just sailed on through thanks to management that matches its name, others like Aviva (LSE: AV) had it tougher. Aviva was overstretched just at the wrong time, and had to pare its dividend to the bone. But since an annual low of 15p in 2013 and the introduction of a turnaround plan, the dividend has been steadily recovering.

In 2014 Aviva handed over a yield of 3.7%, and forecasts suggest that will rise to 4.5% this year and 5.2% next on a share price of 469p. But is that realistic? Well, at interim time this year, chief executive Mark Wilson told us that “We have improved the balance sheet, simplified the Group and we are now transforming our business“, adding that the 15% hike in the first-half dividend “underlines our confidence in our cash flow and the business“.

Wads of cash

High street retail has been struggling for years, but a company that consistently seems to beat the gloom is fashion retailer NEXT (LSE: NXT), whose share price has put on 19% in the past 12 months to 7,635p, and has more than trebled in five years. Part of that rise will be due to NEXT’s policy of returning surplus cash to its shareholders through share buybacks when the price is low enough, but so far this year the price has been above the company’s limit and so it has switched to paying special dividends instead.

At the halfway stage, NEXT anticipated an ordinary dividend of 159p for the year to January 2016, up from 150p last year, but also told us its total special dividend should come in at 230p per share, giving shareholders a total of 389p — and that would mean a total yield of 5.1%. If the share price remains high, the special payments should carry through to next year too, when analysts are forecasting a yield of 5.4%.

Mining riches?

My third hard-hit sector for today is mining, and I’m taking a look a the high potential dividends from Anglo American (LSE: AAL). At 634p, The shares have actually climbed 22% since the end of September, but they’re still down 51% over 12 months, and that’s helped push the forecast dividend yield up to 6.6% this year — though analysts are predicted a fall back to 6% next year.

The trouble is, we’ve seen three years of sliding earnings from Anglo American, and we have further EPS falls of 44% and 20% predicted for this year and next. The mooted dividends would be around 1.3 times covered, and the firm has cash on its books from the sale of various assets — the latest was the disposal of its Norte copper business for $300m, to add to the $1.6bn from the sale of the firm’s stake in Lafarge Tarmac.

Recovery needed

But in the long run, keeping the dividend healthy will need a recovery in commodities prices — and with Chinese growth dipping below 7%, there’s no guarantee that’s going to happen any time soon.

Reinvesting dividends like these for the long term can get you to millionaire status by the time you retire.

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