Support services company Carillion (LSE: CLLN) was given a boost today by the announcement that its joint venture has been awarded a £125m contract to carry out work on the next phase of the Dubai Trade Centre District project.
Despite this, Carillion’s shares are down 1% today, which takes their total fall since the turn of the year to 7%. Although disappointing, much of this fall has been offset by a stunning yield, which now stands at 5.8% and which is likely to rise at a rapid rate over the medium term.
That’s because Carillion pays out just 53% of profit as a dividend, thereby providing considerable scope for increases to shareholder payouts in 2016 and beyond. Certainly, the earnings growth of just 3% that’s forecast for next year is rather disappointing, but with Carillion having a price to earnings (P/E) ratio of just 9.2, it has vast upward re-rating potential.
News was also released today by sugar producer & agribusiness Tate & Lyle (LSE: TATE). Its half-year results show that the company’s performance is mixed, with impressive growth in its speciality food ingredients division being offset by challenges in its bulk ingredients business. Overall, Tate & Lyle reported a rise in pre-tax profit of just 1% at constant exchange rates.
Despite this, the company remains a relatively appealing income play. It yields 4.6% and, with dividends expected to climb by 2.4% next year, a real terms rise in income is on the horizon for its investors. Certainly, a dividend coverage ratio of 1.2 is not among the highest in the FTSE 350, while a P/E ratio of 17.7 is hardly cheap, but with earnings forecast to grow by 9% next year Tate & Lyle could prove to be a strong income play over the medium term.
Similarly, Standard Life (LSE: SL) has huge income appeal. That’s at least partly because the asset manager and insurer is forecast to increase its earnings by 47% in the current year, followed by further growth of 20% next year. While other financial services companies also offer excellent growth rates, Standard Life trades on a price to earnings growth (PEG) ratio of only 0.8, which indicates that its shares are set to reverse their 14% decline since the turn of the year.
Regarding dividends, Standard Life now yields 4.4% following its share price fall and, with such strong bottom line growth potential, it seems likely that brisk rises in shareholder payouts will occur in 2016 and beyond.
Meanwhile, publishing and education company Pearson (LSE: PSON) has lost 28% of its value in the last three months following a profit warning. In the short run, it would be of little surprise for the company’s shares to come under further pressure — at least until there is evidence that its financial performance is in-line with previous guidance.
However, for long term income-investors Pearson has considerable appeal. It yields 5.9% from a dividend that was covered 1.3 times by profit last year. So, even if dividends are reduced in the near term, Pearson still seems likely to offer an above average yield. And, with its shares trading on a P/E ratio of 12.9, they appear to offer good value for money based on historical ratings for the company.
