There are many companies paying out bumper dividends in the FTSE 100 but not all offer capital growth too. The three stocks highlighted below are some of the highest yielding in the index but crucially all of them offer growth prospects over the next few years.
Royal Dutch Shell
Royal Dutch Shell (LSE: RDSB) is currently one of the highest yielding companies in London. Today its dividend yield is over 6.8%, a level that hasn’t been seen for years. Even under the immense pressure of the collapsing oil price, Shell has pledged to maintain the dividend at current levels. One might not believe this promise, but coming from a company that hasn’t issued a dividend cut since World War Two, it seems genuine. Full year revenue is expected to fall to just over $300bn and the focus of the business is divesting poor quality assets to streamline for the BG merger. Just last week Shell announced that another $1bn of synergies had been created due to the re-organisation of the business. The company is a good growth prospect in the next 2-5 years and its supersized dividend yield is a bonus.
GlaxoSmithKline’s (LSE: GSK) share price has also been under pressure lately: blockbuster drugs are coming to the end of patents and there is a sizeable revenue gap to fill. However, for income-seeking investors this should be another solid bet as the company is currently paying out a juicy 5.7%. The company also has a good pipeline of treatments and products that should hit the market within 5 years and grow company revenues up from the current £20bn. The company looks good value compared to its peers with a PE ratio of just above 16, and there are some real blockbuster products on the way. Just like Shell, GlaxoSmithKline offers good capital growth over the next 5 years as new products hit the market. Add the yield into the investment case and the company should make good returns for investors that can hold for a few years.
Imperial Tobacco (LSE: IMT) is one of the best performing stocks in the FTSE 100. The company has been operating efficiently and returns have been good over the last few years: this means shares are near an all-time high. This shouldn’t put off new investors though, as the company looks set to increase the dividend over the next few years from the current 4% yield. After acquiring brands in America, Imperial’s increased market share of the USA is set to boost earnings and profits. Crucial to this is the acquisition of a growing e-cigarette brand that looks set to fly and become a top-class revenue contributor. Although sales volume is still declining as more and more people quit smoking, the company offers a very good investment case over the next few years.
All three stocks offer fantastic dividend yields and could also offer capital growth in the medium term. These are just a few of the many high yielding companies in the FTSE 100.
Jack Dingwall has long positions in Royal Dutch Shell and Imperial Tobacco. 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.