MENU

Are Dividend Giants BHP Billiton plc, GlaxoSmithKline plc And HSBC Holdings plc Worth A Buy?

These dividend giants all pay out huge yields that are great for any portfolio. As you can see in the table below all three companies pay more than 6% dividend yield against a FTSE 100 average yield of 4%. Income stocks are becoming a popular addition to many portfolios and should be part of every investor’s research. The three companies listed below are some of the UK’s most popular stocks. 

  Dividend
Yield
Dividend
Cover
BHP 11.7% 0.4
GlaxoSmithKline 6.17% 0.83
HSBC 6.3% 1.58

BHP Billiton

BHP Billiton (LSE: BLT), like many other commodity-based companies, has had a year to forget. Commodity prices are falling ever lower and the company has recently had an environmental disaster in Brazil where 13 people died in a dam burst. The company pays a huge dividend that is coming under threat due to declining revenues and a possible $3.5bn fine for the dam burst in Brazil. 

The dividend cover of 0.4 is less than reassuring, too, and commodity prices don’t look like shooting higher any time soon. Investors that buy the shares now and hold for the long term may well be rewarded well, but should expect short term pain first. 

GlaxoSmithKline

GlaxoSmithKline’s (LSE: GSK) share price has also been under increased pressure, due to blockbuster drugs coming off patent. This has come as a slight surprise to many, as Glaxo has an exiting pipeline of new drugs that should boost company earnings and fill the earnings gap. City analysts forecast strong earnings growth in 2016 and 2017, which should also give strength to its dividend.

At a current yield of 6.1% it looks a solid bet for the next few years, with big growth prospects for such a large company. 

HSBC

HSBC (LSE: HSBA) currently has a P/E ratio of just over 9.5, which implies the company is undervalued and has scope for growth. This growth should be provided by HSBC’s emerging market business and 2016 looks like it may be a good year in these emerging countries. China and India have both had good growth numbers come out in the last few weeks which is encouraging. The company has also identified billions worth of savings that should do wonders for the bank going forward. 

The three companies listed here all offer various risk profiles that should always be taken into account before investing. BHP is the ‘higher risk’ company, due to the declining commodities environment, and its dividend may well have to be cut to conserve cash. It does however offer the highest yield in the FSTE 100,  so for brave investors that believe in the company this could well be the buying opportunity of the decade. GlaxoSmithKline and HSBC are ‘lower risk’ plays, offering solid income with growth prospects too. 

If you're looking for a top income stock that should deliver good returns in 2015 then look no further. The stock is discussed in an exclusive new report titled A Top Income Stock For 2016

It's been written by the Fool's experienced analysts and  contains details of an income stock that should outperform in 2016

The report is absolutely free and there's no obligation. So click here now to get your copy! 

Jack Dingwall has no position in any shares mentioned. The Motley Fool UK has recommended GlaxoSmithKline and 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.