Are Dividends From Royal Dutch Shell Plc, Tate & Lyle PLC And BBA Aviation plc Unmissable?

Royal Dutch Shell Plc (LON: RDSB), Tate & Lyle PLC (LON: TATE) and BBA Aviation plc (LON: BBA) are offering tasty-looking cash.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

With the FTSE 100 on an erratic ride this year and very possibly set for more of the same in 2016, focusing on dividends can be a less stressful way to invest — and when the index dips, we can pick up even better yields.

I quite like the look of Tate & Lyle (LSE: TATE). The maker of sweeteners and other food products has been through a tough spell and has seen its share price lose 25% over the past two years, falling to 590p. We’ve had profit warnings, but we’ve seen concerted turnaround efforts which are starting to look good.

At the interim stage reported in November, Tate & Lyle announced an 18% rise in adjusted pre-tax profit and maintained its first half dividend at 8.2p per share. Chief executive Javed Ahmed said that, with the firm’s plans progressing well, “...we remain on track to deliver the guidance for the full year we set out in May, and for future growth“.

There is a further drop in reported EPS forecast this year, but the City expects to see growth starting to return next year. And those dividends are set to start creeping upwards again, with a yield of 4.6% this year perking up slightly to 4.7% next. Those are not massive dividends, but if we really are at the turnaround point that I think, you could be locking in some very nice future dividend rises.

Engineering bargain?

BBA Aviation (LSE: BBA) has suffered from the engineering and aerospace fallout, and its shares are down 33% in 2015 so far, at 173p. Is it a dead duck or an oversold bargain? Very much the latter, I’d say. It’s not like anything has gone dramatically wrong with the firm; there’s just a modest 4% fall in EPS forecast for this year, which was reinforced by a 3% drop in group revenue reported in BBA’s latest trading update on 9 December. And then forecasts suggest a 14% rebound in 2016, dropping the stock’s P/E as low as 11.

But what about that dividend? Its expected to deliver a 4.5% yield this year, rising to 4.7% next — and in 2016 it should be almost twice covered by forecast earnings.

Chief executive Simon Pryce spoke of “strong momentum into 2016” and “significant growth investments made in recent years“, and he seems to me to be someone who’s reasonably conservative in his statements.

Big Oil!

Then there’s Royal Dutch Shell (LSE: RDSB), which forecasts suggest could be offering a dividend yield of 7.7% this year and next — and that yield has been boosted by a 34% share price fall in 2015, to 1,480p. But Shell’s dividend is by no means a no-brainer. The obvious first problem is that it would not be covered for forecast earnings for this year. There’s a 40% drop in EPS expected, and it could be even worse than that as the oil price has continued to slide and has fallen below $40 a barrel.

But on the upside, Shell has plenty of cash available to pay uncovered dividends for a couple of years if it wants to — many are expecting a dividend cut, but I’d put the chances of getting the cash at better than 50/50.

And if you buy today, you’d be getting the shares at a price not seen since 2009. It’s a calculated risk, but I reckon there’s a decent chance it will come good.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

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

More on Investing Articles

Investing Articles

Could the JD Sports Fashion share price double in the next five years?

The JD Sports Fashion share price has nearly halved in the past five years. Our writer thinks a proven business…

Read more »

Bus waiting in front of the London Stock Exchange on a sunny day.
Investing Articles

If interest rate cuts are coming, I think these UK growth stocks could soar!

Falling interest could be great news for UK growth stocks, especially those that have been under the cosh recently. Paul…

Read more »

Investing Articles

Are these the best stocks to buy on the FTSE right now?

With the UK stock market on the way to hitting new highs, this Fool is considering which are the best…

Read more »

Petrochemical engineer working at night with digital tablet inside oil and gas refinery plant
Investing Articles

Can the Centrica dividend keep on growing?

Christopher Ruane considers some positive factors that might see continued growth in the Centrica dividend -- as well as some…

Read more »

Smiling family of four enjoying breakfast at sunrise while camping
Investing Articles

How I’d turn my £12,000 of savings into passive income of £1,275 a month

This Fool is considering a strategy that he believes can help him achieve a stable passive income stream with a…

Read more »

Person holding magnifying glass over important document, reading the small print
Investing Articles

2 top FTSE 250 investment trusts trading at attractive discounts!

This pair of discounted FTSE 250 trusts appear to be on sale right now. Here's why I'd scoop up their…

Read more »

Smiling young man sitting in cafe and checking messages, with his laptop in front of him.
Investing Articles

3 things that could push the Lloyds share price to 60p and beyond

The Lloyds share price has broken through 50p. Next step 60p? And then what? Here are some thoughts on what…

Read more »

Young female business analyst looking at a graph chart while working from home
Investing Articles

£1,000 in Rolls-Royce shares a year ago would be worth this much now

Rolls-Royce shares have posted one of the best stock market gains of the past 12 months. But what might the…

Read more »