Diageo plc, BAE Systems plc & Imperial Brands PLC: Dividend Delights For Difficult Times

Today I’m looking at the terrific payout potential of three FTSE 100 giants.

Break out the bubbly

At first glance, consumer goods plays like Diageo (LSE: DGE) may not be the obvious port of call for those seeking reliable dividend growth during times of macroeconomic turbulence.

Of course, shopper spending is one of the first areas to deteriorate as consumer confidence falls through the floor and people’s wallets and purses become that little bit lighter. But I believe the strength of Diageo’s market-leading labels have the capacity to keep earnings ticking higher regardless of challenging trading conditions.

The London firm is chucking huge sums at developing and marketing brilliant brands such as Captain Morgan rum and Johnnie Walker whisky, and is also doubling-down on the fast-growing premium segment to deliver sales growth. Diageo has rolled out fruit-flavoured versions of its Cîroc high-priced vodka in recent months, for example.

With sales to emerging markets also poised for lift-off, I reckon meaty dividend hikes can be expected in the years ahead as earnings surge. In the meantime, last year’s 56.4p-per-share reward is anticipated to advance to 58.4p in the period to June 2016, creating a handy 3.1% yield.

A defensive destroyer

Underpinned by steady investment by both the US and UK armed forces, I believe major defence supplier BAE Systems (LSE: BA) is a surefire hit for those seeking reliable dividend expansion.

Due to the broad range of potential security threats facing the West — from the increasingly-expansionist policies of China and Russia to the rising might of IS fighters across the Middle East, Africa and now in Europe — demand for BAE Systems’ cutting-edge hardware and software is likely to remain robust looking ahead.

Thanks to its solid long-term earnings outlook, BAE Systems is expected to lift a dividend of 20.5p per share in 2014 to 20.8p for last year, even in spite of an expected 1% earnings decline. And with the bottom line forecast to bump higher again from the current period, another payout rise to 21.5p is predicted for 2016, yielding a brilliant 4.2%.

Light up your investment returns

It’s no secret that cigarette giants such as Imperial Brands  (LSE: IMB), as Imperial Tobacco Group is now known, must overcome a multitude of mighty hurdles — from rising regulatory hurdles to a growing black market — to keep earnings growing in the years ahead.

But thanks to the titanic strength of labels like Davidoff, West and John Player Special, I believe Imperial Brands (like Diageo) has what it takes to traverse these problems and keep sales growing. Indeed, the business has shuttered scores of local labels to focus investment on these so-called ‘Growth Brands’, a decision that’s delivering handsome rewards.

With the company also entering other hot markets like e-cigarettes, the City is confident that Imperial Brands should keep its progressive dividend policy well on track. The business is expected to hike last year’s dividend of 141p per share to 155.1p in the year to September 2016, creating a chunky yield of 4.4%. And I expect payouts to keep rolling higher as earnings steadily advance.

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