Should dividend-seekers sell National Grid plc & easyJet plc and pile into Hargreaves Lansdown plc?

In the last six months, shares in Hargreaves Lansdown (LSE: HL) have fallen by over 10%. While this is disappointing, the financial services company has still recorded a rise in its valuation of 100% during the last five years. Following its share price fall Hargreaves Lansdown’s yield is now slightly higher at 2.7% and many investors may be weighing up buying it due to its income potential.

Clearly, Hargreaves Lansdown is a highly successful company and it’s forecast to increase its bottom line by 10% this year and by a further 13% next year. This should mean upbeat dividend growth prospects, but with Hargreaves Lansdown having a dividend payout ratio of 94%, the scope for increasing dividends at a rapid rate may be somewhat limited.

Furthermore, with Hargreaves Lansdown trading on a price-to-earnings (P/E) ratio of over 35, its shares appear to be fully valued. Even when the company’s earnings growth rate is taken into account, it has a price-to-earnings-growth (PEG) ratio of around three and this indicates that it may be worth looking elsewhere for a better income and value play.

Easy does it

One company that could prove to be just that is easyJet (LSE: EZJ). It yields a very enticing 4% and with dividends due to rise by 19% next year, easyJet is set to yield 4.7% in 2017. Both of these figures compare favourably to the yield of the wider index and with easyJet having the potential to raise dividends at a rapid rate, its income outlook is very upbeat.

For example, easyJet currently pays out just 40% of profit as a dividend and this indicates that there’s scope for shareholder payouts to increase at a faster rate than the company’s bottom line over the medium term. And with earnings growth of 6% this year and 15% for next year being pencilled-in by the market, easyJet’s dividend prospects are enhanced yet further. In addition, easyJet trades on a P/E ratio of just 10.2, which shows that an upward rerating is on the cards.

Power player

Another stock that seems to offer better income potential than Hargreaves Lansdown is National Grid (LSE: NG). It currently yields 4.6% and has a good track record of increasing dividends. For example, in the last five years, National Grid has increased its shareholder payouts by around 2.7% per year, which means that the prospects for a real-terms rise in dividends over the medium term are very encouraging – especially with inflation being relatively low.

National Grid may lack the takeover potential of a number of its utility peers but it offers reduced political risk compared to domestic energy suppliers. And with a highly robust and solid business model, the sustainability of its dividend is relatively high. As such, and while National Grid may fail to offer the capital growth potential of some of its more cyclical index peers, it remains a top-notch income stock with a robust dividend outlook.

Despite this, there's another stock that could outperform National Grid and easyJet in the coming years. In fact it's been named as A Top Income Share From The Motley Fool.

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Peter Stephens owns shares of easyJet and National Grid. The Motley Fool UK has recommended Hargreaves Lansdown. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.