The Motley Fool

Are Vodafone Group plc, Debenhams plc and Admiral Group plc the best dividend stocks EVER?

Being an investor in Debenhams (LSE: DEB) in recent years has been a rather challenging experience. That’s because the retailer’s share price has been akin to a roller coaster, with its future appearing to be decidedly uncertain at times. And with the pressure on consumer spending still being relatively high, investors in the company may be concerned about its dividend prospects.

However, during the last five years Debenhams has either increased or maintained dividends on a per share basis in every year. And with its shares being only marginally higher than they were five years ago, they currently offer a yield of 4.8%. Looking ahead, Debenhams’ dividend is forecast to rise by 5.4% next year and with it being covered over twice by profit, it appears to be highly sustainable.

In addition, Debenhams trades on a price-to-earnings (P/E) ratio of just 9.6 which indicates that as well as offering excellent dividend prospects, it could also be on the cusp of significantly improved share price performance.

Dividends set to rise?

Also offering a relatively high dividend yield is Vodafone (LSE: VOD). The telecoms and media company has a yield of 5% and even though its earnings have come under severe pressure in the last five years, Vodafone has increased shareholder payouts in every year. This bodes well for future dividend rises and shows that even when Vodafone’s earnings performance is disappointing, it still seeks to reward its investors via a higher dividend.

With Vodafone forecast to increase its bottom line in each of the next two years, there’s clear scope for a rapid rise in dividends over the medium term. Furthermore, due to Vodafone gradually becoming an increasingly diversified business after branching into broadband and other services, its top and bottom lines could become increasingly consistent and resilient over the coming years. As such, now could be an excellent time to buy a slice of the company for the long haul.

Price strategy

While Vodafone and Debenhams have experienced a tough period, motor insurance company Admiral (LSE: ADM) has enjoyed something of a purple patch. Its shares have soared by 30% in the last year alone and with the company’s bottom line forecast to rise by 5% in the next financial year, dividend increases could be on the cards.

Of course, Admiral already has a supremely high yield of almost 6% (including special dividends). As such, it remains a firm favourite among income-seeking investors. And while the motor insurance industry is enduring a challenging period, Admiral’s decision to raise prices before many of its competitors seems to have paid off and this can be seen in its forecast growth rate.

Certainly, Admiral is undergoing a period of change in its management team. But it has a highly successful business model and should remain an obvious income choice for the long term.

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Peter Stephens owns shares of Admiral Group, Debenhams, and Vodafone. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.