The reliable nature of tobacco demand has made British American Tobacco (LSE: BATS) a winner for income seekers for an age now.
It can’t be disputed however, that the risks facing Big Tobacco have ratcheted up a notch or several in recent years. Legislators across the globe continue to roll out public smoking bans, plain packaging requirements and other schemes to limit smoking activity. And a rising black market is also hampering profitability for the industry’s major players.
Having said that, the strength of brands like Pall Mall and Lucky Strike is allowing British American Tobacco to navigate the worst of these troubles — sales volumes of these so-called Global Drive Brands leapt 9.8% between January and September.
And the UK-listed giant is also betting big that the fast-growing e-cigarette market should deliver stout earnings growth and mitigate the problem of lost tobacco revenues. British American Tobacco launched its new Vype Pebble product just this week, in conjunction with a new vaping-dedicated store in Milan.
City analysts certainly believe British American Tobacco has what it takes to keep generating solid bottom-line growth and with it exceptional dividend expansion. Indeed, the firm is expected to raise the dividend from a predicted 164.6p per share this year to 179.2p in 2017, helped by an anticipated 15% earnings boost.
This projection yields a chunky 4.1% yield.
Hit the road
Meanwhile, the vast sums being ploughed into revamping Britain’s road network are also expected to deliver excellent dividend growth at Hill & Smith (LSE: HILS).
The company — which provides road furniture such as walkways, safety barriers and signage — announced last month that the UK government’s Road Investment Strategy is helping to propel the top line, with group underlying revenues shooting 15% higher during July-October.
And Hill & Smith is strengthening its market position through shrewd acquisition activity. Just in August the business snapped up street lighting, road sign and traffic management provider Signature for £12.5m.
The number crunchers expect a predicted 8% earnings rise in 2017 to keep Hill & Smith’s progressive payout policy rolling, and a dividend of 26.8p per share is currently expected, up from an estimated 24.9p in the current period.
While a dividend yield of 2.2% may lag a forward average of 3.5% for Britain’s blue chips, I reckon Hill & Smith is in great shape to deliver meaty payout increases long into the future.
Like Hill & Smith, dividend yields at Ted Baker (LSE: TED) also lag those of the broader market through to 2017 by some distance.
The company is predicted to pay a reward of 61.9p per share for the year to January 2018, up from an anticipated 54.6p this year but yielding just 2.4%. However, I reckon soaring demand for Ted Baker’s togs makes it one to watch for both growth and income seekers.
The popularity of the mid-to-premium fashion segment shows no signs of slowing, and retail sales at Ted Baker shot 15.4% higher during the last quarter. New store openings in the US helped to power revenues, but this wasn’t the only story as e-commerce sales exploded 30.3% year-on-year.
The City expects Ted Baker’s bottom line to keep swelling for some time yet, and an 8% rise is predicted for fiscal 2018 alone. I reckon the fashion star’s rising global appeal makes it one to watch for savvy dividend chasers.
Royston Wild has no position in any shares mentioned. The Motley Fool UK has recommended Ted Baker plc. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.