2 ‘secret’ income stocks with monster dividends

Few could argue that leading integrated support services firm Carillion (LSE: CLLN) has underperformed over the last few years, with earnings in decline and the share price now lingering around eight-year lows. Value investors will no doubt be circling, but I on the other hand can see even greater attractions for income seekers.

£1.5bn contract win

At the start of this month, the Wolverhampton-based firm announced that its Carillion telent joint venture had been awarded a three-year contract extension (extendable to five years) to its framework agreement with BT’s Openreach division. It has a potential value of up to £1.5bn. The 60:40 joint venture between Carillion and telecoms group telent will provide a wide range of services including the maintenance, extension and repair of the telephone and data network in the North East, Midlands & Wales, South West, and London & North Home Counties regions.

The initial three-year extension period runs until the end of 2021 and builds on an existing eight-year relationship between Openreach and Carillion telent, during which time the latter has been Openreach’s main delivery partner for the management, maintenance and upgrading of its broadband network. The new agreement could generate up to £900m of revenue over the three years, of which Carillion’s 60% share would equate to £540m. The total value of the contract could increase to £1.5bn if the optional two-year extension is invoked.

World Trade Centre

The news follows another joint venture win for the firm last month, when the Dubai World Trade Centre awarded a £160m contract to deliver Phase 1A6 of the One Central development in the heart of the city’s Central Business District. It seems as though Carillion has started the year on a good footing, winning major contracts with prestigious clients, both at home and abroad.

It could of course be argued that winning major international contracts such as these is just business as usual for a £1bn multinational facilities management and construction services company like this, and that’s true. But with annual revenues set to break the £5bn threshold in 2017 and pre-tax profits likely to exceed £180m, the shares look undervalued at just 6.6 times forecast earnings.

Furthermore, the depressed share price has boosted the already-healthy shareholder payouts which continue to rise with each passing year, and now boast a monster 8.3% yield. With dividend cover at almost two times forecast earnings, there’s also plenty of room for future growth.

Juicy dividend

Another FTSE 250 firm that likes to reward is shareholders handsomely is Inmarsat (LSE: ISAT). The satellite communication services provider has increased its shareholder payouts without fail since it was first listed on the London Stock Exchange in 2005.

The company has struggled to grow its earnings in recent years and the share price has tumbled as a result, earlier this month sinking below 600p for the first time in four years. Inmarsat’s shares are trading at a 33% discount to a year ago, boosting the prospective dividend yield to a juicy 6.6%.

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Bilaal Mohamed has no position in any shares mentioned. 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.