The dividend prospects of FTSE 100-member Taylor Wimpey (LSE: TW) continue to be relatively impressive. The housebuilder has a dividend yield of around 8.8%, which makes it one of the highest-yielding shares in the index. And with its growth forecasts being strong, its current level of payout could increase over the medium term.
Of course, it’s not the only FTSE 100 share which offers impressive dividend growth potential. Reporting on Tuesday was a company that could offer improving levels of profitability, as well as impressive total returns over the medium term.
The FTSE 100 company in question is Intercontinental Hotels (LSE: IHG). Its first-half performance was relatively strong, with it recording its best signings performance for a decade. It delivered revenue per available room growth of 3.7%, which helped it to record an 8% rise in operating profit. Together with a 4.1% net system size growth, the business was able to raise dividends per share by 10%, with earnings growth of 25% suggesting that its strategy is working well.
Encouragingly, each one of the company’s regions has delivered strong performance. China is performing especially well, with the company reporting double-digit growth in revenue per available room and net system size. Alongside the continuation of its efficiency programme, this could lead to an impressive future outlook for the stock.
With Intercontinental Hotels having a dividend yield of 2%, many investors may feel that it lacks income appeal. However, dividends are due to rise by around 10% next year and since they are covered 2.4 times by profit, there is significant scope for further double-digit growth in future years. As such, the company could become a highly enticing income share.
Of course, Taylor Wimpey’s future prospects appear to be somewhat uncertain at the present time. The UK housing market has experienced a difficult couple of years, with confidence coming under pressure as Brexit draws closer. And while the Halifax House Price data released on Tuesday showed a monthly rise in house prices of 1.4%, the prospects for the market remain difficult to predict.
Housebuilders, though, appear to have a brighter future than the stock market is anticipating. The Help to Buy scheme is inflating demand for new-build homes, while continued low interest rates are making mortgages easily available for a range of buyers. Since there is a lack of supply versus demand for new homes, the prospects for Taylor Wimpey appear to be impressive. Its large land bank and strong balance sheet could mean that it is able to offer dividend growth over the long term.
With Taylor Wimpey’s dividend due to be covered 1.3 times by profit in the current year, it appears to be highly sustainable. In fact, growth of 13% is expected next year, which puts the stock on a forward yield of 9.9%. This suggests that it is dirt cheap at the present time. In fact, it may represent one of the most attractive FTSE 100 income opportunities of recent years.
Peter Stephens owns shares of Taylor Wimpey. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.