I’m a big, big fan of Aviva (LSE: AV). Simply put, it’s a cash machine, and this quality has enabled it to light a fire under dividends. Over the past five years these have almost doubled, and City analysts are expecting them to keep on growing.
Last year’s 27.4p per share reward is on course to rise to 29.2p in 2018, or so say the experts, meaning investors can drink in a monster 5.9% yield. And next year the dial moves to 6.7%, thanks to expectations of a 32.9p payment.
While I consider Aviva to be a brilliant dividend bet, income investors scouring the FTSE 100 aren’t short of other great shares to buy today, although some may fall under the radar. Some like Halma (LSE: HLMA), whose smaller dividend yields aren’t guaranteed to draw attention.
Billion pound beauty
Indeed, yields at the business, which supplies specialist safety, health and environmental systems, stand at just 1.1% and 1.2% for the years to March 2018 and 2019, respectively. That’s some way short of Aviva’s corresponding readings and way less than half of the Footsie’s broader average, too.
However, while dividends at many of the FTSE 100’s big yielders are looking in peril — I’m looking at you SSE and Glencore, to name just a couple — I’m confident that Halma has what it takes to continue raising dividends for a long time to come.
Last year’s 14.68p per share reward is expected by City brokers to rise to 15.7p per share in fiscal 2019, and again to 16.8p next year. Halma has lifted dividends for almost four decades on the spin and it looks in great shape to meet current forecasts as well.
Projected dividends are covered 3.1 by anticipated earnings through to the close of next year. And what’s more, like Aviva, Halma’s formidable cash flows provide these payout forecasts a little more protection too.
On the negative side, Halma doesn’t come cheap thanks to its forward P/E ratio of 29.8 times. Still, I reckon this is a small price to pay to tap into its brilliant growth story.
Additional profits rises of 6% and 8% are forecast for this year and next, respectively. And it’s not tricky to see earnings continue to barrel higher as sales pick up overseas — sales in Asia Pacific ran past those of the UK for the first time last year, and helped annual group revenues barge through the £1bn marker — and the company puts its robust balance sheet into action to conduct more earnings-boosting acquisitions.
Aviva isn’t expected to prove a slouch in the earnings stakes either, at least that’s what latest City estimates suggest. A 64% bottom line rise is predicted for 2018, and another 8% rise for next year too. An extra bonus is that current predictions leave Aviva dealing on a prospective P/E multiple of just 8.6 times.
Announcement of a profit fall during January-June has shaken investor confidence a little, Aviva recording a 2% drop to £1.44bn on the back of recent disposals, trading troubles in Canada, and the impact of poor weather. However, the insurer’s long term growth picture remains intact and, with its solvency II capital surplus remaining on the robust side at £11bn as of June, there’s still a lot for investors to celebrate. I think, like Halma, that the firm has all the tools to keep raising dividends for a long time to come.
Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has recommended Halma. 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.