Today I am looking at the dividend prospects of four popular income picks.
Banco Santander
I believe that global banking giant Santander (LSE: BNC) is a great stock selection owing to its mammoth presence in both developed and developing markets. The UK has emerged as the firm’s single largest market more recently, but one should not overlook its surging progress in Latin America — Santander now commands almost four-tenths of total profits from the territory thanks to shrewd expansions and product roll-outs.
And with rising personal wealth levels driving banking services demand resolutely higher, I believe earnings — and consequently dividends — should gather steady momentum. Santander has been forced to slash the dividend by a third, to 20 euro cents per share, in 2015 thanks to recent capital-strengthening measures. But this still yields an impressive 4%. And with profits predicted to explode this year and beyond, I fully expect payouts to trek higher following this year’s curtailments.
RSA Insurance
Financial services giant RSA Insurance (LSE: RSA) has seen its share price oscillate wildly in recent months thanks to the attempted takeover by rival Zurich. The stock understandably collapsed last month after the Swiss firm axed the deal, prompted by the underperformance of its own General Insurance division, and I reckon this current price weakness makes RSA Insurance a snip.
With its dividend policy cranking back into life this year, RSA Insurance is expected to shell out a dividend of 11.5p per share in 2015, yielding a handy-if-hardly-spectacular 2.8%. But the prospect of sustained earnings growth is expected to propel the payout to 15.2p the following year, creating a mighty 3.7% yield. And with massive restructuring building the balance sheet and improving the firm’s focus on core territories, I reckon the omens are good for both growth and income seekers.
British American Tobacco
The investment potential of British American Tobacco (LSE: BATS), and indeed the entire cigarette sector, has come under sustained scrutiny in recent times. The industry has already been whacked by the steady stream of regulation affecting the sale and use of tobacco products across the globe, and legislators are also ramping up the curbs placed on e-cigarettes. A rising black market has done nothing to assuage investor concerns, either.
Still, I believe the positive impact of improving consumer spending power — particularly across emerging markets, home to the majority of the world’s smokers — should power revenues at British American Tobacco and its peers comfortably higher again. With earnings expected to head skywards again from next year, the business is expected to fork out a dividend of 156.1p per share for 2015, yielding an impressive 4.1%. And this figure moves to 4.3% for 2016 amid expectations of a 164p reward.
Bovis Homes Group
I am convinced the chronic homes supply shortage in Britain bodes extremely well for housebuilders like Bovis Homes (LSE: BVS). Indeed, the improving financial clout of new buyers is exacerbating this massive market imbalance and pushing prices up, as illustrated by latest Rightmove numbers this week — the property website announced that average house prices had struck £296,549 in October, up 5.6% on an annualised basis and 0.6% from September.
Despite fresh pledges from Downing Street to ramp up the scale of housebuilding in the country, the situation is not expected to improve any time soon, much to the benefit of Bovis Homes’ bottom line. And as a result dividends are expected to soar — a predicted payout of 40p per share for 2015 yields a market-beating 4.1%, and this number leaps to 4.8% for next year thanks to predictions of a 46.9p dividend.
