Royal Dutch Shell
Shares in titan blue-chip Royal Dutch Shell (LSE: RDSB) (NYSE: RDS-B.US) are down 1.5% in the last year. In the last year, they have moved between a low of 2,098p and a high of 2,365p.
In that time, forecasts for Shell’s 2013 profits have fallen 10%. It may be surprising, therefore, that the shares have not fallen further. However, if there is one thing that Shell is known for, it is paying a dividend.
The forecast payout for this year is $1.84, equal to a 5.6% yield at today’s price. This is expected to rise further next year, pushing the yield to 5.7%.
The recent increase in the price of crude oil will help 2013 profits. Forecasts are for earnings per share (EPS) of $4.15, a price-to-earnings (P/E) ratio of 8 at today’s share price.
BHP Billiton
As fears grow over the strength of the Chinese economy, metal prices have fallen hard. This has hit earnings forecasts throughout the mining sector, leading to some large share-price falls.
Of the FTSE 100 miners, BHP Billiton (LSE: BLT) (NYSE: BBL.US) is regarded at the most operationally diverse. This apparent safety has not stopped the shares falling 22% in 2013.
As BHP’s share price has fallen, the dividend yield on offer is rising. Last year’s payout of $1.12 now represents a 4.5% yield. The consensus of dividend forecasts for this year suggests that shareholders could be in line for a 4.7% yield.
Even though earnings forecasts have been reduced, the potential dividend is more than two times covered by forecast earnings.
Imperial Tobacco
For so long regarded as a safe sector, cracks are now appearing in the foundations of big tobacco.
Imperial Tobacco (LSE: IMT)’s interim results in April revealed a 6% decline in unit sales. Revenues were down 3% and operating profits dropped almost 7%. While income investors will have cheered the 11% dividend increase, rises cannot continue for long at that pace while profits are falling.
City forecasts are for Imperial to report 210.2p of EPS this year, paying a 116.1p dividend. That puts the shares today on a P/E of 10.9, with a 5.1% forecast yield. While miners like BHP may be struggling in the current economic environment, I believe that Imperial faces a different threat — ever-decreasing sales.
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> David does not own shares in any of the above companies.