Today I am looking at three blue-chip stars ready to deliver smashing returns in 2015.
Banco Santander
In a bid to produce a healthier correlation between earnings and dividends, Banco Santander (LSE: BNC) (NYSE: SAN.US) has elected to rein in its previously ultra-generous — and ultimately unsustainable — payout policy from this year onwards.
As a result, the bank is anticipated to fork out a payment of 58 euro cents per share in 2014, down 3% from last year’s levels. And this is expected to dive still in 2015 to 50.4 cents, a hefty 13% drop.
But investors should not lose sight that these projections still produce eye-watering dividend yields — indeed, next year’s payout still produces a sizeable 7.3% yield, albeit down from a figure of 8.4% for 2014.
And with the firm’s terrific exposure to increasingly lucrative emerging markets, and in particular those of Latin America, expected to power earnings higher — growth of 20% is pencilled in for 2015 alone — I expect dividends to continue to outstrip the opposition.
Admiral Group
Of course, a backcloth of rising competition continues to dent investor sentiment towards the motor insurance providers. Against this backcloth Admiral (LSE: ADM) has seen revenues dip lower in recent times, a factor which is likely to result in earnings dips to the tune of 2% and 8% in 2014 and 2015 correspondingly.
In the face of this pressure, the Welsh firm is anticipated to slash a predicted 99.2p per share dividend for this year by 7% in 2015, to 92.4p. Despite expectations of a large downgrade, however, the business still carries a monster yield of 7.5% for 2015, smashing a forward average of 5.6% for the rest of the non-life insurance sector.
Investors should of course be aware that further premium pressure could threaten dividends beyond next year. However, Admiral’s ability to maintain a loyal customer base — total customers rose 10% during July-September to just over 4 million — combined with rising exposure to overseas markets bodes well for future earnings and payout growth.
Direct Line Insurance Group
Like Admiral, Direct Line Insurance (LSE: DLG) also faces intensifying competitive pressures across its core markets. Still, the business is expected to flip from a 3% earnings dip this year to a 7% increase in 2015, helped by its portfolio of blue ribbon brands including Churchill and Privilege.
The result of special dividends bloat the final payout figure for 2014, and a total payment of 48.6p per share has been touted by the City’s number crunchers. Although a subsequent fall is somewhat inevitable, the 2015 figure remains impressive at 22.2p, in turn creating a stonking 7.8% yield.
Direct Line is undergoing a significant transformation programme to strip out costs and improve technological innovation across the business, a promising precursor for future growth. With the firm also ramping up its exposure to fast-growing sectors like landlord and pet insurance, I believe that Direct Line should continue offering delicious dividend yields.