If you are on the lookout for the perfect dividend investment, then I have found two companies that might just be down your street. One is a contrarian play that is as unfashionable as could possibly be, and the other is a turnaround play that is recovering strongly.
Let’s take each one in turn.
Standard Chartered
Standard Chartered (LSE: STAN) has had a torrid few years. This emerging market bank enjoyed over a decade of steady growth and a rising share price. It was one of the few banks that sailed through the financial crisis with an unblemished record.
Yet, round about the time of the Eurozone crisis, the company suddenly seemed to reach the limits of its growth. There were a series of profit warnings, and the share price tumbled.
Sometimes, when a business hits trouble, you initially lose interest. After all, when a downtrend begins, you are unlikely to make a profit until things have settled down. So I turned my attention to other investments. Standard Chartered was on my watchlist, but wasn’t really a share I was considering investing in.
But just last week I thought I’d take a fresh look at this company. After all the share price falls, the bank now looks like a contrarian buy, with a high dividend yield. Here are the numbers: a 2014 P/E ratio of 8.6, falling to 8.1 in 2015. The dividend yield is 5.7%, rising to 5.9%.
If consensus is right, then Standard Chartered is cheap, and there is a high and rising income to boot. This company is no longer the growth investment it used to be, but it has strong appeal as a recovery and dividend play.
Aviva
Insurance provider Aviva (LSE: AV) (NYSE: AV.US) is another turnaround play, but it is much further down the path of recovery. Since the financial crisis this business was stuck in the doldrums, until last year, when profitability rebounded, and the share price began to trend upwards.
Aviva is not the contrarian play that Standard Chartered is, but there is much to be said for the more predictable and consistent earnings that we expect Aviva to produce.
The 2014 P/E ratio is 10.4, and the 2015 P/E ratio is 10.3. The dividend yield is 3.2%, rising to 3.9%. Thus this company is reasonably priced, and I expect the dividend yield to increase over the next few years. With improving earnings from emerging markets, this is a solid high yield buy which promises stability with a dash of growth.