This is the second part of my two-part series looking at the 10 FTSE 100 stocks that qualify for a UK version of the popular Dogs of the Dow high-yield investment strategy.
The Dogs strategy involves buying the 10 highest-yielding stocks in the index at the start of the year, and then selling them at the end of the year. In the US, the Dogs strategy has beaten the Dow in two of the last three years.
Here are the final five 2015 Dog stocks from the FTSE 100 (if you missed the first five stocks, you can catch up here):
|
Company |
2015 prospective yield |
|
Royal Dutch Shell (LSE: RDSB) |
5.9% |
|
GlaxoSmithKline (LSE: GSK) |
5.9% |
|
Standard Chartered (LSE: STAN) |
6.0% |
|
Direct Line Insurance Group (LSE: DLG) |
7.4% |
|
Admiral Group (LSE: ADM) |
6.9% |
Shell
No-one quite knows how the oil market will behave next year.
However, Shell should be able to afford to ride out the storm, thanks to its huge scale, large gas business and low debt levels.
Although cash flow could come under pressure next year, the firm’s forecast P/E of 9.8 suggests to me that Shell remains a safe income buy.
GlaxoSmithKline
Allegations of bribery and corruption, patent expiries, and falling profits.
It’s been a poor year for Glaxo, but this has left the UK’s largest pharmaceutical firm trading with a prospective yield of nearly 6% and a planned 82p per share capital return in 2015.
Glaxo remains in my portfolio, and on my buy list.
Standard Chartered
Shares in Asia-focused Standard Chartered have fallen by around 35% this year, amid a constant run of downgraded forecasts.
As a result, the bank’s shares trade on a 2015 forecast P/E of just 8.1, which prices in a lot of bad news, in my view. A prospective yield of around 5.9% should also reward patient investors.
Direct Line
Direct Line makes it into the Dogs of the FTSE thanks to a generous special dividend policy, which gives the firm’s shares a prospective yield of 7.4%, the highest in this group.
The fall in motor insurance premiums does seem to be slowing, so 2015 could be a reasonable year for Direct Line.
Admiral
As with Direct Line, it’s important to remember that these insurers’ generous yields are driven by special dividends, which are currently being paid every year, but may not be in the future.
That aside, Admiral’s 2015 forecast P/E of 14.2 reflects the fact that earnings per share are expected to fall by around 8% next year, raising the risk that dividend growth could also stall.