In these days of low inflation and low interest rates, where can income-seekers go to get a decent annual supply of cash? You might be surprised to hear of the yields available from some of our big FTSE 100 companies:
Banks
The banks are back to offering attractive annual returns, with HSBC Holdings (LSE: HSBA)(NYSE: HSBC.US) having kept its dividends growing nicely. For the year just ended in December 2014, analysts are expecting a 5.2% yield on the current 613p share price, and they have rises to 5.6% and 6.1% marked in for the next two years.
That should be well covered by earnings, with a P/E ratio of 11 currently, dropping to under 10 by 2016. Cheap income? It looks tempting to me.
Aerospace
The aerospace and defence business is a bit patchy, but BAE Systems (LSE: BA) has been motoring along nicely and has kept its dividends growing too. The share price has put on an impressive 18% over the past 12 months, but even after that we’re expecting a pretty decent 2014 yield of 3.9%.
That’s better than the index average from shares on a very average P/E of under 14, but there’s more as the yield is predicted to continue growing, to 4% in 2015 and 4.2% in 2016.
Insurance
Insurance companies are looking good for income too, with Aviva (LSE: AV)(NYSE: AV.US) expected to yield a relatively modest 3.3% for the year just ended. But forecasts have that rising to 3.8% for 2015 followed by 4.6%. Aviva famously slashed its dividend in 2012 after it became overstretched, but the annual payment is recovering — and being very nicely covered now, it’s looking sustainable.
What about the share valuation? Even after a two-year rise of 46%, we still have a P/E ratio of only 11.3 and dropping as far as 9.5 based on 2016 forecasts.
Why February?
But why am I looking for shares specifically for February? Well, the low price of oil has spooked a lot of investors, and sentiment has been further damaged by the latest struggles in the eurozone as the European Central Bank tries to fight off deflation.
That’s led to a flight for safety, as investors seek companies paying decent dividends and looking like they’re in a good shape to see off the oil crisis and any cracks in the euro. Some shares have already been pushed upwards, so if you want good-value income investments, now could be the time to start doing your homework.