The FTSE 100 is cautiously approaching an all-time record of 7,000 points and above, so what kind of shares should we be looking for right now?
I say companies paying steady dividends, and then we should reinvest the cash each year. And even though the FTSE is up 11% since mid-December, I still reckon there are some irresistible dividend yields out there. Here are three:
Big Oil
Is the low price of oil a reason to shun Royal Dutch Shell (LSE: RDSB) (NYSE: RDS-B.US)? Absolutely not. In fact, it’s a good reason to give it preferential consideration, because it has lower overall production costs than smaller competitors, can cut back on higher-cost assets while the oil price is low, and can continue to generate all that lovely cash that goes to pay dividends.
The Shell share price has been a bit erratic of late as the short-termers have been in and out, but on a price of 2,232p we’re looking at dividend yields of around 6% forecast for the next two years — and despite the oil-price panic, forecasts for Shell’s dividends are actually firming up.
Retail energy
If cheap oil is bad news for some producers, it’s positively good news for retail energy suppliers. It’s high prices that turn the political screws and put pressure on profit margins, while falling wholesale prices give companies like Centrica (LSE: CNA) a bit of breathing space and help them get those margins up a bit.
Centrica, the owner of the British Gas and Scottish Gas brands, is again pushing dividend yields of around 6%, and they’re some of the best and most reliable on the market.
At a price of 294p, Centrica still looks good value to me.
Safe as houses
For something a little different, how about housebuilder Persimmon (LSE: PSN)? Persimmon has enjoyed a stunning recovery in earnings since the depths of the recession, with its share price almost five-bagging since the depths of 2010. Dividend recovery has been idiosyncratic, with the company paying special dividends as and when it saw fit — but the cash return was impressive.
Now analysts are forecasting effective yields of 6.3% this year and 7.1% next, and though the share price has soared to 1,563p, it’s still on a forward P/E of only 11, dropping to less than 10 on 2016 forecasts.