SSE
While many savers are hoping for a steep rise in interest rates over the next few years, the reality is that a loose monetary policy seems to be here to stay. After all, with inflation being zero, there appears to be little scope for the Bank of England to move rates higher. As such, higher yielding stocks could become even more popular – especially those that are expected to grow their dividends at a brisk pace.
One such company is SSE (LSE: SSE). It currently yields a whopping 5.9%, which makes the FTSE 100‘s yield of 3.5% seem rather paltry. And, with dividends expected to rise by 3.2% next year, SSE looks set to pay around 12% in dividends in the next two years alone. As such, it appears to be a superb income stock that could see investor sentiment increase over the medium term as dividends continue to play an important role in the finances of a wide range of savers and income investors.
Smith & Nephew
While Smith & Nephew (LSE: SN) (NYSE: SNN.US) may not be the most exciting of health care companies, with it being focused on wound care and replacement joints rather than the next big blockbuster drug, it has performed extremely well in recent years. For example, over the last five years, shares in the company have risen by 63%, which is far superior to the FTSE 100’s gain of 25% in the same time period.
Looking ahead, Smith & Nephew could benefit from favourable demographics, with demand for its products continuing to grow as older people make up an increasing proportion of populations across the developed world. And, looking a little shorter term, Smith & Nephew confirmed its guidance in today’s update, and is forecast to increase its bottom line by a very enticing 13% next year. This could catalyse investor sentiment and push the company’s share price even higher.
Burberry
Recent results from Burberry (LSE: BRBY) confirmed that the brand is making excellent progress in diversifying its product line and increasing its exposure to key markets across the developing and developed world. For example, sales increased by 9% in its most recent quarter, with double digit growth in the US providing a major boost to the company’s top and bottom line and, as you may expect, the company’s share price reacted favourably and is now up 18% in the last year.
Clearly, Burberry’s marketing campaign is currently very successful, with its focus on ‘Britishness’ proving particularly popular in the US, where the recent opening of a new store in Los Angeles shows that this is a company that is not merely a play on emerging market consumer trends. And, with Burberry set to increase its sales by a further 21% to £3bn by financial year 2017, it could see its share price move sharply upwards over the medium to long term.