Today I’m looking at the investment prospects of three hot dividend stars.
A brilliant banking pick
Fears over the stability of the global economy – combined with enduring concerns over escalating regulatory fines – have damaged the share prices of the world’s leading banks during the course of 2015. And for HSBC (LON: HSBA) specifically, fears over emerging market cooling has pushed its share price value 12% lower since January.
Still, I believe this weakness represents a solid buying opportunity for those seeking hot dividend stocks at a great price. HSBC has consistently lifted the dividend even in times of severe earnings bumpiness, and the City doesn’t expect this trend to cease in the immediate future. Indeed, predicted payouts of 51 and 52 US cents per share for 2015 and 2016, respectively, yield a terrific 6.4%.
Concerns over the market slowdown in Asia are likely to reverberate for some time yet. But HSBC’s strength in this territory has enabled it to traverse the worst of these problems, particularly in Hong Kong where revenues continue to surge. And I believe galloping banking product demand in these regions should continue to blast dividends higher beyond next year.
The remedy for poor returns
Like HSBC, medicines giant GlaxoSmithKline (LSE: GSK) failed to set the market on fire in 2015 and is trading at more or less the same share price as that seen at the turn of the year. I believe investors may be missing a trick here, however, as the Brentford company’s supercharged R&D operations look set to deliver rich rewards in the years ahead.
The issue of crippling patent expirations has long been a bugbear for Big Pharma’s major manufacturers – indeed, GlaxoSmithKline is expected to endure a fourth successive earnings dip in 2015 as sales have stagnated. These pressures have prompted the firm to put paid to its progressive dividend policy and freeze last year’s reward of 80p per share through to the close of 2017.
But savvy stock selectors should note that such a figure still yields a gargantuan 5.8%. Additionally, GlaxoSmithKline is expected to bounce back into earnings growth from 2016 as new product rollouts offset patent lapses and developing market sales take off. So I expect the drugs colossus to continue delivering market-mashing yields.
Strike up a fortune
The defensive nature of British American Tobacco’s (LSE: BATS) operations has long made it a favourite for those seeking dependable dividend growth year after year. While adverse currency movements have hampered revenues during the course of 2015, the company’s exceptional long-term outlook has seen the stock price advance 8% since the turn of the year.
And with good reason, in my opinion. British American Tobacco’s suite of ‘Global Drive Brands’ – labels that include the likes of Dunhill and Lucky Strike – continue to grab market share from the competition.
And this trend is likely to continue as the London business doubles down on investment in these products. On top of this, a renewed focus on expanding its developing market footprint, not to mention boosting its position in the exciting e-cigarette segment, also bodes well for future earnings and dividend growth.
In the meantime, the City expects British American Tobacco to shell out dividends of 156.2p per share in 2015 and 164.3p next year, projections that yield 4.1% and 4.2%, respectively.