Today I’m looking at the payout prospects of two FTSE-quoted high yielders.
A banking beauty
“If China sneezes, the rest of the world catches a cold,” or so the saying goes. When you factor-in recent patchy datasets from the US, combined with the prospect of further monetary tightening across the Pond, then suddenly the outlook for all financial markets becomes a little more gloomy.
British banking behemoth Lloyds (LSE: LLOY) has rapidly de-risked the business through a steady stream of asset divestments. But the knock-on effect of weakness in the world’s two largest economies on the domestic economy could have near-term implications for the bank.
On top of this, Lloyds of course faces the prospect of further financial penalties related to the previous mis-selling of PPI. Indeed, the bank was forced to squirrel away a further £500m to cover these costs during the third quarter, taking total provisions within a whisker of a quite astonishing £14bn.
Still, Lloyds has worked tirelessly to repair its battered balance sheet in the wake of the 2008/2009 financial crisis, and its Simplification restructuring plan saw operating costs fall a further 2% between July and September, to £1.9bn.
And these endeavours are expected to propel the dividend comfortably higher in the years ahead, or so say the City’s army of analysts. Having got shareholder rewards back on the agenda last year, Lloyds is expected to raise a projected dividend of 2.4p per share for 2015 to 3.7p in the current period, yielding a monster 5.1%.
So while Lloyds still faces possible reverberations from the shaking global economy, the company’s decision to focus on its retail operations makes it much less of a risky selection than much of the rest of the banking sector, in my opinion. And with the business sporting a healthy CET1 ratio of 13.7% as of September, I believe Lloyds is in great shape to meet current dividend forecasts.
Supercharge your income flows
And I’m even more optimistic that power play National Grid (LSE: NG) should make good on current dividend projections. The essential nature of electricity provision, combined with a lack of competitive pressures, makes it a robust stock bet regardless of the wider economic climate.
While it’s true that National Grid’s operations certainly put the squeeze on capital levels, the impact of Ofgem’s RIIO price controls are proving highly effective in keeping cash seepage at a minimum.
And the firm’s asset expansion scheme in the UK and US provides its earnings outlook with a further shot in the arm, a factor I believe should continue sending dividends higher in the years ahead.
This view is certainly shared by the number crunchers, and a predicted payment of 43.7p per share for the year to March 2016 (a figure that yields a stonking 4.8%) is anticipated to stomp to 44.7p in the following period. As such National Grid’s yield steps to an even-better 5%.