Today I am looking at the income potential of three FTSE-quoted giants.
A telecoms titan
I am convinced telecoms colossus Vodafone (LSE: VOD) will remain a terrific bet for income investors long into the future, thanks in no small part to its ambitious investment strategy.
For one, Vodafone’s foray into the lucrative quad-play sector took a further significant step forward this week. The company announced it was merging its operations in the Netherlands with Liberty Global at a cost of €1bn.
Vodafone’s move to snap up multi-services giants Kabel Deutschland and Spain’s Ono has already provided the business with exceptional cross-selling opportunities of its mobile services. And elsewhere, the fruits of the firm’s ‘Project Spring’ multi-billion-pound organic investment scheme is also helping to drive demand in Europe as well as in emerging markets.
Although these measures are not expected to drive earnings at Vodafone higher until the year ending March 2017, excellent cash flows are expected to propel the dividend to 11.5p per share in the current period, yielding a brilliant 5.3%. The payout is expected to be locked at this level next year, but I expect dividends to head higher again further out as the balance sheet strengthens.
Construction play strides higher
I also believe income investors should take a look at support services and construction giant Carillion (LSE: CLLN).
A weakening in the Markit/CIPS UK Construction Purchasing Managers’ Index is hardly cause for cheer — growth in January came in an a nine-month low of 55. But I believe Carillion’s terrific record of generating new business should keep earnings heading higher.
In December the firm advised it had inked or was in the process of negotiating around £1bn worth of new business with private and public sector clients alike, and I expect Carillion to continue churning out the wins.
With earnings expected to rattle steadily higher in the near-term and beyond, the City expects Carillion to lift a dividend of 17.75p per share for 2014 to 18p for 2015, and again to 18.6p in the current year. Consequently the business sports a gigantic yield of 6.1%.
A dependable dividend pick
At first glance Unilever (LSE: ULVR) may not be the first port of call for income chasers — unlike Vodafone and Carillion, its prospective yield does not put the FTSE 100 average around 3.5% to the sword.
But thanks to the tremendous popularity of labels like Axe deodorant, Dove soap and Cornetto ice cream with shoppers, Unilever boasts terrific earnings visibility regardless of wider pressures created by macroeconomic choppiness, a critical quality for reliable dividends.
The household goods giant is expected to generate a 120 euro cent per share dividend in 2016, matching last year’s payment and resulting in a chunky yield of 3.3%.
I believe investors can put much more faith in these projections than the barnstorming yields seen across the mining and energy segments, for example. And I fully expect payouts at Unilever to head higher in the longer-term as massive brand investment pays off, and consumer spending clout in emerging markets steadily rises.