Today I’m running the rule over three red-hot dividend stocks.
Dividends set to fly
Conventionally speaking, airlines like easyJet (LSE: EZJ) can’t be considered go-to stocks for those seeking dependable dividend flows. ‘Big ticket’ purchases like holidays are always the first things to go when tough economic conditions put pressure on consumer wallets.
But easyJet’s leading position in the budget flight market makes it a robust income selection, in my opinion, as it’s less immune to falling travel spend. In fact, the business is well positioned to enjoy rising passenger numbers should flyers begin to shun more expensive operators like British Airways.
And in the long term, I believe easyJet’s route-and-airport expansion programme — combined with the likelihood of low fuel costs — should keep earnings, and subsequently dividends, rolling higher.
For the years to September 2016 and 2017, respective shareholder rewards of 59.7p and 70.6p per share are currently forecast. These figures produce bumper yields of 3.8% and 4.6%, respectively, and are protected by meaty coverage of 2.4 times.
Construct colossal returns
‘Bricks and mortar’ have traditionally been watchwords for those seeking investment security. And I believe stock selectors can get in on the action by snapping up housebuilders such as Barratt Developments (LSE: BDEV).
The Royal Institution of Chartered Surveyors (RICS) expects property prices to slow in the coming months as stamp duty hikes for landlords kick in. Still, the body expects this weakness to prove temporary as government schemes to boost homebuilding fall short — indeed, RICS expects property values to rise by a quarter over the next five years.
And in the meantime, an environment of low interest rates — allied with steadily-improving buyer affordability — should keep powering buyer demand, in my opinion.
This view is shared by the City, meaning Barratt Developments is anticipated to pay dividends of 29.7p per share in the year to June 2016, and 36.6p in the following period. Subsequently the firm sports massive yields of 5.3% for this year and 6.6% for 2017.
A smouldering selection
Top cigarette manufacturers such as Imperial Brands (LSE: IMB) have seen their top lines take a pasting in recent years. Ever-tighter regulatory restrictions on the sale and use of tobacco products have exacerbated deteriorating social attitudes towards cigarette smoking, while the impact of adverse currency movements has also hit the industry hard.
Still, Imperial Brands has kept its progressive dividend policy in place despite these travails. The business is placing great faith in the potential of its ‘Growth Brands’ like Davidoff and West to drive long-term returns.
Sales volumes of these labels leapt 7.3% between October and December, and I believe Imperial Brands’ decision to supercharge investment in these labels while shuttering underperforming local brands should pay off handsomely. On top of this, the firm’s huge cost-cutting programme also boosts the company’s long-term earnings outlook.
Imperial Brands is expected to shell out a dividend of 155.4p per share in the period to June 2016, creating a huge 4.2% yield. And this reading rises to 4.6% for 2017 thanks to predictions of a 170.7p payment.