Today I’ll be discussing the outlook for payment services company PayPoint, outsourcing group Mitie, and banking giant HSBC. Is the chunky dividend income offered by these three companies too good to miss?
Dividend hike
Payment services firm PayPoint (LSE: PAY) has enjoyed a decent rally recently despite reporting a plunge in profits for the last financial year to the end of March. Pre-tax profits fell sharply to £8.2m, from £49.6m, on slightly lower revenues of £213m, compared to £219m a year earlier. The lower profits were largely due to a £30.8m impairment charged booked against the company’s mobile payments business, which is up for sale.
However, adjusted operating profit was up from £49.5m to £50.1m, and the full-year dividend was raised to 42.4p per share. In addition, the company plans to return a further 21p per share from the proceeds of its online payments unit. The FTSE 250 firm has an excellent track record when it comes to dividends, with payouts increasing every year since 2005. At current levels, the share price supports prospective yields of 6.1% for this year, rising to 6.7% for the year to March 2018.
Share buyback
Strategic outsourcing and energy services company Mitie Group (LSE: MTO) has launched a £20m share buyback programme to return surplus cash to shareholders, after the firm revealed a more-than-doubling of pre-tax profits for the year to March. The Bristol-based group reported a massive 133% rise in pre-tax profits to £97m, from £42m for the same period a year earlier, even though it recorded slightly lower revenues of £2.23bn.
The outsourcing specialist also announced a 3.4% hike in the total dividend payout to 12.1p, with the final payment of 6.7p going ex-dividend on the fateful date of 23 June. The company was also proud to announce that the dividend had been increased for the 27th consecutive year, and proud it should be! Analysts are forecasting further increases in the medium term, with yields forecast at 4.5% and 4.7% for this year and next. With Mitie’s track record, I certainly wouldn’t bet against it.
Director’s cut
One of HSBC’s (LSE: HSBA) non-executive directors recently dipped into his wallet and bought 20,827 shares in the bank at a total cost of £93,621. Joachim Faber extended his holding in the global banking giant to 66,605 shares, bringing his total interest in the lender to almost £300,000. With the shares down 28% from a year ago maybe the time was right to snap up a bargain.
At current levels, HSBC is trading on a lowly 11 times forecast earnings for the current year, falling to just 10 times in 2017. And with dividend yields forecast at 7.7% and 7.6% for the next couple of years, who could blame him for being greedy when others are fearful?