I’m not going to spend time banging on about the dangers of leaving your hard-earned savings stranded in a low-yielding, inflation-battered cash ISA. There are plenty of articles out there from the Fool’s team of writers alone detailing why a reliance on such products is one of the biggest investment mistakes.
Quite simply, I’d rather dedicate my time to looking at two brilliant FTSE 100 income shares whose dividend yields blast past the sub-2% interest rates currently on offer from current cash ISAs. These are two shares whose growth and dividend prospects could allow you to enjoy an early retirement.
Big yields, brilliant value
The first of these Footsie heroes, ITV (LSE: ITV), isn’t having the best of times right now as the improvement in advertising revenues hasn’t gone as far as City brokers had hoped.
Thus earnings figures at the broadcaster have been downgraded since I last covered the firm, and profits are now expected to duck 3% in 2018 and 2% in 2019. A tentative bottom-line uptick had previously been projected for next year.
Still, I remain convinced that ITV has a very bright future ahead of it as it builds its position as a truly global programme-making powerhouse. Its audience share in Britain has been rising during the first nine months of 2018 and is likely to continue to do as the bulky investment it makes in ITV Studios to bring viewer-winning titles like Victoria and Endeavour continues.
Indeed, ITV has plans to grow total production hours to around 10,000 in its bid for world domination, but this is not the only place where it is splashing the cash. It is developing its on-demand ‘ITV Hub’ service with a view to eventually grabbing 30m subscribers. And the company is undertaking aggressive cost-cutting to finance these massive investments.
Consequently the number crunchers believe ITV will have the financial strength that it takes to keep dividends rising despite the likelihood of some medium-term earnings pressure. Last year’s 7.8p per share reward is anticipated to rise to 8p in 2018 before edging to 8.2p in 2019.
The business thus carries monumental yields of 5.3% for this year and 5.4% for next year. Combined with its dirt-cheap forward P/E ratio of 9.8 times, I reckon ITV is a scintillating big-cap bargain right now.
Another dividend master
Mondi (LSE: MNDI) is another FTSE 100 share that City brokers are expecting will keep hiking dividends for some time yet, resulting in more inflation-busting yields.
For 2018 the abacus bashers are expecting a 72 euro cents per share reward, a figure that creates a bulky 3.7% yield. And the meter rises to 3.9% for 2019 thanks to the projected 77 cents payout. And what’s more, like ITV, Mondi can also be picked up for next-to nothing, the packaging giant carrying a prospective P/E multiple of 11 times.
City brokers are forecasting earnings rises of 19% and 6% for 2018 and 2019 respectively to provide the bedrock for these dividend rises. And they can be forgiven for being optimistic following the Footsie firm’s announcement last week that underlying EBITDA rose 30% from July to September thanks to the impact of improving selling prices.
And the growing supply and demand imbalance in Mondi’s markets convinces me that the business can continue to generate solid earnings (and thus dividend) progression long into the future.