The FTSE 100’s Hottest Dividend Picks: Old Mutual Plc

Royston Wild explains why Old Mutual plc (LON: OML) is an excellent pick for savvy stock hunters.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

Today I am looking at why I consider Old Mutual (LSE: OML) to be an attractive dividend selection.

Dividends poised to stride higher

Even though earnings have slipped in three of the past five years, life insurance giant Old Mutual has remained a popular pick with income seekers, the firm having lifted the annual dividend at an eye-watering compound annual growth rate of 52% since 2009.

Payment growth has become a lot more ‘civilised’ in recent years, so to speak, with the full-year dividend rising just 14% in 2013 to 8p per fivepoundcoinsshare.

And City analysts see further weighty payment rises on the horizon, with a 9% advance pencilled in for 2014, to 8.7p, despite another (albeit fractional) earnings fall during the period. A solid 11% earnings improvement chalked in for 2015 is expected to undergird a stronger 13% dividend rise to 9.8p per share.

The dividend forecast for 2014 produces a weighty yield of 4.3%, making mincemeat of a prospective average of 3.2% for the FTSE 100 although falling slightly short of a corresponding readout of 4.6% for the entire life insurance sector. But 2015’s expected increase blasts Old Mutual’s yield to a stunning 4.9%.

Emerging market exposure bolsters dividend outlook

Meanwhile, dividend coverage through to the end of next year should boost investor confidence in the likelihood of such bumper payouts. Indeed, dividend forecasts for this year and next boast are covered by 2.1 times predicted earnings, above the generally-regarded security territory of 2 times.

And with an extensive exposure to emerging markets, Old Mutual is well positioned to benefit from the low penetration rates of insurance products and rising disposable income levels in these regions. Almost four-fifths of the firm’s funds under management (or FUMs) are held in South Africa, and the company saw total FUMs in the country leap 12% as of the end of March from the corresponding point in 2013, to 671.7bn Rand.

The firm also has solid exposure to Asia, Latin America and other parts of Africa, and reported that total developing region gross sales rose 18% during January-March. And the firm is investing heavily in these geographies to latch onto rising revenues opportunities, including the acquisition of Ghana’s Provident Life and Kenya’s Faulu in recent times.

With Old Mutual pulling up trees in these exciting regions, I believe that dividend seekers can look forward to strong payout growth in coming years in line with robust earnings expansion.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Royston Wild has no position in any shares mentioned. The Motley Fool has no position in any of the shares mentioned.

More on Investing Articles

artificial intelligence investing algorithms
Investing Articles

Should I buy skyrocketing Palantir stock for my ISA in 2025?

This red-hot artificial intelligence share has even outperformed Nvidia so far this year. Is it finally time I added it…

Read more »

Affectionate Asian senior mother and daughter using smartphone together at home, smiling joyfully
Investing Articles

2 of my favourite UK growth shares this December!

These FTSE 250 growth shares offer excellent value right now. Here's why I'll buy them for my portfolio if the…

Read more »

Mature Caucasian woman sat at a table with coffee and laptop while making notes on paper
Investing Articles

10% dividend growth! 2 FTSE 100 stocks tipped to supercharge cash payouts

These FTSE 100 stocks have strong records of dividend growth. And they're expected to keep on delivering, as Royston Wild…

Read more »

Investing Articles

Down 17% in a month and yielding 7.39%! Is this FTSE 100 share a screaming buy for me?

When Harvey Jones bought Taylor Wimpey last year he thought this FTSE 100 share was a brilliant long-term buy-and-hold. Has…

Read more »

Investing Articles

Here’s how I’m using a £20k ISA to target £11k+ in income 30 years from now

Is it realistic to put £20k in an ISA now and earn over half that amount every year in passive…

Read more »

Young black colleagues high-fiving each other at work
Investing Articles

If I could only keep 5 UK stocks from my portfolio I’d save these

Harvey Jones is running through his portfolio of top UK stocks to see which ones he couldn't bear to do…

Read more »

Midnight is celebrated along the River Thames in London with a spectacular and colourful firework display.
Investing Articles

I’m aiming for a million buying unexciting shares!

By investing regularly in long-established, proven and even rather dull businesses, this writer plans to aim for a million. Here's…

Read more »

Investing Articles

3 things to consider before you start investing

Our writer draws on his stock market experience to consider a few vital lessons he would use to start investing…

Read more »