3 Stock Superstars Yielding Above 7% In 2015: Banco Santander SA, Admiral Group plc and Direct Line Insurance Group PLC

Royston Wild explains why Banco Santander SA (LON: BNC), Admiral Group plc (LON: ADM) and Direct Line Insurance Group PLC (LON: DLG) are set to produce terrific income flows next year.

| 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 three blue-chip stars ready to deliver smashing returns in 2015.

Banco Santander

In a bid to produce a healthier correlation between earnings and dividends, Banco Santander (LSE: BNC) (NYSE: SAN.US) has elected to rein in its previously ultra-generous — and ultimately unsustainable — payout policy from this year onwards.

As a result, the bank is anticipated to fork out a payment of 58 euro cents per share in 2014, down 3% from last year’s levels. And this is expected to dive still in 2015 to 50.4 cents, a hefty 13% drop.

But investors should not lose sight that these projections still produce eye-watering dividend yields — indeed, next year’s payout still produces a sizeable 7.3% yield, albeit down from a figure of 8.4% for 2014.

And with the firm’s terrific exposure to increasingly lucrative emerging markets, and in particular those of Latin America, expected to power earnings higher — growth of 20% is pencilled in for 2015 alone — I expect dividends to continue to outstrip the opposition.

Admiral Group

Of course, a backcloth of rising competition continues to dent investor sentiment towards the motor insurance providers. Against this backcloth Admiral (LSE: ADM) has seen revenues dip lower in recent times, a factor which is likely to result in earnings dips to the tune of 2% and 8% in 2014 and 2015 correspondingly.

In the face of this pressure, the Welsh firm is anticipated to slash a predicted 99.2p per share dividend for this year by 7% in 2015, to 92.4p. Despite expectations of a large downgrade, however, the business still carries a monster yield of 7.5% for 2015, smashing a forward average of 5.6% for the rest of the non-life insurance sector.

Investors should of course be aware that further premium pressure could threaten dividends beyond next year. However, Admiral’s ability to maintain a loyal customer base — total customers rose 10% during July-September to just over 4 million — combined with rising exposure to overseas markets bodes well for future earnings and payout growth.

Direct Line Insurance Group

Like Admiral, Direct Line Insurance (LSE: DLG) also faces intensifying competitive pressures across its core markets. Still, the business is expected to flip from a 3% earnings dip this year to a 7% increase in 2015, helped by its portfolio of blue ribbon brands including Churchill and Privilege.

The result of special dividends bloat the final payout figure for 2014, and a total payment of 48.6p per share has been touted by the City’s number crunchers. Although a subsequent fall is somewhat inevitable, the 2015 figure remains impressive at 22.2p, in turn creating a stonking 7.8% yield.

Direct Line is undergoing a significant transformation programme to strip out costs and improve technological innovation across the business, a promising precursor for future growth. With the firm also ramping up its exposure to fast-growing sectors like landlord and pet insurance, I believe that Direct Line should continue offering delicious dividend yields.

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 UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

US Stock

The Nvidia share price falls! Here’s what I think happens next for the S&P 500

Jon Smith reviews the overnight results from Nvidia and explains why this could stall the S&P 500 performance through to…

Read more »

Investing Articles

Down 15% today, is this FTSE 100 share too cheap for me to miss?

JD Sports' share price has tanked after the FTSE 100 share released another profit warning. Is this the opportunity I've…

Read more »

Investing Articles

Up 8% today, is this FTSE 100 growth stock a slam-dunk buy for me?

Halma's share price is soaring thanks to another headline-grabbing trading update. Is the FTSE 100 stock now too good for…

Read more »

Investing Articles

With a P/E ratio of just 10.5 is now a brilliant time to buy a cut-price FTSE 250 tracker?

Harvey Jones says a recent dip in the FTSE 250 leaves the index trading at bargain levels. One stock in…

Read more »

Warren Buffett at a Berkshire Hathaway AGM
Investing Articles

To build a passive income flow, I’d follow this Warren Buffett approach

Warren Buffett has set up passive income streams most people can only dream about. Our writer sees some practical lessons…

Read more »

Growth Shares

As the boohoo share price falls, could it become a penny stock in 2025?

Jon Smith outlines some of the recent problems involving the boohoo share price and considers if things could get even…

Read more »

Young Asian woman with head in hands at her desk
Investing Articles

Here are the worst-performing FTSE 100 shares over the last 5 years

These five FTSE 100 shares have been complete duds over the last half decade. But is there potential for a…

Read more »

Investing Articles

Nvidia stock has tripled this year! Can it keep rising?

Nvidia's latest sales update showed strong growth and the stock's been on a tear so far in 2024. So is…

Read more »