Today I am outlining the terrific appeal of three dividend destroyers.
ARM Holdings
At first glance microchip play ARM Holdings (LSE: ARM) may not appear an obvious candidate for dividend chasers. Like all tech stocks, the Cambridge-based business is required to plough vast sums of capital into product research and development, leaving little on the side for shareholder returns.
But in recent times ARM Holdings has vowed to return increasingly-large amounts of cash to its stakeholders, and last year raised the full-year dividend by an eye-watering 23% to 7.02p per share. And the City does not expect this strategy to cease any time soon — payouts of 8.3p and 10.1p per share are forecast for 2015 and 2016 correspondingly, yielding 0.8% and 0.9%.
While yields may still lag the FTSE 100 average of 3.5% by some distance, I reckon ARM Holdings’ increased focus on dividend yields should produce big returns in the years ahead. The chipbuilder’s dominance of the smartphone and tablet PC markets continues to pay off handsomely — earnings are expected to explode 66% in 2015 and 14% in 2016 alone, a promising sign for future payouts.
Vodafone Group
Unlike ARM Holdings, telecoms giant Vodafone (LSE: VOD) has long been a favoured income selection thanks to its sterling record of offering above-average yields. Although earnings growth has been bumpy thanks to competitive and wider macroeconomic pressures in its critical European marketplace, the firm’s ability to throw up plenty of cash has kept shareholder rewards growing year after year.
And City forecasts suggest that Vodafone should keep this policy trucking in the near-term at least. A payment of 11.22p per share for the 12 months to March 2015 is anticipated to rise to 11.5p this year, yielding a gigantic 5.2%. However, the impact of its £19 billion Project Spring organic investment programme is expected to keep the payment locked around this level in fiscal 2017.
But further out I fully expect dividends at Vodafone to chug higher again, with the costs associated with this programme gradually filtering out and its revamped data and voice services driving earnings higher. When you factor in Vodafone’s surging intensifying popularity in lucrative Asian, African and Middle Eastern destinations, too, I believe the firm is in great shape to deliver spectacular long-term returns.
LondonMetric Property
Thanks to the effects of an improving British economy, I believe that real estate investment trust (or REIT) LondonMetric Property (LSE: LMP) should remain a favourite for those seeking top-drawer dividends. The capital-based business advised this week that gross rental income advanced 10% during April-September, to £31.7m, although falling profits from joint ventures and escalating finance costs pushed pre-tax profit 9% lower to £64.3m.
LondonMetric remains embarked on a busy restructuring drive to boost the quality of its real estate, enhancing the desirability of its properties, the development opportunities therein, and the possibility of valuation uplifts. Indeed, LondonMetric also purchased a 356,000 square foot distribution warehouse development in Warrington this week at a cost of £30m as part of this goal.
Earnings at LondonMetric are expected to charge 14% higher in the period concluding March 2016, shoving the dividend to 7.2p per share from the 7p reward offered in each of the past four years. And predictions of an extra 12% bottom-line bump in fiscal 2017 is anticipated to improve the dividend to 7.5p. Consequently LondonMetric sports gargantuan yields of 4.3% 2016 and 4.5% for 2017.
