Today I am looking at the dividend prospects of three London-quoted stock giants.
Payments pounding higher
Dividend yields over at microchip manufacturer ARM Holdings (LSE: ARM) have long lagged the wider average of Britain’s blue-chip index. The Cambridge-headquartered business has long been a terrific earnings generator, while cash coming into the business has also stomped relentlessly higher for donkey’s years now.
Still, these qualities have failed to translate into white-hot dividends thanks to the gargantuan investment ARM Holdings needs to keep it at the cutting edge of chip design, a critical discipline for the business to remain a favoured supply with the likes of Apple and Samsung.
With earnings expected to have surged a further 67% in 2015, City expects ARM Holdings to hike the dividend by an exceptional 18%, to 8.3p per share. And dividends are predicted to rev 22% higher in the current 12-month period, to 10.1p, driven by an extra 14% bottom-line boost.
I fully expect many short-term investors to give the tech giant short shrift as this year’s figure still produces a paltry 0.9%, some way short of the FTSE 100 average around 3.5%.
But for patient stock seekers I reckon ARM Holdings is certainly one to keep an eye on. Such stratospheric hikes in the annual dividend should not be given scant regard, particularly as demand for the firm’s chips in established markets like smartphones, as well as new product areas like servers, continues to march higher. I fully expect shareholder rewards to continue to surge along with profits.
Supporting stellar returns
Unlike ARM Holdings, support services specialists Mitie Group (LSE: MTO) have long offered up chunky dividends to income-hungry investors. The wide and indispensable nature of the firm’s operations — from pest control and cleaning right through to insurance claims management — has provided the business with the terrific earnings visibility to keep payouts marching northwards.
So even though the bottom line at Mitie Group is expected to flatline in the year to March 2016, the company’s impressive long-term prospects are expected to drive the dividend from 11.7p per share last year to 12.2p in the present period. And a further raise is anticipated for fiscal 2017, to 13p, accompanied by a meaty 7% earnings rise.
As a consequence Mitie Group carries chunky yields of 4% and 4.2% for 2016 and 2017 correspondingly. With a chunky order book underlining the company’s enviable ability to grind out contract wins, I fully expect dividends to continue rising at a decent rate.
Hold on for stonking yields
Helped by the splendid cash flows delivered by Friends Life, I believe life insurance giant Aviva (LSE: AV) is a terrific selection for those seeking brilliant dividends in the near-term and beyond.
Aviva is expected to raise 2014’s dividend of 18.1p per share to 21p in the year just passed, shrugging off an anticipated 8% earnings decline. And a 11% recovery is expected to thrust the payment to 24.2p in 2016. Consequently Aviva’s yield leaps to a stunning 4.8% for the current period.
And I believe the company has plenty of levers to keep payouts surging higher — its operations in Europe continue to throw up plenty of cash, while its Polish, Turkish and Asian units provide exciting opportunities for earnings expansion. As a consequence I believe Aviva is one of the more solid income picks amongst Britain’s listed insurers, particularly as Solvency II capital directives hit the sector.
