Today I’m looking at three blue-chips with dynamite dividend prospects.
Dividends firing higher
Weapons builder BAE Systems (LSE: BA) has long been a reliable pick for those seeking robust dividend growth year-after-year. The dependable nature of its products in today’s volatile world gives the business terrific long-term earnings visibility, a critical quality for income chasers, and I expect steady economic growth in the US and UK to keep propelling profits higher.
BAE Systems saw sales leap 7.6% in 2015 to £17.9bn, it announced on Thursday, a result that drove operating profit 15.5% higher to £15bn. And chief executive Ian King said that he expects profits to advance a further 10% in the current period “as defence budgets recover.“
Supported by a predicted 5% earnings recovery, the City expects BAE Systems to raise a dividend of 20.9p for 2015 to 21.5p in the current period. A consequent 4.2% yield comfortably outstrips the FTSE 100 average of 3.5%, and I expect payouts to keep marching higher as the firm’s expertise across a variety of defence applications delivers solid sales growth.
A smoking income pick
Like BAE Systems, cigarette giant Imperial Brands (LSE: IMB) also has a stellar reputation for delivering exceptional dividend expansion. While tobacco volumes may be heading lower across the industry, the colossal strength of labels like John Player Special and Gauloises enables the London firm to keep delivering earnings growth year-after-year.
Imperial Brands is, not surprisingly, doubling-down on product and marketing investment in its ‘Growth Brands’ to capitalise on their popularity, while moves into the rapidly-growing vapour and caffeine segments also provides the business with hot sales opportunities.
And helped by the impact of huge cost-cutting across the business, Imperial Brands is expected to punch a meaty 10% earnings rise in the year to September 2016. Consequently the tobacco giant is predicted to lift the dividend to 155.1p per share from 141p last year, yielding an impressive 4.4%.
A fine financial selection
Life insurance leviathan Legal & General (LSE: LGEN) has endured a torrid start to 2016, the stock shedding 16% of its value since the start of January as market jitters have weighed.
Legal & General went some way to assuaging investor concerns over the exposure of its bond portfolio this month, however, the company advising that its exposure to the basic resources sector stands at just 1.2% and the oil and gas segment at just 5.2%.
Sure, the stock may have recovered some ground since then, but I believe Legal & General is still far too cheap. The company continues to enjoy rampant product demand across the globe, helped in no small part by steady product innovation in the face of demographic and technological changes.
With Legal & General expected to follow a predicted 14% earnings advance for 2015 with an extra 7% rise in 2016, the number crunchers expect the dividend to rise to 14.3p per share this year from an anticipated 13.4p previously. Consequently the insurance giant sports a spectacular 5.4% yield.
