3 Super Income Stocks: Vodafone Group plc, SSE PLC And Pearson plc

These 3 stocks have superb dividend prospects: Vodafone Group plc (LON: VOD), SSE PLC (LON: SSE) and Pearson plc (LON: PSON).

| 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.

The poor performance of the European economy has dragged on Vodafone (LSE: VOD) in recent years. The telecoms company has recorded a fall in earnings in each of the last two financial years, with a further decline of 11% expected in the current financial year too. As such, many investors may view its pivot to Europe as a bad move that has hurt its long-term outlook.

While this may be true in the short run, Vodafone continues to offer excellent long-term prospects. The sale of its stake in Verizon Wireless and the purchase of discounted assets in Europe could help to boost its long-term profitability, with Vodafone’s bottom line expected to return to positive growth as soon as next year. In fact, Vodafone is due to report a rise in earnings of 22% in the 2017 financial year, followed by a rise of 28% in the following year. This has the potential to improve investor sentiment in the company and send its shares higher.

As well as capital gain potential, Vodafone also offers bright income prospects. It yields 5.3% at the present time and with the company’s financial performance set to improve as the Eurozone implements a major quantitative easing programme, it seems to be an excellent income stock to buy right now.

Long-term stability

Also offering superb long-term income potential is utility company SSE (LSE: SSE). Its yield is among the highest in the FTSE 100, with it currently standing at 6.1%. While other FTSE 100 companies also yield over 66%, few have the resilience and defensive characteristics of SSE. It offers low volatility and with uncertainty surrounding the outlook for the global economy and FTSE 100 being high, it could outperform the wider index over the medium term.

In addition, SSE also offers a relatively safe dividend since it has a very stable business model. This means that the chances of a dividend cut are slim, with SSE having a healthy dividend coverage ratio of 1.25. As such, dividends are likely to rise by at least as much as inflation in future, thereby providing the company’s investors with a good chance of a real-terms increase in their income in future years.

Dividend growth potential

Meanwhile, education specialist Pearson (LSE: PSON) may not offer the same level of stability as SSE, but its prospects for dividend growth are high. That’s because its new strategy appears to be sound and has the potential to turn the performance of the business around after a highly challenging period.

For example, Pearson is forecast to increase its bottom line by 12% next year and this puts it on a price-to-earnings growth (PEG) ratio of 1.2. This indicates that there’s capital gain potential on the cards, while Pearson’s dividends are expected to be maintained at their current level. This puts the company on a yield of just over 6%.

This combination of growth, value and income appeal could prove to be a potent one, making Pearson a highly appealing buy for the long run – especially for investors seeking impressive dividend growth potential.

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.

Peter Stephens owns shares of SSE and Vodafone. 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

Investing Articles

The Compass Group share price looks ready for growth after positive 2024 results

The Compass Group share price is up 4% today following positive full-year results. Our writer considers its prospects in 2025…

Read more »

Young mixed-race couple sat on the beach looking out over the sea
Investing Articles

How I plan to build an £86k yearly second income in the stock market

Is it realistic to aim for a substantial future second income by investing in high-quality shares? This writer firmly believes…

Read more »

Investing Articles

Here’s the Vodafone share price forecast up to 2027

Can anything stop the Vodafone share price slide? It's still early days for the company's turnaround plan, so we might…

Read more »

Investing Articles

Down 37%, here’s one of my favourite FTSE 100 bargain shares to consider

This FTSE 100 retailer's shares have collapsed in 2024. Despite tough trading conditions, is now the time to consider buying…

Read more »

Investing Articles

Which do I like best today, Nvidia or Tesla stock?

EV maker Tesla stock is on the up, while Nvidia growth is softening a bit. But they're both in the…

Read more »

Investing Articles

After jumping 15%, my favourite FTSE 250 stock looks set for the premier league

Games Workshop stock recently reached an all-time high, placing it within touching distance of promotion from the FTSE 250.

Read more »

Surprised Black girl holding teddy bear toy on Christmas
Investing Articles

1 top growth stock on my Christmas buy list!

Ben McPoland reveals one top-notch growth stock down 29% that he plans to stuff into his portfolio in time for…

Read more »

Growth Shares

This FTSE 250 stock soared 9% yesterday! Is the party just beginning?

Jon Smith points out a FTSE 250 stock that leapt based on some speculation yesterday, but questions whether to get…

Read more »