While Prudential (LSE: PRU) may not be offering the blistering yields of some of its FTSE 100 compatriots, the rate at which the business is hiking dividends year after year should still attract serious attention from dividend investors.
And thanks to its bright earnings prospects in emerging regions, I am confident that The Pru should keep on lifting the annual payout at quite a pace. The insurance colossus has pledged to lift dividends around 5% each year but a combination of terrific cash generation and unbroken earnings growth has enabled it to beat this pledge year after year.
Indeed, Prudential lifted 2017’s total payment by 8% to 47p per share. And City analysts are expecting the business to continue outperforming its goal.
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Helped by a predicted 3% profits rise in 2018, a 50.6p dividend is anticipated. And the 10% earnings improvement estimated for next year nudges the payout projection to 55.4p.
As I said, subsequent yields of 2.6% and 2.9% respectively may be on the solid side rather than spectacular. However, the foundations for long-term dividend growth are a lot more robust than those of many of the blue-chip big-yielders.
Global star
Prudential announced plans to divide itself into two separate companies a couple of months back. Prudential PLC will concentrate on the US and the emerging regions of Asia and Africa, and M&G Prudential will take in the retirement and savings businesses in the UK and Europe.
The split was designed to allow each segment to “focus on their distinct strategic priorities in their chosen geographies.” While the latter is in great shape to grab shedloads of business on the back of Britain’s ageing population, I am particularly excited by Prudential’s opportunities in other territories, and particularly Asia.
Prudential noted in March that “the Asia pan-regional life and asset management business is well-positioned to meet the savings and protection needs of a growing and increasingly wealthy population,” and the Footsie giant is quite right to be so optimistic.
Booming demand from Asian consumers helped it record new business profit growth of 12% back in 2017. And with the company steadily building its presence across the region, this impressive bottom-line expansion looks set to keep rolling.
At today’s prices Prudential can be picked up on a forward P/E ratio of 12.9 times. This is shockingly cheap given the firm’s exceptional long-term earnings and dividend prospects.
Build a fortune
Taylor Wimpey (LSE: TW) is another top drawer income share that can be picked up for next-to-nothing. But unlike Prudential, the company offers market-mashing dividend yields immediately.
In 2018, supported by an anticipated 5% profits improvement, the Footsie housebuilder is expected to pay a total dividend of 15.3p per share. This means share pickers can enjoy a monster 7.6% yield.
And next year a 15.6p reward is forecast by the Square Mile, supported by an estimated 4% earnings rise and yielding a staggering 7.7%.
Right now Taylor Wimpey can be picked up on a forward P/E ratio of 9.5 times. Some would argue that this is a reflection of the deteriorating housing market, but I believe this is far too low given that the business is still on course to deliver solid profits growth in the years ahead thanks to the UK’s homes shortage. It’s a hot buy, in my opinion.
