What dividend-generating stocks can sometimes lack in growth prospects, they will hopefully more than make upfor witha juicy income stream. So what do these three FTSE 100 stalwartsoffer?
Patiencemay be rewarded
Pharmaceutical play AstraZeneca (LSE: AZN) has a strongdividend trackrecord, and right now offers an annual 4.71% cash injection foryour portfolio. Its growth history is decent as well, rising 27% over the past five years, five times the average FTSE 100 return of just over 5%. This is pretty impressive given that anumber of AstraZenecas top-selling drugs have come off patent in recent years, hitting revenues in the short term. This means that investors mustbe patient to see whetherchief executivePascal Soriots long-term strategy forreplenishing the companys drugs pipeline gets profits gushing again.
The aim is for new blockbuster treatments to deliver revenues of $45bn by 2023, up from$26bn last year. Right now, growth is slow, with Q1revenue increasing by 5% to $6.1bn, although that fell to just 1% at constant exchange rates. AstraZeneca also has to bear the expenseof its enlargedR&D operations, with costs rising 15% in the quarter.Total revenue and core EPS growth look set to decline as it loses Crestorexclusivity in the US. Growth may be patchy over the next couple of years, but with cover of 1.5 the dividends should still flow while we wait to see whether Soriots strategy is likely to prove a winner.
Hammered by public anger
The sad truth is that the only reason to have held British Gas owner Centrica (LSE: CNA) for the last five years has been the dividend. The share price is down 35% in what has been a troubled time for the company, which has been hammered bypublic anger over utility bills, falling wholesale energy prices, squeezed profits and the unpleasant surpriseearlier this monthof a 750minstitutional share placing of 350m new shares.
Centricas response to itstroubles has been to slash costs and capex, which is hardly an original strategy in the current climate, but has proved effective elsewhere. Following the commodity stock playbook, it also took a knife to its dividend, which was cut by 30%, although it is stillforecast to yield 6.1% byDecember. Management is aiming for progression from here which will tempt investors, even those who arent fully convinced by theirability to turn this ailing crate around.
The best of both worlds
By comparison,United Utilities (LSE: UU) hasoffered the best of both worlds, with a healthy dividend and index-thrashing growth. Its share price is up 54% over the last five years, which partly explains its lower but still respectable yield of 3.97%.
The recently reported0.6% rise in full-year revenue to 1.73bn was solid, although new regulated price controls contributed to a 9% drop inunderlying operatingprofitsto 604m. The final dividend was raised 2% to 25.6p, making a total of 38.45p for the year. Investors can hope for further progression as well, with management planning to raisedividends by at least RPI through to 2020.
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Harvey Jones has no position in any shares mentioned. The Motley Fool UK has recommended AstraZeneca and Centrica. We Fools don’t all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.
