Collecting dividends is a key part of investing. Indeed, dividends not only provide you with a passive income but they can help your portfolio ride out market down-turns.
With this in mind, here are two shares that could spice up your portfolios performance next year.
2014 has been a transformational year forPremier Farnell(LSE: PFL). The company has been working to reorganise its business, reduce costs and increase efficiency. Management has predicted that this reorganisation will reduce annual costs by 6m to 8m.
This cost reduction is expected to drive Premiers growth over the next few years. Earnings per share are expected to grow 11% during 2016 as cost savings filter through. Unfortunately, costs incurred from the restructuring, as well as currency headwinds are going to hold the company back during its 2015 financial year, which it is already halfway through.
Still, Premier supports a dividend yield of 6.1% at present levels, so investors will be paid well to wait for the companys recovery. The payout is covered one-and-a-half times by earnings per share and is set to rise by an inflation busting 3% next year. Whats more, after falling 22% year-to-date, Premier currently trades at a lowly forward P/E of 11.
All in all, Premier looks cheap at present levels and offers an extremely attractive dividend yield of 6.1%.
With a market capitalisation of only 644m, Premier may be too small for some income investors. In that case for blue-chip income seekers,Royal Dutch Shell(LSE: RDSB) looks to be the best pick.
At present levels, Shell is set to support a dividend yield of 5.4% next year and the payout will be covered twice by earnings per share.
However, Shell has recently been hit by concerns over the falling oil price but this has only presented a buying opportunity. You see, one of Shells strengths is the integrated nature of its operations. Indeed, while the companys upstream earnings will fall in line with the oil price, Shells downstream operations will benefit.
For example, as the price of oil falls, the cost of acquiring oil to refine will fall, widening Shells profit margins. AndBPsmanagement has stated thatfor every $1 improvement in the profit margin for refined products, BP generates an additional pre-tax operating profit of $500m.
Whats more, Shell has plenty of experience dealing with a low oil price. The company has been around in one form or another for nearly 200 years. Over the past 10 years alone, the price of oil has traded as low as $20 per barrel and as high as $140/bbl. Despite these wild price swings, Shells dividend payout has been uninterrupted since the end of the Second World War.
So, based on the data above, it seems as if Shells dividend is safe for the time being and the companys shares would make a great pick for any income portfolio.
Not for you
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