The search for income has never been harder than it is today. With prospects forthe first base rate hike nowreceding, that isnt going to change soon.
It has been a traumatic five or six years for savers, but this only serves to throw the value of company dividend payouts into even sharper relief. For investors, this is your best income option today.
Their dividend yields are gold, pure black gold. And now could be a good time to topup your tank.
BP Or Not BP?
If you buy BP today, you are locking into its current yield of 5.3%. Better still, thisis forecast to hit 5.6% in December, and 5.9% one year after that.
Thats the beauty of dividend payments. If management pursues a progressive policy, as BPs does, your dividend payouts will rise in value, year after year, helping your money keep pace with inflation.
BPs dividend is worth 8.3% more than one year earlier.
Over the same period, the interest rate on the average savings account has risena meagre1.5%, from 0.66% to the princely figureof 0.67%, according to Moneyfacts.co.uk.
Sure Of Shell
Today, Shell gives you a 5% yield. Again, that is forecast to rise, hitting 5.3% by December 2015. This puts it comfortably above the FTSE 100 average yield of 3.6%.
Management policy is also progressive. Its Q1 2014 dividend of $0.47 per share is up 4.4% year-on-year.
Now could be a good time to buy into Shells juicy yield, with the share price down 9% in the past three months. That means youre getting it at a fat discount, despite a whopping 33% rise in Q2 profits to $6.1bn.
Dash From Cash
Company dividends arent guaranteed, of course, but neither is the return on cash. Two years ago, the average savings account paid 1.04%, an astonishing 36% more than you get today.
Thats worth bearing in mind, if youre worried that BPs Gulf of Mexico ongoing legal saga will force it to cut its dividend payout again.
BP and Shell arent too expensive either, trading at forecast p/e ratios of 9.4 times and 9.9 times earnings respectively for December 2014.
High income going cheap? In todays low interest rate world, thats priceless.
Why do savers put up with 1% or 2% on cash whenGreat British Companies Like These Can Yield Up To 6%?
At Motley Fool, we have never underestimated the power of the dividend. Now you can learn how to tap into this power by downloading our latest special report How To Create Dividends For Life.
This no-obligation report demonstrates how reinvesting dividends for growth is the best way to build long-term wealth on the stock market. It is completely free so Click Here Now.
Harvey Jones has no position in any shares mentioned. 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.