No investor can afford to ignore top dividend-paying stocks in todays low interest rate world. Here are four FTSE 100 companiesthat are easily overlooked, but whose solid yieldsshould keep your portfolio ticking over in the years to come. Theymight providesome capitalgrowth, as well.
Keep It Legal
Legal & General Group (LSE: LGEN) has been one of the best FTSE 100performerslatelywithout getting the credit it deserves. It is up a whopping 160% over the past five years, against a meagre 10% on the index as a whole. L&G merits praise for leaping on the tracker bandwagon before it even started rolling, and it now has a lucrative, low-cost passive fund operation.
It survived the collapse of the annuity market following recentpension freedom reforms by expanding sales from bulk annuities and auto-enrolment workplacepension schemes. Net cash generation has soared from 320m a year in 2008to 1.1bn today. Earnings per share (EPS) growth looks strong at 15% next year and steady at 6% in 2016. By then the yield is forecast to hit 5.5%. At 15.66 time earnings it isnt cheap, but that still looks a price well worth paying.
Feeling Is Mutual
Maybeits the name, but investors rarelyseeOld Mutual (LSE: OML) as a sexy stock. It has looked sprightly lately, however, rising more than 12% in the last month, after Barclays hailed it as under-priced and upgraded it to overweight.
Over five years, Old Mutualhas delivered 65% growth, and all the numbers look set fair for this South Africa-focused insurer. It is valued at a modest 12 times earnings. EPS isforecast to grow 11% this year and 5% next. Operating margins of 43.4% look meaty.There are juicier yields than Old Mutuals progressive4.1% but most of them carry greaterrisks, whereas this one is nicely covered 2.1 times. If you have ignored it, Old Mutual merits a fresh look.
Pennon Is Mightier
Value investors might want to hold their noses before sinking money into water, sewage and waste specialists PennonGroup (LSE: PNN), which trades at a pricey 20 times earnings. That issurprisingly high given the problems afflicting subsidiary Viridor, which turns recycled plastics and metals into energy, andhas been hit by the falling oil price. Still, Pennonhas grown 31% over five years.
Given its priceyvaluation you know the yield wont be spectacular, although 3.88% is more than presentable. WithEPS forecast to drop 9% next year perhaps this isnt the best time tooverpay for Pennon. It may be worth looking for a buying opportunity, however, with EPS forecast to rebound to 17% in 2017.
Lucky Number Severn
Severn Trent (LSE: SVT) also looks pricey,trading at around 20 times earnings, but it has more to show for it, having gained 65% over five years. Theyield looks a little watery at 3.77%, having been cut 5% in line with regulator Ofwats recent proposals. The company is aiming to raisethe dividend at least in line with RPI inflation until 2020, although with RPI at just 0.8% in September, investors will be hoping for more than that. With EPS set to drop 11% in the year to next Marchand another 2%the year after, again, investors may want to wait. But this is well worth addingto your watchlist.
Next year, UK companies will hand out out nearly 90bn worth of dividends and some of this could be yours if you know where to look
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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.