If you are on the lookout for the perfect dividend investment, then I have found two companies thatmight just be down your street. One is a contrarian play thatis as unfashionable as could possibly be, and the other is a turnaround play thatis recovering strongly.
Lets take each one in turn.
Standard Chartered (LSE: STAN) has had a torrid few years. This emerging marketbank enjoyed over a decade of steady growth and a rising share price. It was one of the few banks that sailed through the financial crisis with an unblemished record.
Yet, round about the time of the Eurozone crisis, the company suddenly seemed to reach the limits of its growth. There were a series of profit warnings, and the share price tumbled.
Sometimes, when a business hits trouble, you initially lose interest. After all, when a downtrend begins, you are unlikely to make a profit until things have settled down. So I turned my attention to other investments. Standard Chartered was on my watchlist, but wasnt really a share I was considering investing in.
But just last weekI thought Id take a fresh look at this company. After all the share price falls, the bank now looks like a contrarian buy, with a high dividend yield. Here are the numbers: a 2014 P/E ratio of 8.6, falling to 8.1 in 2015. The dividend yield is 5.7%, rising to 5.9%.
If consensus is right, then Standard Chartered is cheap, and there is a high and rising income to boot. This company is no longer the growth investment it used to be, but it has strong appeal as a recovery and dividend play.
Insurance provider Aviva (LSE: AV) (NYSE: AV.US) is another turnaround play, but itis much further down the path of recovery. Since the financial crisis this business was stuck in the doldrums, until last year, when profitability rebounded, and the share price began to trend upwards.
Aviva is not the contrarian play that Standard Chartered is, but there is much to be said for the more predictable and consistent earnings that we expect Aviva to produce.
The 2014 P/E ratio is 10.4, and the 2015 P/E ratio is 10.3. The dividend yield is 3.2%, rising to 3.9%. Thus this company is reasonably priced, and I expect the dividend yield to increase over the next few years. With improving earnings from emerging markets, this is a solid high yield buy which promises stability with a dash of growth.
If you are interested in Standard Chartered and Aviva as income investments, and would like to know more about this crucial investing technique,then we at the Fool have written a guide which explains everything you need to know aboutdividend investing.
Prabhat Sakya 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.