What better than a solid energy supplier for a long-term stream of reliable dividends? Thats how investors have typically been seeing Centrica (LSE: CNA), the supply side of British Gas.
Last years 5.1% dividend is predicted to grow to 6.9% this year and 7.1% next. But underlying that theres a different story.
With earnings per share crashing by 32% in 2014, the dividend was cut from 17p to 13.5p, and the following year to 12p. Those forecasts suggest only a modest recovery to 12.4p by 2018, with weak cover its the tumbling share price thats made the forward yields look so attractive.
Weak performance
Since a peak in 2013, the shares have shed 57% of their value to todays 172p, so that previous darling of income seekers has actually provided a pretty disappointing overall five-year return.
Whats the problem? Well, the fall in the price of oil coupled with increasing competition has taken its toll, and customer numbers at British Gas have been falling. Im sure there are other reasons too, and I wont go too far into my own opinions of customer service at British Gas except to say I am not impressed.
As the UKs biggest, its also the one with the most to lose to competitive newcomers perhaps Centrica can be thought of as the Tesco of the energy supply sector, with new Aldis and Lidls popping up all over the place.
Theres also a big political risk here too if nationalising fanatic Jeremy Corbyn should ever get into the hot seat (and Mrs Mays and Mr Johnsons antics are increasing the likelihood of that, in my opinion), that fat dividend could disappear.
A dividend upstart?
Who is it I think could be a better dividend bet? Its unlovedTrinity Mirror (LSE: TNI), which released a Q3 trading update on Monday.
The company is in the business of print publishing newspapers like the Daily Mirror and Sunday Mirror, and a bunch of local newspapers. Thats a market that the investing world seems to think is disappearing fast, and its certainly true that sales of print newspapers are declining as online publishing increasingly takes over.
But I think rumours of the death of the business are exaggerated. I dont know how many working folk go out every morning to their jobs in offices, in factories, on building sites, on roads and railways, or wherever but many of them still have todays newspaper rolled up under their arms, rather than their Kindle or iPad.
For the third quarter, revenues have continued to decline, but the company reckons its madestructural cost savings of 20m for the year so far, which is 5m ahead of target, and net debt stood at a modest 19m even after paying out 6m for the interim dividend.
Cheap shares
And the share price, at 80p, is deemed so low that the firm is buying them back by the shedload 9m has already been spent so far of a target of 10m.
But how cheap are the shares really? Well EPS is expected to drop by 10% this year, but level out to a 1% fall in 2018. And that puts the shares on a forward P/E of only 2.5. Were also looking at a price-to-book value of just 0.4, putting a very low price on the companys assets.
I reckon this dog is far from dead.