The last year has seen manydividends culled, withAntofagasta,Centrica,Glencore,WM Morrison,J Sainsbury,Standard CharteredandTescotaking the knife to their payouts in 2015. MeanwileBHP Billiton,Rio Tintoand Rolls-Royce Holdinghave sacrificed theirsthis year. Other payouts also look vulnerable asmarkets slow, but the following three dividendsshould survive 2016 intact.
Ongrid
National Grid(LSE: NG)has been my favourite utility play for some yearsand with total growth of 65% over five years and 10% over 12 months, it has given investors some much-needed ballast. Nothing is absolutelysecure of course, and its share price has retreated slightly on recent reports that Government ministers may strip National Grid of its role as the UKs power system operator.
The stock isnt cheap either, trading at 16.46 times earnings, but you cantcomplain about the yield at 4.50%. Its solidly covered 1.5 times and brokers seem optimistic (if not ecstatic) about its prospects, expecting it to pegup to 4.60% by the end of March this year, then4.70% in2017 and 4.80% in 2018. Earnings per share growth forecasts of 1% a year for the next couple of years are similarly steady. UBS recently warned that National GridsUS business was overvalued and short-term regulatory risks in the UK havent been priced-in, so growth may disappointin future. But feware questioning the yield.
Not-such-snail-mail
Royal Mail(LSE: RMG)has steadied after all the excitement surrounding its launch, growing around 7.5% over the past year. Fewwill be complaining if it can continue to deliver on that. At the current yield of 4.6% you have a total annual return of around 12%. Healthy 6% year-on-year growth in its key parcels business is encouraging, as is double-digit revenue growth in European parcels. UK letters are indecline but at least the pace of the slowdown has been slower than expected. Royal Mail isalso buoyed bya substantial portfolio of London property.
While the deliveries business will actively attract newcompetition Amazon is my biggest concern Royal Mails domesticdomination allows it to invest more in technology and business efficiency.Growth prospects may be limited and a slowdown in the wider economy would certainly hurt, but at 10.7times earnings the price may partly reflect that risk. Itsdividend is nicely covered twice, and lookssafer than moston the FTSE 100 today.
Setting Standards
Investors in insurance company Standard Life (LSE: SL) have endured a tough year, with the share price falling 17% in that time. That seems harsh given that this financially robustinsurer enjoyed a pretty steady 2015, with fee-based revenue up 10% to 1.58bnand group underlying cash generation up 7% to 447m. It currently yields 5.7%, although the cover is worryingly low at just 0.7. Managementhas a good track record, however, increasing thedividend every year since floating in 2006.
Standard Life has moved away from being a traditional insurer to fee-based asset management, which leavesit vulnerable to short-term dips in market sentiment, while holding out stronger long-term growth prospects. This could be a lower-risk way to play the future stock market recovery. And while you wait, the yield suggests that Life is sweet.
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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.
