Are you looking for outstanding dividend picks for 2015? Look no further than the top yielders among the biggest blue-chip holdings of renowned fund manager Neil Woodford.
Right now, Woodford favourites GlaxoSmithKline (LSE: GSK) (NYSE: GSK.US), Imperial Tobacco (LSE: IMT) and Centrica (LSE: CNA) are offering yields in excess of one-and-a-half times the FTSE 100 average.
| Recent share price | Forecast yield | |
| Imperial Tobacco | 2,804p | 5.0% |
| GlaxoSmithKline | 1,383p | 5.8% |
| Centrica | 277p | 6.3% |
Imperial Tobacco
For years, Woodford has reckoned companies in the tobacco sector deserve a higher rating than the market has given them. Long-term returns have proved him right.
Even a 20% rise in Imperial Tobacco’s shares in 2014 has not dampened Woodford’s enthusiasm. He bought more shares as recently as November, and his team still sees the sector as “a very compelling long-term investment proposition”. In fact, at the latest reckoning, Imperial is the second-largest holding of the CF Woodford Equity Income fund.
Despite the rise in the shares, Imperial offers a smokin’ 5% dividend yield. Furthermore, management has committed to increasing the annual payout by at least 10% a year “over the medium term”. For 2015, shareholders will also get more regular cash returns as the company moves from twice-yearly to quarterly dividend payments.
GlaxoSmithKline
GlaxoSmithKline’s shares, in contrast to those of Imperial, performed poorly in 2014, declining 14% amidst corruption scandals, expiring patents and falling profits. Nevertheless, GSK remains Woodford’s fourth-largest holding.
While earnings forecasts for the pharma group have fallen through the year, dividend expectations have held up better. As such, the drop in the share price has pushed GSK’s yield up to a pulsing 5.8%.
Dividend increases may be limited — or curtailed — for the next year or two, as the company restructures to return to profit growth, but the size of the yield offers good compensation for the wait.
Centrica
Shareholders of Centrica, the owner of British Gas, suffered an even worse time than their counterparts at GSK in 2014. Centrica’s shares fell 20% over the year.
The big energy firms have had politicians, regulators and the media on their backs, and Centrica has also had to deal with unfavourable weather conditions and boardroom departures.
As with GSK, Centrica’s dividend forecasts have held up better than earnings forecasts. The bigger drop in Centrica’s shares has pushed the energy firm’s dividend yield even higher than GSK’s — to a super-fired 6.3%. Centrica is Woodford’s biggest holding in the utilities sector.
