Today I am looking at the dividend outlook of four FTSE 100 powerhouses.
ARM Holdings
At face value ARM Holdings (LSE: ARM) may not appear to be the most attractive income stock on the market. The capital-intensive nature of the microchip maker’s business means that dividend yields have long trailed the market, and this trend is not expected to cease any time soon — indeed, predicted payouts of 8.7p per share for 2015 and 10.5p for 2016 create readouts of 0.9% and 1% respectively, well below the 3.4% FTSE 100 average.
Still, the Cambridge-based firm is dedicated to shelling out increasingly-lucrative rewards to its shareholders, increasing dividends at a compound annual growth rate of 24.7% since 2010. While it is true slowing tablet PC and smartphone demand remains a worry, should ARM Holdings’ relationship with Apple remain solid, and diversification into other hot markets like networks and servers pay off, I would expect dividends to keep racing away.
Standard Life
Similarly, I believe that financial leviathan Standard Life (LSE: SL) is a great bet for increasingly-lucrative payments. The company grabbed headlines last month by announcing it was rolling up its Singapore insurance division at a loss of £45m, but I believe a combination of massive investment in its product catalogue and distribution network — not to mention potential for exciting acquisitions, backed by its robust balance sheet — should keep revenues flowing in from across the globe.
Indeed, Standard Life’s exceptional capital base has enabled dividends to continue trucking higher even in spite of recent profit pressures. So with double-digit earnings rises anticipated through the medium term at least, I reckon the insurer is in great shape to keep rewarding income chasers. For 2015 the business is expected to fork out a payment of 18.5p per share, yielding 4%. And this rises to 4.3% for next year amid predictions of a 20.1p dividend.
Imperial Tobacco Group
With consumer spending power improving in critical emerging regions, I believe that the earnings — and consequently dividend — outlook at Imperial Tobacco (LSE: IMT) is becoming ever-more brighter. The business has undergone massive restructuring during the past few years to slash costs and bolster the bottom line, while moves to shutter swathes of underperforming local labels in favour of its sales-driving Growth Brands is also paying off handsomely.
And Imperial Tobacco’s moves into the lucrative North American market also bodes well for growth, particularly as the raid for Reynolds and Lorillard’s hot labels included the acquisition of blu, one of the continent’s most popular e-cigarettes. With these factors in mind the City expects the tobacco company to raise the dividend from 128.1p per share in the year to September 2014, to 141.8p this year and 155.7p in 2016. These figures create huge yields of 4.3% and 4.7% correspondingly.
SSE
I am not so confident over the dividend picture at SSE (LSE: SSE), however. The business is being battered by increasing competition from independent suppliers, a situation worsened by enduring criticism by consumers groups, politicians and the media over the profit levels being recorded by the so-called ‘Big Six’ electricity and gas specialists.
And with the Competition and Markets Authority recently floating the idea of a price cap and massive energy market reforms, I believe that SSE — along with the rest of the utilities space — is no longer a safe-haven for those seeking meaty dividend growth year after year. The calculator bashers expect the business to hike the payment of 88.4p per share in the 12 months to March 2015 to 90.5p this year and 93p in 2016, creating mammoth yields of 5.6% and 5.8%. But given the increasingly-difficult regulatory environment I reckon dividend hunters could end up disappointed.
