GSK has been regularly paying dividends for years. In fact, its annual payment has consistently grown at a compounded annual growth rate of roughly 3.4% over the past 10 years. Last year, the pharmaceutical giant yielded 4.4% in dividends. I believe these characteristics make it ideal for income investors.

In comparison, a good easy-access cash ISA may give you returns of 2%. I don’t know about you, but I know where I would invest my money.

A strong business base

GSK’s business base is strong. Consider the fact that the company has succeeded in diversifying its revenue sources over the years. Apart from pharmaceuticals, GSK is into vaccines and healthcare consumer products, too.

Moreover, what is interesting is the huge commitment that the company has been showing towards research and development (R&D). In fact, currently it is reinvesting much of its cash flow into that. GSK spends close to £4 billion on R&D every year to remain relevant in the industry and develop a competitive edge.

Consequently, if there is a pharmaceutical company that will keep its place in the coming years, I believe it is GSK.

Investment in GSK is for the long haul

GSK has found itself in troubled waters in recent years. For the past five years, earnings per share (EPS) have been rapidly falling. The company has been investing heavily in R&D to update its pipeline of drugs.

Last year the stock price delivered almost 30% in return. Its R&D investments are for the intermediate to long term, so only patient investors will gain I believe.

Why I’m a buyer

GSK is a solid income stock. The drug company currently has a stunning 4.4% dividend yield. For years its annual payout has been roughly 61% and as much as 89%. Hence, apart from its declining EPS concern, GSK easily makes my watchlist.

But what about the declining EPS? The first cause is increasing competition. For example, in 2019 GSK had its Advair – a bronchodilator used to prevent symptoms of asthma and chronic obstructive pulmonary disease – challenged by the approval of a generic competitor in the U.S.

Next is its heavy investment in building its products portfolio. In December 2018, for instance, it started the acquisition of Tesaro, an oncology-focused pharmaceutical firm, for $5.1 billion.

Apart from these, the past years have actually been good for GSK. Therefore, the company’s falling EPS should not be a concern at all. And 4.4% is a lot better than 2%, don’t you think?

The post Forget cash ISAs! At 4.4% dividend yield, I’ll buy this FTSE 100 stock appeared first on The Twelfth Magpie.

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Pi De Jonge has no position in any of the shares mentioned but will be opening long positions in the future. The Motley Fool UK owns shares of and has recommended GlaxoSmithKline. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

In fact, for the last five years, the company has been growing its dividend yield at a surprisingly fast rate. Add to that the fact that it pays out roughly 21% of its cash flow in dividends. At its current dividend yield of around 4.4% at the time of writing, I believe Carnival should be on the watch list of every serious income investor for the year.

Carnival has challenges ahead, but not forever

Generally, the cruise business is passing through challenging times. Demand has been low, regulations in some quarters have become tight, and to rub salt in the wound, just 3.5% of both American and European consumers have ever taken a cruise in their lifetimes.

However, the industry can easily reverse this trend. All it needs to do is to concentrate on ageing citizens who can easily shore up demand for cruise services. Fortunately enough, it is already doing that. And Carnival, with over 100 ships – the largest fleet of its peers – is best positioned to benefit the most.

Moreover, with the company’s particular efforts to grow its capacity and expand its reach, it will not be long until we start seeing substantial improvement in the demand for its services, especially in Europe and Asia. Then it is expected to surpass its last $5 billion in sales for the coming years.

Carnival isn’t perfect, but nothing is

As appealing as it is as an income stock, Carnival is not perfect, but what is? Demand for the cruise service has been low, with a very small percentage of American and European consumers seeming to be interested in it.

The major saving grace for Carnival in the long term is the increasing number of ageing people who have been the largest consumers of its service. So if the company’s concerted efforts in expanding its share of the overseas cruise vacations market pays off, its balance sheet – which is still the strongest in the industry – will be further improved.

Hence, Carnival is a buy, in my opinion. If you consider its modest 10× price-to-earnings ratio, its reasonable 4.4% dividend yield and a healthy balance sheet that seems impossible to ever show any sign of weakness, concerns about the current short-term low demand for its services will fall apart.

The post Why I’d cruise through 2020 with this FTSE 100 dividend stock appeared first on The Twelfth Magpie.

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Pi De Jonge has no position in any of the shares mentioned. The Motley Fool UK has recommended Carnival. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

In spite of that, at a 10.8× forward price-to-earnings (P/E) ratio, the stock is currently undervalued I believe. An investment in BP, therefore, is an investment in a robust dividend-paying stock that is discounted by negative market sentiment. As a result, it offers the dual benefits of a stable dividend and a high upside potential in the share price.

Everyone runs into debt sometimes

Presently, the greatest concern investors might have about BP is its high debt. It is currently operating at a debt-to-capital ratio of 43%. But the company has been making efforts to divest billions of assets and optimise its capital expenditure (capex). Thus, soon, it will be sitting on tonnes of cash to offset much of its debt.

However, we should be aware that BP is not the only highly leveraged company among its peers. There is Shell, with a debt-to-capital ratio of 32%, too. Even ExxonMobil has 19%. Evidently, everyone runs into debt sometimes, and BP isn’t an exception.

BP is divesting and optimising its capex

Perhaps the most notable of BP’s strategic efforts is its divestment and capital expenditure optimisation. These two are geared towards reducing its debt profile and ensuring constant liquidity. Therefore, the energy giant will always have sufficient cash flow for dividend and more.

Moreover, BP’s upstream expansion projects have been undeterred. The company has embarked on the construction of a diversified portfolio of projects, underpinning high-quality growth to 2021 and beyond. Since 2016, this strategic plan has resulted in the development of over 23 upstream projects.

Why BP is a buy for me

BP is a buy, in my opinion. Apart from its significant debt, it has more going for it than it has going against it. For example, the company is making conscious efforts to stem the tide of debt. For example, it intends to divest over $10 billion worth of assets over two years — 2019 and 2020 — an action that will help to free up cash for debt repayment.

With a robust upstream portfolio, BP is well poised to tremendously profit from any possible increase in oil price. Add to that its current low valuation of 10.8× its forward P/E ratio – only Shell is lower in the industry…

The post How I’d buy BP to invest £200 in the FTSE 100 appeared first on The Twelfth Magpie.

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Pi De Jonge has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Still, in spite of the projected further fall in the price of oil, you might want to consider getting yourself some Royal Dutch Shell (LSE: RDSB).

A dividend king

Shell is a dividend king. Presently, its yield is 6.3%, the highest of the oil companies. Only BP comes close, at just over 6%. Notably, though, there are concerns that the company might have to sacrifice its dividend payments if the price of oil does not hold up in the coming years.

Also, there is the rising long-term debt profile stemming from the 2016 $53 billion acquisition of BG Group and other capital expenses. Nevertheless, a dividend cut is highly unlikely as the company is progressing towards the range of $28 billion to $33 billion organic free cash flow by the end of 2020.

Shell is forging on

Naturally, oil – the “fuel of the world” – is highly susceptible to regular swings in price. For instance, between late 2015 and early 2016 the price tanked, leading to disappointing performances for Shell, ExxonMobil and most of their peers.

Add to that the persistent debates on oil use that have been garnering more support in recent years. Environmental and workplace safety concerns are at the top of the list of the highly scrutinising factors under which the oil industry is becoming increasingly assessed.

As a result of these concerns, the world is making efforts towards deflecting to a lower-carbon economy. In fact, in 2019 in the United States, the rising use of natural gas pushed coal to its lowest demand in more than four decades.

The good news, however, is that Shell is responding quite well to these industry developments. The oil giant is investing heavily in natural gas. In fact, since 2018, its integrated gas business has been the largest contributor to its net income, affirming the company’s dedication to a more renewable-based energy future.

Conclusion

Royal Dutch Shell is properly responding to the changing landscape of its industry. Especially, the company is strongly positioning itself to benefit highly from future growth in renewables. Presently, focusing on solar, it is leading the way in clean energy investments.

In fact, if there is a company that is well poised to benefit from the far-ranging potentials of oil today, it is Shell. And if there is a company that is less probable to suffer if the world completes its transition to a lower-carbon economy, it is also Shell. The partnership with Qatargas, its LNG Canada joint venture and its Prelude FLNG project in Australia, are all lofty attempts towards ensuring that.

Therefore, Shell is as solid as ever. And at its current dividend yield of 6.3%, it makes a good buy if you are an income investor.

The post Forget oil price falls! I think a portfolio needs Royal Dutch Shell appeared first on The Twelfth Magpie.

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• Down 65% with a 5.65% yield! Is this dividend share a once-in-a-decade buy? 
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Pi De Jonge has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

A strong dividend investing appeal

BT needs no introduction. The UK-based company offers services ranging from telephony, home security and internet services. In addition to its firmly established brand, the group has also won an income investing appeal over the years.

However, BT has been having a shocking run for the last five years. From £5 in November 2015, its share price has been consistently falling, presently at around £1.93. Plus, its debt profile has been rising, owing largely to the expensive fibre broadband and 5G investments it has been making.

That might be some good news nevertheless. Because, at its current dividend yield of 8% and a price-to-earnings (P/E) ratio of 8, BT could be holding a lot of room for future return.

Declining revenue for three years

In 2017, BT’s sales were flat. However, since 2018, its annual profit postings have been improving.  In fact, the company recorded a marginal increase in its pre-tax profit in 2019.

BT’s sales and profits will continue to rise in a sustainable way. Why? Because its long-term capital investments in ultra-fast internet service and 5G technologies, coupled with improved customer support service, are expected to be its primary drivers of growth in the coming years. 

Capital investments to offset declining income in the long term

Operating in an increasingly competitive industry, BT is left with no choice than to be up-to-date if it does not want to be pushed out of the game. To this effect, the firm has been investing heavily in the latest technologies such as full-fibre ultrafast broadband and 5G.

In fact, as of September 2019, BT had connected at least 1.8 million UK homes on its full-fibre broadband. Given that just roughly 8% of the UK population currently has access to ultra-fast broadband, there are still a lot of opportunities for the company to invest in this regard.

While those high-cost investments might momentarily impact the company’s cash flow, they are good costs that it will definitely recoup down the line. Or how else can it reverse the trend of declining revenue that it has been experiencing for the past three years?

Undoubtedly, BT is currently undervalued. While a dividend cut is possible for the 2020/2021 financial year, the company’s dividend payment will be normalised once its long-term capital investments start paying off, and the share price will ultimately improve.

Conclusion

So, even if the management decides to introduce a dividend cut like its peers Vodafone and Deutsche Telekom have done in the past, BT can still make a good albeit risky buy for far-sighted, adventurous bargain investors.

The post Why I think 8%-yielding BT is the king of FTSE 100 dividend stocks! appeared first on The Twelfth Magpie.

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Pi De Jonge has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

A high dividend yield

Global sales of tobacco have been slowing over the last few years, and the risk of it becoming completely outlawed is now ever-present. Still, Imperial Brands, the British tobacco giant, seems undeterred in generating real value, especially for its income investors.

Shareholders have been generously rewarded, with the company having disbursed approximately £10 billion in dividend payments over the past 10 years. In fact, as of December 2019, its annual dividend yield stood at roughly 11%.

Over the last two years, Imperial has had a poor run that saw its share price almost halved from over £31. However, it seems the stock is picking its pieces back again, steadily making gains over the last month.

New revenue sources in face of stalling tobacco sales

Imperial Brands has done a good job of expanding its revenue sources. Using a newly adopted strategy of sustainable and profitable growth, the company has since ventured into vaping and heated tobacco products and the cannabis business, which collectively tags Next Generation Products (NGP).

Imperial followed its 2018 investment in the UK biotech firm Oxford Cannabinoid Technologies (OCT) with a £75 million deal it struck with the pot producer, Auxly Cannabis Group, in July 2019. Both are expected to help diversification efforts by furnishing it with further options for future growth.

Ever-present regulatory uncertainties

In spite of the efforts to explore alternatives to boost growth, Imperial’s overall operations are still susceptible to regulatory complexities and uncertainties. In fact, in September 2019, Walmart announced it would stop selling vaping products.

That decision of the world’s largest retailer came on the heels of a mysterious vaping-associated lung disease that had resulted in the death of at least eight people in prior weeks. Consequently, Imperial had to revise its projections for the 2019 fiscal year.

Still, for the year, the company grew its NGP revenues by roughly 50% in spite of the regulatory whirlwind. Overall, revenue growth recorded across all operations was about 2%. That is nothing short of impressive for a company that has been facing declining demand for its core product.

For the next 12 months, we can only fold our arms and see how Imperial’s new business adventures pan out. However, one thing is highly probable: given its impressive 10-year average positive cash-flow of £2.4 billion,  Imperial should always be able to pay its income investors their dues.

The post Why I think this FTSE 100 stock with an 11% dividend yield should be on your watch list appeared first on The Twelfth Magpie.

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Pi De Jonge has no position in any of the shares mentioned. The Motley Fool UK has recommended Imperial Brands. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.