Inflation hit a new high of 6.2% in February. Vodafone (LSE: VOD) has a 6% dividend yield and is outperforming the wider UK market index with an 8% year-to-date gain. Today, I will be assessing whether this FTSE 100 stock has a place in my portfolio.

Paying dividends

High-dividend paying companies are infamous for compensating for their underperformance with large payouts. This is often seen in industries that have high levels of uncertainty or headwinds, such as metal commodities and tobacco.

However, Vodafone has managed to buck the trend so far this year. The British telecommunications company pays one of the UK’s highest dividends. In fact, it is among the top 25% of dividend payers in the UK. The payout rounds up to approximately €0.09 or £0.07 per share.

Furthermore, the Vodafone share price has also outperformed the FTSE 100 by a rather solid 7% so far this year. The surge in its share price came after its better-than-expected Q3 results. For that reason, Vodafone does look like a promising passive income stock, at least for the short term.

Dial up growth

Nonetheless, as a long-term investor, I have a strong interest in a company’s future prospects. I always look for companies that can sustain a continued level of earnings growth, even if they don’t pay dividends.

Although revenue growth from Vodafone’s most recent quarterly trading update was positive, a 3.1% annual growth rate does not entice me. With that being said, there are also positives. Most notably, revenue growth was impressive in Egypt (18.5%) and Turkey (22%). However, these two countries together only contribute 9% of the group’s total service revenue. Also, Italy (-1.3%) and Spain (-1.6%), which each contribute 20% of total service revenue, saw declines.

While I have no doubt that Vodafone has a path to recovery in a post-pandemic world, just how much it can recover by remains a question. The company’s annual earnings have been extremely volatile, sliding in and out of profitability. Revenue has been on a decline since 2015. As such, I think Vodafone’s growth prospects are limited, and so are its future dividends.

Top up your balance

Vodafone’s dividend of 6% is not well covered by its earnings. This all brings me to raise the most worrying factor about Vodafone — its balance sheet. With an extremely high level of debt and declining cash levels, the British telecommunications company does not seem to have a bright future ahead. Moreover, with interest rates continuing to rise, Vodafone is going to find it difficult to pay off all that debt without much growth. In addition, its dividend payments have fallen over the past 10 years.

Even if I was a dividend investor, I would be skeptical of receiving a healthy level of dividend payments from Vodafone for the medium to long term. I am staying clear of this FTSE 100 stock and won’t be buying it for my portfolio anytime soon.

The post This FTSE 100 stock could earn me passive income with a 6% dividend yield appeared first on The Twelfth Magpie.

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John Choong has no position in any of the shares mentioned at the time of writing. The Motley Fool UK has recommended Vodafone. 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.

Convergence

During the decade under Colao’s leadership, Vodafone has made the transformative journey from mobile operator to become a converged player, providing both fixed and mobile services. Via a combination of acquisitions and organic capital expenditure, the company has invested heavily to gain a foothold in fixed-line and pay TV markets.

Most recently, Vodafone Australia, the company’s joint venture in that country, has agreed to merge with local broadband provider TPG Telecom in a bid to bolster its competitive positioning in Australia’s telecom sector.

Liberty Global

Elsewhere, the group also agreed to pay €18.4bn to buy Liberty Global’s cable networks in Germany and Eastern Europe to create a stronger competitor against former monopoly incumbents such as Deutsche Telekom. Few analysts question the wisdom of Vodafone’s strategy to use acquisitions to bring much needed scale to the group, but many are worried that the task of integrating the new networks comes at a time of an upcoming leadership change.

Nick Read, who will replace Colao in October, is widely seen as an unproven CEO. He was appointed the group’s CFO only back in 2014 — although investors should be reassured by his experience in running the group’s British and emerging market divisions.

Rising debt

Another cause for concern is the group’s rising debt burden. The debt-fuelled acquisition of Liberty’s assets will raise net debt to roughly €50bn at the time of completion, close to the top end of management’s target range.

The Liberty deal would also mean that the business would be more exposed to slower-growing markets in Europe, which will account for more than three-quarters of its combined operating profits. Intense competition in Italy and Spain remains a cause of unease, even though trading conditions there have recently improved considerably.

Additionally, investors should take note of the growing cost of infrastructure and mobile spectrum in recent years. Vodafone hasn’t always managed to cover the dividend with free cash flow (after spectrum and restructuring costs) since the sale of its stake in Verizon Wireless in 2013, and that has put a lot of pressure on its balance sheet.

Dividends

In spite of this, management remains committed to its progressive dividend policy. Last year, dividends per share rose by 2% in euro terms to 15.07 euro cents, or 13.33p. This means that at its current share price, Vodafone has a dividend yield of 8.1% — making it one of the highest yielding stocks in the FTSE 100.

Investors should nonetheless be wary. Even after a 30% year-to-date fall in its share price, valuations don’t look cheap. Shares in Vodafone are worth 18.9 times its expected earnings this year, despite sluggish growth and significant medium-term uncertainty.

The post How low can the Vodafone share price go? appeared first on The Twelfth Magpie.

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Jack Tang has no position in any 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.

Succession of setbacks

Its share price has been stuck in a prolonged rut ever since accounting irregularities at its Italian business first came to light in the summer of 2016. BT swiftly faced mounting clean-up costs as it later became apparent that the accounting scandal was much worse than it had originally thought.

This was the first of a succession of setbacks to hit the company, and before long, BT also reported a slowdown in demand for its pay-TV services and warned on profits following a collapse in orders in its public sector business.

Underlying the uncertainty over BT’s outlook for growth, the group scaled back its dividend growth ambitions. It has scrapped its previous target of increasing the payout by 10% or more for 2018, instead promising to retain a ‘progressive’ dividend policy.

Convergence

But despite all this, there are reasons to be bullish on the company as well. BT is undergoing a major transformation which will see the company bring together its consumer division with EE’s wireless network to drive converged products and to create a seamless network for customers.

I expect convergence, where one service provider offers multi-play services, will continue to provide opportunities for growth in the long run. It’s also likely that convergence will give an integrated incumbent a strategic advantage over its competitors, through better cost saving opportunities and upselling potential.

It’s also worth noting that earlier fears over the soaring costs of broadcast rights to English Premier League football matches may have been overdone. The total money spent on the rights to broadcast matches in the UK for the next three years is set to fall for the first time in more than a decade, in stark contrast to earlier estimates of as much as 40%.

Uncertainty remains

Still, there’s still a great deal of uncertainty to consider as well. The company is set to face tougher competition going forward as rivals such as Hyperoptic have stepped up capital investments in full-fibre broadband.

Regulator Ofcom is supportive, having recently published new proposals to allow rivals to install fibre on BT’s telegraph poles and in its underground tunnels. On the upside, however, building networks is an expensive business, while BT still has the advantages of scale on its side.

Then there’s the sustainability of its dividends to worry about. The pension deficit and weakness in free cash flows are major concerns, all at a time when capital investments are increasing. These risks will likely continue to overhang its shares, dampening the prospect of a major breakout in its share price any time soon.

Low valuations

Nevertheless, its low valuation is a big reason to still be interested. With shares in BT currently trading at a forward P/E of just 8.8, there’s significant upside potential in the longer term should the company successfully deliver on its turnaround strategy.

It’s probably because of this that City analysts are becoming more sanguine on its shares. Out of the 23 analyst recommendations, eight are strong buys, up from five just three months ago.

The post Will the BT share price ever make a successful comeback? appeared first on The Twelfth Magpie.

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Jack Tang has no position in any 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.

With this in mind, here are three beaten-down shares that I’m avoiding at the moment.

Dividend cut risk

First up is telecoms company Talktalk (LSE: TALK). The company’s share price has fallen by 19% over the past year, which compares unfavourably to the UK FTSE All-Share Index’s gain of 24%.

Talktalk has struggled to shake off the damage caused by the high-profile hacking scandal in 2015, and in order to win back customers, management has decided to rebrand the business. Talktalk is returning to its challenger roots by focusing on delivering value for money for its customers and keeping prices down. Signs of success are beginning to show too, with its churn rate falling to less than half the levels seen last year.

But looking forward, Talktalk faces margin pressure from higher costs due to rising investment needs and hikes in BT Openreach wholesale charges. Because of Talktalk’s more limited size and its new Fixed Low Price Plans, the company seems be in a weaker position than its rivals.

Moreover, Talktalk’s dividend policy seems unsustainable as city analysts expect its dividend cover to fall short of 0.7x this year. This indicates a dividend cut is likely to take place soon, and the risk of this happening will likely continue to weigh on Talktalk’s share price.

Difficult trading

Defence supplier Cobham (LSE: COB) isn’t doing any better. The company’s share price fell by 15% today after yet another profit warning — its fifth in the past 12 months.

Cobham said it now expects underlying trading profit for 2016 to be £225m, which represents a further reduction of £20m from its January guidance of £245m. It’s also well below the estimate of £290m from only three months ago.

There’s mounting uncertainty about its troubled contract with Boeing’s KC-46 tanker programme, and there is growing concern that Cobham may need another equity raise before long.

“The balance sheet is clearly not strong enough to properly support the operations of the group,” the company said in its press release today.

Regulatory risks

Shares in CFD provider Plus500 (LSE: PLUS) have barely recovered since the FCA announced plans to clamp down on the contracts for difference market in December.

New regulations could pose a bigger challenge for Plus500 than its larger rivals as regulation tends to hit smaller firms the hardest. Proposed changes to make it more difficult for Plus500 to acquire new customers and restrictions on marketing would have a greater impact on the company as it has relatively high churn rates.

Shares in Plus500 currently trade at eight times forward earnings this year. That doesn’t seem too demanding, but given expectations that profits will fall sharply under the proposed new regulations, I’m avoiding its shares for now.

The post 3 beaten-down shares I’m avoiding right now appeared first on The Twelfth Magpie.

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Jack Tang 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.

Big Purchases

In less than three weeks since the shock profit warning, seven directors (or their closely-related parties) have bought nearly 200,000 shares, worth almost £600,000. Non-executive director Anthony Ball and Kay Rose, wife of non-exec Nick Rose, were the biggest buyers and purchased 70,000 and 75,000 shares respectively, at a cost of 302p per share on 30 January. Chairman Michael Rake’s wife Caroline and HR director Alison Wilcox were also noticeable buyers.

It’s important to realise that these are very sizeable sums — for comparison, director purchases (outside of dividend reinvestment plans) amounted to just over £20,000 during the six months before the 24 January announcement. And that’s before we mention the sell trades during that period, some of which were very large.

Luis Alvarez, CEO of BT’s Global Services division, which oversees BT Italia, sold 190,000 shares on 2 December 2016. That represents a sale of more than a third of his total shareholding at the time, which netted him £674,500. The timing of the trade seems noteworthy in light of BT Italia’s problems, however there’s no suggestion of insider trading.

Sign of confidence

It’s always nice to see managers showing faith in their companies, but there may be more to it than that. There’s a lot of research out there which shows that whenever executives buy significant quantities of shares in their own companies, the stock often outperforms the market in the coming months. This would suggest that excess returns can be earned by following the pattern of director trades.

The rationale for following director trading is simple. The theory is that directors tend to have a better understanding of the day-to-day running of their company and can sometimes be privy to inside information. These information asymmetries can help directors to better time the market, which may give them an edge over ordinary shareholders.

Directors often buy after a significant drop in the share price of their company, and when they do so, this is usually seen as a sign of confidence in the company’s prospects. That said, directors are only people, and being like the rest of us, they can mistakes from time to time.

Should you join in?

There’s a lot of differing opinion on BT’s shares. Some are optimistic about the company’s cost-cutting potential following its acquisition of EE, the UK’s biggest mobile network operator. It’s for this reason that Barclays reiterated its “Overweight” rating on BT on 30 January.

I’ll also add that BT is generating robust cash flows despite recent setbacks, and this has enabled the company to promise dividend growth of at least 10% over the next two years.

Others are less sanguine though. Analyst Saeed Baradar of city broker Louis Capital is concerned about the prospect of a football rights bidding war and the impact this could have on its dividend sustainability. On top of this, BT has one of the most underfunded pension schemes in the world, and the deficit may still have further to rise as inflation expectations grow in the UK.

The post Directors at BT Group plc keep buying — should you join them? appeared first on The Twelfth Magpie.

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Jack Tang 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.

Free cash flow isn’t looking too good either, due to its massive Project Spring investment programme. In Vodafone’s 2016 financial year, the company generated just £1bn in free cash flow, which was sufficient to cover only around a third of the sum needed for its dividend policy. And although these big-budget investments should help to improve the company’s long-term growth prospects, these cash uses will still put pressure on its medium-term dividend prospects.

Nevertheless, the telecoms giant still managed to increase dividends per share by 2% in each of the past two years and is expected to maintain a similar level of dividend growth over the next couple of years.

Granted, Vodafone has attractive earnings growth on the cards, with analysts expecting underlying earnings per share to grow 35% this year and 12% in 2017. But despite that rapid pace of growth, dividends may still be under-covered by earnings for at least another few years.

A better pick?

Of course, Vodafone isn’t the only company in the telecoms sector with great dividend prospects. Domestically-focused BT Group (LSE: BT-A) has a good yield and is set to grow dividends at a faster rate than Vodafone over the next few years.

But investors have their concerns with BT too. The company has a large pension deficit and a relatively high level of indebtedness. In June, a funding update showed BT’s pension deficit had widened by nearly £3bn to total £9.9bn. Moreover, due to its acquisition of wireless carrier EE, BT’s net debt position almost doubled over the past year to £9.8bn.

However, near-term tailwinds in the form of synergies from the integration of EE and improvements in operational efficiency should provide comfort in the outlook for earnings and free cash flow generation. Looking ahead, BT is due to report a 2% fall in its bottom line this year, with earnings forecast to rebound 9% in the following year, valuing its shares on forward P/Es of 12.8 and 11.8, respectively.

BT’s dividends are also well covered. Earnings per share last year were 2.4 times its dividends, while free cash flow exceeded dividends by more than two times. This should be more than enough for the company to gradually pay down its pension deficits, leaving sufficient room for further growth in dividends per share.

The stock may yield just 3.6% right now, but with dividends forecast to rise by 10% this year and 11% in 2017, its dividend growth outlook is tempting. Plus, with BT having increased dividends per share by 90% over the past five years, it has an excellent track record when it comes to rewarding shareholders.

The bottom line

So while Vodafone has a higher dividend yield, BT seems set to benefit more greatly from near-term tailwinds and is likely to deliver better dividend growth over the next few years.

The post Vodafone Group plc vs BT Group plc. Which is better for dividend investors? appeared first on The Twelfth Magpie.

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Jack Tang 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.

I wouldn’t buy every fallen share right now, but by keeping a close eye on individual companies and listening to what they say, I think it’s possible to find pockets of good value.

The UK remains attractive, says Aviva

Composite insurance firm Aviva (LSE: AV) sounds upbeat despite a 28% or so plunge in its share price this year.

On 6 July, Aviva’s chief executive assured us the UK remains an attractive market even though it’s too soon to quantify what effects Brexit may have on the firm’s operations. The medium-term outlook remains good and he reckons Aviva will deliver more growth down the line. Last year, around 60% of operating profit came from the UK and Ireland, the firm’s largest market.

City analysts following Aviva expect earnings to grow around 9% during 2017. At a share price of 360p, it trades on a forward price-to-earnings (P/E) ratio of just over seven and the dividend yield runs at just over seven for 2017 too. I must admit, that ‘square’ 7-7 valuation puts me off a little. I remember the disastrous attraction of the London-listed banks when their valuations looked ‘square’ just before profits and share prices plunged during the financial crisis last decade. Nevertheless, Aviva remains one to watch.

Still growing

At 389p, BT Group’s (LSE: BT.A) shares are off 18% since January. The firm’s fibre broadband rollout has helped give the shares a good run up over recent years, but there’s a degree of cyclicality in the business model. If a downturn comes, BT will be vulnerable. Yet its growth plans keep me interested. In May, it announced ambitions to “invest billions more on fibre, 4G and customer service,” which could boost earnings later.

BT has yet to deliver any post-referendum guidance, but City analysts expect earnings to sink this year by 10% and to rise by 8% for year to March 2018. The forward P/E ratio runs at just over 12 and there’s a dividend yield of around 4.5% with the payout covered almost twice by forward earnings. If the UK economy holds up, this valuation will look attractive in hindsight.

Tough going

Marks and Spencer Group (LSE: MKS) is the biggest faller of this line-up, down around 36% this year and demonstrating its vulnerability to macroeconomic events. Costs seem set to inflate for retailers. The rising minimum wage and higher costs of imported stock due to the fallen pound should see to that. If a domestic recession squashes sales further, profits could plunge.

City analysts seem gloomy on M&S, predicting an annual earnings decline of 10% to March 2017 and a 1% uplift the next year. Growth has been elusive for years. A promising food offering has failed to offset lacklustre clothing sales as yesterday’s Q1 numbers again showed.

Today’s share price around 289p put the firm on a forward P/E rating of just over nine and the dividend yield runs at around 7.4%. However, I can’t help thinking that growth was hard for M&S to find pre-referendum, so could be even harder now. Investors’ best hope seems to be for reversion to a higher valuation if recession fears fade, rather than reliance on any decent forward uplift in earnings.

The post The investing case for laggards Aviva plc, BT Group plc and Marks and Spencer Group plc appeared first on The Twelfth Magpie.

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Kevin Godbold 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.

The telecoms and broadcasting sector has been turned up-side-down in the past decade by a series of sweeping strategic moves. BT Group is taking over Everything Everywhere, becoming the country’s leading broadband supplier and mobile business. It has also entered the pay-tv market, and now owns the rights to Champions League football.

Vodafone has been out-thought by its rivals

Sky (LSE: SKY) still dominates pay-tv in the UK, offering Hollywood movies and Premier League football to its customers, and it has expanded into broadband and now also has companies in Italy and Germany.

This has left Vodafone as the odd one out, seemingly out-thought by its rivals. Its Project Spring aimed to renew the telecoms giant, but it has been strategically out-manoeuvred, and its share price has been moribund for the past few years. There have been a few small purchases, and on and off discussions with Virgin Media owner Liberty Communications, but there has been no big, transformational deal.

So what could it do to make up some of this lost ground? Well, what if it bought Sky?

It would be the dream move, and in one fell swoop Vodafone would be one of the world’s leading pay-tv operators, as well as gaining a substantial broadband business. The company would be able to offer the triple and quad play deals that have gained so much business for its competitors. It would have renewed strength and greater synergies in Europe. And by building up its broadcasting assets it would take the fight to arch-rival BT.

Taking over Sky would be a transformational move

This would be the transformational move that its shareholders were hoping for. But could it ever happen?

Well, there would be several barriers to jump over. First, for a £56bn company to take over a £15bn firm, it would need to sell off some of its others assets, to make sure it doesn’t have too much debt.

Then the deal would require regulatory approval. But I don’t think this would be too difficult to acquire.

And, perhaps the most difficult thing, would be to gain the approval of Sky’s board. Although the synergies are clear, Vodafone may be forced to go hostile, increasing the price it would have to pay.

These difficulties probably explain why Vodafone has not yet launched a bid. It seems, instead, to have settled for a series of smaller deals, such as buying out minority shareholders in Vodafone India, and acquiring Spain’s leading cable operator, ONO.

But to me this seems like tinkering around the edges, and is unlikely to have a dramatic effect on the company’s bottom line. Instead, it may be a gamble, but I think Vodafone should try and change the whole game by acquiring Sky.

The post Should Vodafone Group plc buy Sky plc? appeared first on The Twelfth Magpie.

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Prabhat Sakya has no position in any shares mentioned. The Motley Fool UK has recommended Sky. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

The firm’s chief executive Vittorio Colao says Project Spring has transformed the quality of Vodafone’s technology, enhancing the customer’s experience and clearing the way for the firm to expand its enterprise services.

A return to growth

The year to 31 March 2016 was significant for the company. For the first time since 2008, Vodafone managed to grow its revenue organically and its earnings before interest, tax, depreciation and amortisation (EBITDA), both key metrics for measuring success. Investors would also have been pleased as the firm also posted the first quarter of positive revenue growth in Europe since December 2010. 

Hopes for further forward growth are high. The firm has 46.8m 4G customers and its 4G coverage in Europe now scores as high as 87%. Meanwhile, 3G is still important. It has 72.5m 3G data users in emerging markets who could help to drive the growth in earnings. There’s also potential to expand income in broadband services. Vodafone serves 13.4m broadband customers in Europe present but the service is available to 30m homes across the continent so there’s growth potential.

City analysts following the firm certainly see its potential. They expect Vodafone to grow its earning by 18% during the year to March 2017 and by 29% the year after that. But those investing in Vodafone now pay a high price for such expectations. At today’s 229p share price, the firm trades on a forward price-to-earnings (P/E) ratio of almost 30 for the year to March 2018. If things don’t work out as expected, the shares could fall a long way as the market adjusts its assumptions about Vodafone.

Better value

There’s better value to be found in the growing specialist healthcare mid-cap company BTG (LSE: BTG). City analysts predict earnings to grow by 2% during the year to March 2017 and 25% the year after. However, at a share price of 608p, the forward P/E ratio for year to March 2018 runs at just under 22, which is lower than the value placed on Vodafone’s forward earnings.

BTG released its full-year results yesterday too. The firm is making good progress with several products and chief executive Louise Makin said the company is investing in geographic expansion and product innovation to expand both organically and by acquisition.

There really is a lot to like with BTG. The firm operates in a defensive sector, it has a good record of successful execution and it sports a strong balance sheet with surplus cash and zero borrowings. The cash-generative nature of BTG’s business provides plenty of ammunition to drive forward growth either by acquisition or by investing money in research and development to power the firm’s organic progress.

The post How BTG plc could outperform Vodafone Group plc appeared first on The Twelfth Magpie.

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Kevin Godbold owns shares in BTG. The Motley Fool UK has recommended BTG. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

Phone phenomenon

With customer demand flowing across the globe, I reckon Vodafone (LSE: VOD) should keep on delivering market-mashing dividends in the years ahead. The telecoms titan saw total organic service revenues flip 1.4% during October-December, the sixth successive quarterly improvement.

Not only is Vodafone benefitting from improving off-take in Europe — revenues here slipped just 0.6% in the period — but surging data and voice demand in Asia, the Middle East and Africa saw organic service revenues in these regions leap 6.5% year-on-year.

Vodafone has thrown vast sums at improving its global presence via its multi-billion-pound Project Spring organic investment programme. And with these costs set to slip in near future — 92% of mobile builds have now been completed — Vodafone’s balance sheet should enjoy an extra boost.

 The company is expected to keep the dividend stable around 11.4p per share in the year to March 2017, yielding a smashing 5.2%. And a predicted 11.6p for the following year reward propels the yield to an unmissable 5.3%.

Build bumper returns

I am convinced the gargantuan gap between housing supply and homebuyer demand should keep powering dividends at Persimmon (LSE: PSN) in the near-term and beyond.

At face value, latest data from the Royal Institution of Chartered Surveyors (or RICS) made for worrying reading. The impact of increased stamp duty on landlords saw new property enquiries drop by a net balance of 22% in April, the biggest drop since 2008.

The body added that the fall “may also reflect some uncertainty beginning to enter the market in the run up to the UK’s referendum on its EU membership.”

Still, RICS estimates that house prices should continue chugging higher in the longer-term, with average values expected to advance 3%-5.5% during the next five years.  And the City expects shareholder payouts at Persimmon to keep climbing against this backcloth — the London firm is expected to dole out dividends of 110p and 111.7p per share in 2016 and 2017 respectively, throwing up lip-smacking yields of 5.6% and 5.7%.

Make a deposit

While banking play Lloyds’ (LSE: LLOY) reliance on the British high street may not make it a hot stock for growth investors, I believe the stable nature of the domestic retail market makes it a rock-solid pick for those seeking solid dividend growth.

Sure, the issue of PPI-related penalties is set to weigh on the bank for a little while longer — claim numbers are expected to accelerate ahead of a proposed 2018 deadline, a scenario that is likely to add substantially to Lloyds’ current £16bn bill.

But the bank is pulling out all the stops to reduce costs across the rest of the business, and remains well on course to close 200 branches by the end of 2017.

Lloyds’ CET1 pile clocked in at a healthy 13% as of March, and this should continue to head higher as a robust UK economy boosts revenues and streamlining measures continue to pay off.

Consequently the number crunchers expect Lloyds to shell out dividends of 4.3p per share in 2016 and 5.2p next year. And I reckon subsequent yields of 6.8% and 7.9% for 2016 and 2017 are too good to pass up on.

The post Lloyds Banking Group plc, Vodafone Group plc and Persimmon PLC: The FTSE 100’s Hottest Dividend Stars? appeared first on The Twelfth Magpie.

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Royston Wild 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.