Are Dividends From NEXT plc (6%), Galliford Try plc (5.6%) And Petrofac Limited (4.8%) Too Good To Miss?
Despite the tough competitive business it's in, there are very few successful cash generators like NEXT(LSE: NXT) around. For the year ended January 2015, it paid out 150p in ordinary dividends plus 110p in special dividends, and returned extra cash though buying back its own shares to the tune of £138m.
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For the year just ended in January 2016, analysts are expecting a total dividend return of 399p per share. At the first-half stage this year the firm announced a 53p interim ordinary dividend, and had revealed another 120p in special dividends. There have been no buybacks so far this year as the shares have been priced above the company's limit. So the forecast is looking pretty good for the full year.
Since 2 December however, NEXT shares have fallen back by 16% to 6,600p, so the final quarter of the year might well see share buybacks resume. And it might have given us a nice buying opportunity too, dropping the P/E to 15.3 (and forecasts for the next two years would drop it further to under 14 by January 2018).
The drop also pushes up this year's potential total dividend yield to 6%, with forecasts suggesting 6.2% and 6.5% for the following two years. Ace investor Neil Woodford counts NEXT among his high-yield investments, and it's hard to argue with him.
Cash from houses...
Housebuilding and construction group Galliford Try(LSE: GFRD) has offered investors the best of both worlds in recent years -- its share price has quadrupled over five years and it's been paying out progressive dividends too.
The shares have actually fallen back by 20% since their 12-month peak in August 2015, to 1,443p, along with a slowdown in share price growth across the sector. But that's lifted the forecast dividend yield for the year to June 2016 up to 5.6%, with analysts suggesting a whopping 6.8% in 2017.
At the halfway stage reported on 25 February, we heard of a 12% rise in revenue with earnings per share up 24%, and the interim dividend was lifted by 18% to 26p per share. That makes full-year forecasts look undemanding.
The shares are on a forward P/E of 11.4, dropping to 9.6 on 2017 forecasts, which sounds cheap to me for such attractive dividend yields.
...And from oil too
Shares in Petrofac(LSE: PFC) are down 38% since their May 2014 peak, to 890p. The falling oil price has been the culprit. Yet as a profitable oil services company, Petrofac is somewhat isolated from that. Its main customers in the Middle East are still pumping as much as they can, and they still need Petrofac's services.
The shares are on lowly P/E multiples of around 10 based on forecasts for this year and next, and a decent rise in oil prices could see demand for services rising and earnings growing ahead of forecasts. For the year to December 2015, we've already heard of a 10% rise in revenue to $6.8bn.
The other tasty thing about Petrofac is its dividend, which is forecast to yield 4.8% this year and 5.1% next, and it would be a little over twice covered by forecast earnings each year. So we have a potential and relatively safe play on a recovering oil price, coupled with strong and well-covered dividends. How could you not like that?
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It's a company with a market cap of around £500m, so it's not a high-risk tiddler, and dividends have been growing very strongly over the past few years.
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Alan Oscroft has no position in any shares mentioned. The Motley Fool UK owns shares of and has recommended Petrofac. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.
