Are easyJet plc, Royal Mail plc and Barratt Developments plc about to slash their dividends?
Despite posting a loss for the first six months of the current financial year, shares in easyJet(LSE: EZJ) have risen by up to 3% today. That's largely because easyJet's performance was in line with expectations despite it experiencing challenging trading conditions. Notably, the terrorist incidents in Europe have caused demand for air travel to come under pressure, which makes easyJet's increase in revenue of 0.3% seem like an excellent result.
Furthermore, easyJet's loss of £24m is down from a small profit of just £7m in the same period of last year, with the first half of the year normally a slower period for the business. However looking ahead, easyJet remains confident in its outlook, with forward bookings being in line with last year. And with easyJet having a strong balance sheet and a sound business model, it has decided to raise dividends by a quarter to 50% of net profit. This puts it on a forward yield of around 4.7% which indicates that it offers significant income appeal.
Certainly, easyJet's current performance is slightly disappointing. However, it's performing well in a tough market and while there's no guarantee that things will pick up any time soon for the airline industry, for long-term income-seeking investors easyJet's appeal is very strong.
Great income pick
Also offering a relatively high yield is Royal Mail(LSE: RMG). It currently yields 4.6% but as with easyJet, its recent performance has been somewhat disappointing. For example, in the year to the end of March 2016, Royal Mail is expected to have recorded a fall in its bottom line of 9%. But even still, its dividends are expected to have been covered around 1.8 times by profit. This shows that there's adequate headroom and that shareholder payouts could increase even if profitability is squeezed yet further.
However, with Royal Mail forecast to increase its bottom line by 6% in the current year and by a further 5% next year, its dividend prospects remain bright. In fact, Royal Mail is expected to raise them by 11% during the course of the next two years which means that they should easily beat the rate of inflation. As such, Royal Mail remains a top notch income play.
No need for nerves?
Meanwhile, many investors are becoming increasingly nervous about the prospects for the UK housing market. That's because the ratio of house prices to incomes is now close to an all-time high and this could cause severe affordability issues - especially if interest rates are raised. This is a key reason why Barratt Developments' (LSE: BDEV) share price has slumped by 14% since the turn of the year, with it showing little sign of mounting a successful recovery any time soon.
However, Barratt continues to offer excellent income prospects. For example, it currently yields 5.6% and with dividends forecast to rise by over 20% next year, its yield could reach as much as 6.8% over the course of the next 12 months. And with dividends being covered 1.8 times by profit, the chances of them being slashed appears to be rather slim.
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Peter Stephens owns shares of easyJet and Royal Mail. 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.