3 top dividends for the next decade: Direct Line Insurance Group plc, Land Securities Group plc and easyJet plc
Whatever you say about Direct Line Insurance(LSE: DLG), you can't deny the company's solid dividend policy.
Direct line has been steadily paying out special dividends over and above its ordinary dividend. With its full-year results announcement in March, the company said" "We've also continued to grow regular dividends and announced another special dividend". The combination of an ordinary dividend of 9.2p per share plus a special dividend of 8.8p was actually eclipsed by a one-off extra cash payment of 27.5p per share as a result of the firm's sale of its International division.
City analysts are forecasting a total dividend yield of 6.1% for the current year, rising to 6.2% for 2017, and that looks pretty attractive if Direct Line can pull it off. Cover by earnings would be thin at around 1.3 times and the company is assessing its solvency capital requirements, with approval for its model hoped to be received by mid-year. That adds risk, but Direct Line doesn't anticipate any "step change" on that score.
The shares have had an erratic 12 months, up only 2.6% to 367p, but they're still up 80% over five years and they're on a forward P/E of only a little over 12 based on 2017 forecasts. Overall I see Direct Line shares as being close to fair value, but the company's cash rewards strategy makes it look attractive to me from a long-term income perspective.
Invest in land?
If you want steady annual income, one option many overlook is buying shares in an investment trust. And if you think income from property is likely to remain healthy for many decades (as I do), the real estate investment trust (REIT) Land Securities Group(LSE: LAND) could be worth a look.
It's actually the largest commercial property development and investment company in the country, and gets the bulk of its income from retail and office space rental. And its status means that, unlike some other kinds of investment company, it can even-out its dividend payments over the long term and provide a more stable income.
We're not looking at one of the highest dividends in the FTSE 100, but averaging around 3% and a little higher on shares priced at 1,170p, they're the kind that could provide you with steady income for decades to come.
An airline, really?
I've traditionally seen airline shares as a big no-no. Not that there's any problem with the companies themselves, but it's an industry at the mercy of costs and events it can't control and offers little in the way of differentiation apart from price competition. The airlines can advertise their first-class luxury on telly, yet all I want is the cheapest seat that will get me to where I want to go.
But I'm actually quite impressed by easyJet(LSE: EZJ), especially after founder Stelios Haji-Ioannou led a shareholder revolt that forced the company to refocus on what matters and stop chasing expansion at all cost. What matters, of course, is long-term returns to shareholders. And along with impressively rising earnings, easyJet shares have been rewarding investors with ever-growing dividends.
With the shares currently at 1,462p, we're looking at a forecast dividend yield of 4.5% this year, rising to 5.2% on 2017 predictions. An airline offering great long-term income potential? The world's turned upside down I tell you!
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Alan Oscroft 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.