AstraZeneca plc (4.71%), Centrica plc (5.87%) and United Utilities Group plc (3.97%) are dividend WINNERS!
What dividend-generating stocks can sometimes lack in growth prospects, they will hopefully more than make up for with a juicy income stream. So what do these three FTSE 100 stalwarts offer?
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Patience may be rewarded
Pharmaceutical play AstraZeneca(LSE: AZN) has a strong dividend track record, and right now offers an annual 4.71% cash injection for your portfolio. Its growth history is decent as well, rising 27% over the past five years, five times the average FTSE 100 return of just over 5%. This is pretty impressive given that a number of AstraZeneca's top-selling drugs have come off patent in recent years, hitting revenues in the short term. This means that investors must be patient to see whether chief executive Pascal Soriot's long-term strategy for replenishing the company's drugs pipeline gets profits gushing again.
The aim is for new blockbuster treatments to deliver revenues of $45bn by 2023, up from $26bn last year. Right now, growth is slow, with Q1 revenue increasing by 5% to $6.1bn, although that fell to just 1% at constant exchange rates. AstraZeneca also has to bear the expense of its enlarged R&D operations, with costs rising 15% in the quarter. Total revenue and core EPS growth look set to decline as it loses Crestor exclusivity in the US. Growth may be patchy over the next couple of years, but with cover of 1.5 the dividends should still flow while we wait to see whether Soriot's strategy is likely to prove a winner.
Hammered by public anger
The sad truth is that the only reason to have held British Gas owner Centrica(LSE: CNA) for the last five years has been the dividend. The share price is down 35% in what has been a troubled time for the company, which has been hammered by public anger over utility bills, falling wholesale energy prices, squeezed profits and the unpleasant surprise earlier this month of a £750m institutional share placing of 350m new shares.
Centrica's response to its troubles has been to slash costs and capex, which is hardly an original strategy in the current climate, but has proved effective elsewhere. Following the commodity stock playbook, it also took a knife to its dividend, which was cut by 30%, although it is still forecast to yield 6.1% by December. Management is aiming for progression from here which will tempt investors, even those who aren't fully convinced by their ability to turn this ailing crate around.
The best of both worlds
By comparison, United Utilities(LSE: UU) has offered the best of both worlds, with a healthy dividend and index-thrashing growth. Its share price is up 54% over the last five years, which partly explains its lower but still respectable yield of 3.97%.
The recently reported 0.6% rise in full-year revenue to £1.73bn was solid, although new regulated price controls contributed to a 9% drop in underlying operating profits to £604m. The final dividend was raised 2% to 25.6p, making a total of 38.45p for the year. Investors can hope for further progression as well, with management planning to raise dividends by at least RPI through to 2020.
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Harvey Jones has no position in any shares mentioned. The Motley Fool UK has recommended AstraZeneca and Centrica. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.
