These 3 hated dividend stocks look like buys

The Motley Fool

Whilst bouncing away from the three-and-a-half-year furrows ploughed in July, market appetite for easyJet (LSE: EZJ) remains undeniably patchy.


There are a number of factors denting investor confidence, including fears over crimped traveller spending power as the UK prepares for Brexit; rising competition in the low-cost sub-segment; increasing fuel prices; and the prospect of further sterling weakness in 2017 and beyond.

These troubles are expected to send earnings at the airline 22% lower in the period to September 2017, and drive another stake into easyJet's dividend policy. A second successive payout cut is expected by City analysts, this time to 42.9p per share from 53.8p in fiscal 2016.

While the scale of the predicted cut is certainly wince-inducing, share pickers shouldn't forget that this reading still yields a market-busting 4.4%, soaring above the FTSE 100 forward average of times. And the predicted dividend is also protected two times by estimated earnings.

The trading environment may become a lot more turbulent for easyJet in the year ahead. But I remain convinced its expansion programme, allied with surging demand for budget airline tickets, should deliver robust earnings growth in the years ahead.

Make the connection

Telecoms giant BT Group (LSE: BT-A) has also fallen out of favour during 2016. The stock is now dealing at a 20% discount to levels punched at the start of the year, and touched its cheapest since October 2013 just this week.

I view this is a prime buying opportunity, however, and particularly for income chasers. BT carries a splendid 4.2% dividend yield for the period to March 2017 -- created by a predicted 15.3p per share payment -- and dividend coverage clocks in at a sturdy two times.

Demand for BT's broadband and television services continues to sprint higher, helping revenues at its Consumer division shoot 11% higher during July-September. And the acquisition of mobile operator EE this year significantly bolsters the firm's quad play proposition, providing its earnings outlook with further strength.

Mail mammoth

Although the Royal Mail (LSE: RMG) share price remains up from levels printed at the start of the year, the company has fallen out of favour more recently and its stock value hit eight-month nadirs just this week.

Fears over the impact of a cooling economy on letters and parcels volumes as the EU withdrawal process begins has hampered demand for Royal Mail's stock in recent times. But I believe the delivery giant should remain in rude health as the e-commerce phenomenon continues to take off, as do revenues from the parcels play's pan-European GLS division.

Britain's oldest courier is expected to endure a 1% earnings slip in the year to March 2017. Still, this isn't expected to hamper its progressive dividend policy and Royal Mail is expected to pay a 22.8p per share dividend.

Not only does this figure yield a monster 5.1%, but the touted reward is also covered 1.8 times by predicted earnings. I believe Royal Mail remains a sound long-term stock pick.

Make a fortune while others fidget

In short, there are plenty of reasons to remain bullish on the UK stock market, even if the risks have just leapt a notch or several.

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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.