Construction and engineering firm Carillion(LSE: CLLN) suffered three years of falling earnings up to December 2014. But with its prudent dividend policy the firm has been able to keep its cash payments going and adequately covered.
The year to December 2015 delivered a total payment of 18.25p per share, which was slightly ahead of forecasts and provided investors with a 6.5% yield on a share price of 279p. That came after underlying earnings rose by 4% while City analysts were predicting just 1%.
Forecasts suggest two more years of modestly rising cash, with mooted yields of 6.7% and 6.8% for 2016 and 2017, respectively, but those might well be upped now after 2015 came out a little ahead of expectations.
Chairman Philip Green told us that Carillion's repositioning during the recession has enabled it to "take advantage of opportunities for growth as market conditions improve," and the firm's strong order book and revenue visibility for 2016 of 84% support his words.
Carillion shares are on a forward P/E of just eight based on 2016 estimates, and that looks too cheap to me.
Shares in Talk Talk Telecom(LSE: TALK) were already losing ground before October's internet security breach sent them plummeting further, and over 12 months they're now sitting on a 43% loss to 231p.
One thing that has done is boost the potential dividend yield. The firm provided a 4% yield for the year to March 2015, after increasing its dividend by 15% -- and it says it plans to do the same this year. That rise, coupled with the falling share price, would lift the 2016 dividend yield to a mammoth 7.2%.
But TalkTalk doesn't have the earnings to put where its mouth is, and the last two years' dividends were nowhere near covered. This year's and next's won't be either, according to forecasts, and 2018's cash would only be covered a little over 1.1 times -- and that's assuming the dividend remains static after this year's.
If income is what you want and if TalkTalk manages to keep the dividends going until earnings catch up then it might be one for you, but paying out too much cash is a strategy that could depress the share price still further.
Investec(LSE: INVP) shares fell to 403p in early February, though they've since picked up to 488p for a 12-month loss of 15%. But the specialist banking and asset management firm has put in three years of rising earnings, with three more on the cards -- there's an EPS gain of 6% forecast for the year to March 2016, followed by 8% and 13% for the following two years.
On top of that, a steadily rising dividend is predicted to yield 4.6% this year, growing to 5.8% by March 2018 -- and it would be around twice covered if forecasts prove accurate.
The downside is that the firm's heavy focus on South Africa might render those forecasts useless as that country's economy struggles, yet I see Investec as a tempting proposition with that 5.8% yield from shares that would be on a P/E of under 10.
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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.