Are these 3 FTSE 100 stocks on Neil Woodford's radar?

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Neil Woodford

Last year, Neil Woodford's head of investment communications, Mitchell Fraser-Jones, said that

"In very simple terms, our total return expectation for a stock equals its dividend yield plus the anticipated rate of dividend growth".

Woodford's flagship equity income fund aims to deliver "high single digit annualised returns". So, I think we can assume that stocks with a dividend yield, plus anticipated rate of dividend growth in double digits, are of potential interest to him.

Woodford's equity income fund currently holds just ten FTSE 100 stocks -- low by his historical standards -- so I've been looking for blue chips that could be on his radar based on his total return ready-reckoner. I've passed over certain sectors he's currently very negative on (oil, banks and miners, for example, which account for well over a third of the Footsie's weighting), but that still leaves a number of possibilities.

Investable proposition

Woodford has held Morrisons(LSE: MRW) in the past -- indeed, in spring 2013, when he was at Invesco Perpetual, he was the supermarket's largest shareholder. However, he didn't buy Morrisons when he launched his own fund a year later, which was a wise move, as the company subsequently struggled and cut its dividend deeply.

The business is beginning to improve, two years into the tenure of chief executive David Potts. The company is expected to deliver a 5.3p dividend for its financial year ending 29 January, giving a yield of 2.2% at a share price of 237p. Annual dividend growth is forecast to run at 11%, so the Woodford ready-reckoner clocks an annual total return of 13.2%.

Back in 2014, Woodford told the BBC that supermarkets faced "a long road ... before the industry can re-emerge as an investable proposition". Has Morrisons come far enough? Woodford hasn't bought back in, but the 13.2% figure looks appealing to me.

Other opportunities

Smith & Nephew(LSE: SN) is another stock Woodford has held in the past. He exited the position in January 2015 when its shares were trading near what, at the time, were all-time highs in the wake of bid speculation. He thought that "other opportunities now offer greater long-term income potential".

When Woodford sold, the expected dividend for 2014 was 19.2p, giving a yield of just 1.6%. The shares today, at 1,175p, are at around the same level but the expected dividend for 2016 is 24.1p, giving a far more attractive yield of 2.1%. Annual dividend growth for the next two years is 8%, giving a Woodford ready reckoner number of 10.1%.

Woodford very much likes the healthcare sector, but I wonder if Smith & Nephew's 10.1% is attractive enough for him. I suspect he continues to see other opportunities with greater potential.

Very buyable

Woodford hasn't to my knowledge ever held shares in Coca Cola HBC(LSE: CCH) -- the Footsie-listed firm that is one of The Coca-Cola Co's largest bottlers.

Analysts are expecting a 36.7p dividend for 2016, giving a yield of 2% at a share price of 1,815p. The dividend is forecast to increase by 14-15% in each of the next two years, taking the Woodford ready reckoner number into the high teens.

Woodford's main consumer goods bets are tobacco companies, but he's not averse to holding other staples if the price is right. Coca Cola HBC scores highly and looks very buyable to me at the current price.

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G A Chester has no position in any shares mentioned. The Motley Fool UK has recommended Coca-Cola HBC. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.