At first glance, my belief that Royal Mail(LSE: RMG) is a great growth stock may seem total folly.
Britain's ancient courier has hit a wall recently as Brexit-linked economic turbulence has dented mail traffic at home. Royal Mail noted in January that "we are seeing the impact of overall business uncertainty in the UK on letter volumes, in particular advertising and business letters." Letter volumes slipped 6% during April-December.
As a consequence, the City expects Royal Mail to have printed a 4% earnings decline in the year to March 2017, and to follow this up with a 1% bottom-line dip in the current period.
A great package
Still, I am convinced Royal Mail can effectively ride the coat-tails of the internet commerce phenomenon in the long term and punch splendid revenues expansion.
While retail data has been less-than-impressive since the turn of January, with Britons hunkering down in the face of rising inflation and an increasingly-uncertain economic outlook, the amount of shopping conducted online remains extremely strong. The latest IMRG Capgemini e-Retail Index, for instance, showed cyberspace sales shooting 15% higher in February.
And looking further afield, Royal Mail can also look hopefully to its GLS European packages division to help drive earnings. While only accounting for a quarter of the carrier's revenues at present, sales at the arm continue to explode and volumes leapt 8% during the nine months to December.
And Royal Mail's near-term profits problems are not anticipated to put paid to its progressive dividend policy either, thanks to the fruits of its extensive cost-cutting programme.
An anticipated 23p per share dividend for fiscal 2017 is expected to rise to 23.8p in the present period before rising to 24.8p in 2019. These forward figures yield a chunky 5.6% and 5.9% respectively.
A steadily-improving product pipeline also convinces me that GlaxoSmithKline (LSE: GSK) has what it takes to generate exceptional earnings, and consequently dividend, expansion in the years ahead.
Glaxo is anticipated to build on last year's 35% earnings decline with rises of 8% and 3% in 2017 and 2018 respectively. And with its pipeline firing on all cylinders again, I would expect the bottom line to keep swelling and to offset patent losses on blockbuster labels.
In recent weeks, for instance, it has announced positive testing results for its Relvar Ellipta asthma treatment, noting that patients with well-controlled asthma were able to switch to the product from the Seretide Accuhaler drug "without compromising their lung function."
And Glaxo has around 40 new medicines in development spanning rapidly-growing health segments like HIV, oncology and vaccines which it hopes to have filed with regulators within the next decade. The medicines giant hopes to have received the sign-off on half of these labels by 2020.
Back on the dividend front, the City expects the firm to offer up an 80p per share payment in 2017, in line with previous guidance and yielding an impressive 4.8%.
With the Brentford business seeing an earnings picture that is getting ever-rosier, the calculator bashers expect dividends to start rising again from next year. An 80.3p payment is currently forecast, also yielding 4.8%. I believe investors can look forward to increasingly-abundant dividends further down the line as sales move into the fast lane.
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Royston Wild has no position in any shares mentioned. The Motley Fool UK owns shares of and has recommended GlaxoSmithKline. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.