What better than a solid energy supplier for a long-term stream of reliable dividends? That's how investors have typically been seeing Centrica(LSE: CNA), the supply side of British Gas.
Last year's 5.1% dividend is predicted to grow to 6.9% this year and 7.1% next. But underlying that there's a different story.
With earnings per share crashing by 32% in 2014, the dividend was cut from 17p to 13.5p, and the following year to 12p. Those forecasts suggest only a modest recovery to 12.4p by 2018, with weak cover -- it's the tumbling share price that's made the forward yields look so attractive.
Since a peak in 2013, the shares have shed 57% of their value to today's 172p, so that previous darling of income seekers has actually provided a pretty disappointing overall five-year return.
What's the problem? Well, the fall in the price of oil coupled with increasing competition has taken its toll, and customer numbers at British Gas have been falling. I'm sure there are other reasons too, and I won't go too far into my own opinions of customer service at British Gas except to say I am not impressed.
As the UK's biggest, it's also the one with the most to lose to competitive newcomers -- perhaps Centrica can be thought of as the Tesco of the energy supply sector, with new Aldis and Lidls popping up all over the place.
There's also a big political risk here too -- if nationalising fanatic Jeremy Corbyn should ever get into the hot seat (and Mrs May's and Mr Johnson's antics are increasing the likelihood of that, in my opinion), that fat dividend could disappear.
A dividend upstart?
Who is it I think could be a better dividend bet? It's unloved Trinity Mirror(LSE: TNI), which released a Q3 trading update on Monday.
The company is in the business of print publishing -- newspapers like the Daily Mirror and Sunday Mirror, and a bunch of local newspapers. That's a market that the investing world seems to think is disappearing fast, and it's certainly true that sales of print newspapers are declining as online publishing increasingly takes over.
But I think rumours of the death of the business are exaggerated. I don't know how many working folk go out every morning to their jobs in offices, in factories, on building sites, on roads and railways, or wherever -- but many of them still have today's newspaper rolled up under their arms, rather than their Kindle or iPad.
For the third quarter, revenues have continued to decline, but the company reckons it's made structural cost savings of £20m for the year so far, which is £5m ahead of target, and net debt stood at a modest £19m even after paying out £6m for the interim dividend.
And the share price, at 80p, is deemed so low that the firm is buying them back by the shedload -- £9m has already been spent so far of a target of £10m.
But how cheap are the shares really? Well EPS is expected to drop by 10% this year, but level out to a 1% fall in 2018. And that puts the shares on a forward P/E of only 2.5. We're also looking at a price-to-book value of just 0.4, putting a very low price on the company's assets.
I reckon this dog is far from dead.
Alan Oscroft has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. 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.