For dividend investors with exposure to the UK stock market, the first quarter proved yet another bountiful period as recent data from Link Asset Services showed.
Shareholder rewards in that period hit fresh record highs of £19.7bn, but the financial services firm’s UK Dividend Monitor report showed not all London-quoted shares are equal.
In particular, the survey showed that stocks from the FTSE 100 embarrassingly outshone the mid-caps during quarter one as, after excluding the effect of exchange rates and supplementary dividends, payouts from the Footsie rose 2.6% in the three months to March. Mid-cap payouts, by comparison, fell by 2.5%.
And there’s plenty of reason to expect some of the FTSE 100’s big hitters to continue impressing as 2019 progresses and probably beyond too.
Take ITV (LSE: ITV), for example. At current share prices, City predictions of an 8.1p per share dividend for 2019 yield a whopping 6%. For next year, an 8.5p reward is anticipated which nudges the yield to 6.3%.
Many share pickers remain reluctant to take a chance on the broadcaster because of the steady pressure on advertising budgets. ITV has seen earnings fall for the past couple of years because of constrained marketing spend. Last year, advertising sales at the firm edged just 1% higher to £1.8bn.
Things look set to remain difficult at the Footsie firm for a little while longer too. ITV cautioning recently that “economic and political uncertainty continues to impact the demand for advertising as we expected, with total advertising forecast to be down 3% to 4% for the first 4 months.”
The Brexit saga looks set to drag well into autumn at least, and this threatens to flatten ad sales well beyond this month. It’s why the number-crunchers are anticipating another annual earnings drop in 2019, this time by a chubby 12%.
Still, I believe the future remains extremely bright for ITV because of its transition to a multimedia broadcaster as well as steps to establish itself as a truly global programme-making goliath. Last year, turnover at its ITV Studios production division grew 6% to £1.67bn, a result that helped group revenue grow 3% to £3.77bn, despite those problems in the ad market. And online viewing numbers grew by 32% year-on-year.
Another 6% yielder
Right now, ITV carries a forward P/E ratio of 9.9 times, a figure I consider far too cheap given the company’s exceptional long-term outlook. And the same can be said for National Grid (LSE: NG), another dirt-cheap dividend star that’s much too cheap at current prices (as I type, it sports a prospective P/E multiple of 14.2 times).
As concerns over the health of the global economy drag on, the peace of mind that the electricity network operator affords makes it a great share to buy right now, the indispensable nature of its services giving it excellent earnings visibility. It’s why the number-crunchers are expecting dividends to keep rowing through the medium term, to 48.8p and 50.2p per share for this fiscal year and next, respectively.
Subsequent yields sit at an inflation-busting 6% and 6.1%. I’m confident that efforts to build operations in Europe and the US should provide the base for profits and thus dividends to keep growing further into the future.
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Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has recommended ITV. 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.
Motley Fool UK 2019