3 Neil Woodford High-Yield Shares
LONDON -- Ace City investor Neil Woodford has thrashed the FTSE 100 over the last five, 10, and 15 years. Hence, I always keep an eye on his holdings for promising investment ideas.
Woodford is very selective in picking shares for his £20 billion funds. Fewer than one in five of the U.K.'s top 100 companies earn a place in his market-beating portfolios.
The following three firms all offer prospective dividend yields of more than 5%:
Woodford hasn't been the biggest fan of utilities in recent years, but he does hold electricity group SSE (formerly Scottish & Southern Energy). Analyst consensus forecasts put SSE on a sparky 12-month forward yield of 5.5%.
SSE has told us it expects to announce a dividend of about 84 pence a share for the year ending March 2013 when it releases its results on Wednesday. This will be the last distribution under the company's policy of annually increasing the dividend by at least 2% above retail price index inflation.
For the future, the board will be following a slightly more flexible policy of annual increases "greater than" RPI inflation. Analysts have penciled in dividend growth of about 4.5% for each of the next two years.
Woodford has made a big bet on the pharmaceuticals industry. The company within this sector that he has put the most faith in is AstraZeneca. The U.K.'s No. 2 pharma firm has a weighting of more than 9% in the master investor's funds. Analyst consensus forecasts put Astra on a healthy 12-month forward yield of 5.4%.
The company's earnings continue to suffer from the loss of exclusivity on some of its key products. On the face of it, that doesn't sit too comfortably with a progressive dividend policy by which the directors intend to "maintain or grow the dividend each year."
However, Astra's board has given itself a license to potentially fulfill the policy by setting the annual dividend to reflect its view of the company's earnings prospects "over the entirety of the investment cycle." City experts are currently forecasting modest growth in the dividend over the next couple of years.
Woodford's faith in BAE Systems is strong enough for him to afford the defense group a near-5% weighting in his funds. The stock currently offers an income a tad above 5% based on analysts' forecast 12-month dividends.
BAE's earnings have been up and down like a yo-yo over the last five years, but the company has steadily increased its dividend each year. Lumpy earnings are in the nature of BAE's business, so its dividend policy is not tied to the earnings of any single year. The board aims to pay a dividend that is covered twice by "long-term sustainable" underlying earnings.
Analysts are forecasting that BAE's dividend will be raised by about 4.5% for 2013, with a more modest increase penciled in for 2014.
Woodford excels at finding big dividend-paying winners for his market-beating funds, and two of the three shares I've highlighted feature within this newly updated Motley Fool report. You can download this report for free right now -- and enjoy reading an exclusive analysis of eight of Woodford's favorite blue chips. Simply click here.
The article 3 Neil Woodford High-Yield Shares originally appeared on Fool.com.G. A. Chester has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.