Inflation could affect share prices in 2017 in my opinion. It is on the rise and according to various forecasts, could hit 3% or 4% this year. Therefore, I’m surprised at the level of dividend yields which are available on the following 4 UK shares.
GlaxoSmithKline plc (LON:GSK) (LSE:GSK.L) has a dividend yield of 4.7%. Its share price has risen 10% in the last 3 months. I like the diversity of its business model, but also the growth potential it has within its pharma division. The investment it has made in its pipeline in the last few years could mean it outperforms other pharma shares in my view. This could not only help GlaxoSmithKline’s share price, but also lead to higher dividends per share.
In the same sector, AstraZeneca plc’s (LON:AZN) (LSE:AZN.L) shares have a dividend yield of 4.6%. I think this means they have investment appeal. Like GlaxoSmithKline, AstraZeneca has a good pipeline of potential new drugs in my view. More investment could be on the way, which is forecast to mean increasing dividends per share and a potentially higher share price. I’m also upbeat about AstraZeneca’s defensive characteristics and think its share price could perform relatively well in a down trending stock market.
BT Group plc (LON:BT.A) (LSE:BT.A.L) has a dividend yield of 4.6%. That’s due in part to its share price fall from earlier this year, where BT released a profit warning. Therefore, many investors may be looking at BT as a less stable income option due to potential difficulties in its Italian division. In my opinion, its relatively high dividend yield means a margin of safety is available. Therefore, while GlaxoSmithKline and AstraZeneca’s share prices may be more stable from a dividend perspective, I think BT still has investment appeal.
HSBC Holdings plc (LON:HSBA) (LSE:HSBA.L) could be at the start of a new and more profitable period. I like the strategy it has adopted to become more profitable, with cost reduction a main focus. I also think the Asian economy has high growth potential and HSBC could capitalise on this. HSBC’s shares have a dividend yield of 6.3%. For a large banking company with exposure to fast-growing Asian economies, this seems relatively appealing in my opinion for the long term.