While the FTSE 100 has a dividend yield of 4.7% at the moment, shares in Aviva plc (LON:AV) (AV.L), Vodafone Group plc (LON:VOD) (VOD.L), Centrica PLC (LON:CNA) (CNA.L) and Taylor Wimpey plc (LON:TW) (TW.L) offer yields in excess of 7%. Could they deliver impressive income returns?
Aviva is expected to yield 8.8% in the 2019 financial year. A falling share price is a key reason for its high yield, but the company is also increasing dividends at a fast pace after it was able to generate excess capital in recent years.
While the recent resignation of the company’s CEO may mean it faces a period of uncertainty, I think that Aviva could deliver impressive long-term returns as a result of its strong position in key markets.
Vodafone’s dividend yield of around 8.5% continues to be one of the highest in the FTSE 100. The company’s stock price has experienced a challenging 12-month period, with investors becoming increasingly uncertain about its financial outlook due to investment in 5G and acquisitions.
In my view, dividend growth could be relatively limited as a result of financial commitments elsewhere. However, with what I view as a sound strategy that includes partnership agreements, I feel that Vodafone could deliver impressive returns in the long run. In the near term, though, further volatility could be ahead.
Centrica’s dividend yield of around 8% suggests to me that investors are continuing to adopt a cautious stance as the company moves ahead with a strategy change. Alongside this, it faces significant political and regulatory risk in my view which could cause further share price volatility.
With Centrica expected to become a leaner and more efficient business as a result of cost cuts, I feel it may offer long-term recovery potential. In the near term, though, it may remain somewhat unpopular at a time when investors are increasingly adopting a risk-off stance towards the wider stock market.
Taylor Wimpey’s dividend yield of over 10% suggests to me that the stock could offer a margin of safety. The company, and wider housebuilding sector, are unpopular at the moment as investors remain cautious about the prospects for the UK economy ahead of Brexit.
With Taylor Wimpey having a strong balance sheet and what seems to be a sound overall strategy, I’m optimistic about its long-term income prospects. Demand continues to outstrip the supply of new homes in the UK, and this situation seems likely to exist over a number of years in my view.