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, very selective in picking shares for his 20 billion pound funds. As few as one in 10 of the U.K.'s top 350 companies earn a place in his market-beating portfolios.
The following three companies have notable records as fast dividend growers over the last four years:
Market cap (in billions of pounds)
Recent share price (in pence)
Annual dividend growth (%)
Forecast yield (%)
|Capita (LSE: CPI.L )||4.9||745||16||3.2|
|G4S (LSE: GFS.L )||3.8||267||15||3.3|
|PayPoint (LSE: PAY.L )||0.5||785||14||3.8|
Outsourcing specialist Capita provides back-office administration and front-office customer contact services to private and public sector organizations throughout the U.K. and Ireland. Woodford views public sector spending cuts as a long-term positive for Capita, and has significantly increased his holding in the group through the past 18 months.
Capita raised its latest interim dividend -- for the six months to June 30 -- by 10%, and analysts are forecasting the same uplift for the final dividend. The shares are currently towards the upper end of their 52-week trading range, but have fallen back a little of late following the loss of a contract with the Criminal Records Bureau. Any further weakness could provide investors with an opportunity to buy into this fast dividend-grower at a reasonable price.
G4S is another outsourcer. The company specializes in sectors where security and safety risks are considered a strategic threat. With operations in more than 125 countries and over 657,000 employees, the group is the largest employer on the London Stock Exchange.
G4S's reputation has been hit this year by its Olympics staffing gaffe, which necessitated the drafting in of 3,500 troops to help police the event. Current-year profits will also be hit by the blunder. Analysts are forecasting flat earnings and only a modest rise in the final dividend after the company held the interim at the same level as last year. However, G4S is expected to resume double-digit earnings and dividend growth in 2013, and Woodford has resolutely stood by the company and its chief executive.
PayPoint, a FTSE 250 firm, processes consumer payments for telecoms, energy, water, transport, and parking, among other things. It is the leading payment collection network in the U.K. and also has operations in France, Romania, and North America. The group handles more than 12 billion pounds from over 650 million transactions annually.
PayPoint's shares have climbed relentlessly over the past two years and are now rated on 18 times forecast earnings for the year to March 2013. On the income side, analysts are expecting 13% dividend growth, giving a yield of 3.8%, followed by further double-digit growth in 2013-2014. PayPoint's credentials as a fast dividend-grower are impeccable, but the current earnings rating is just a bit too rich for my tastes. It's certainly one to keep an eye on, though.
Buying great companies at great prices has enabled Woodford to beat the wider market by over 300% in the last 15 years. If you'd like to learn more about his favorite large caps with good dividends and growth potential, I recommend you grab the exclusive Motley Fool report: "8 Shares Held by Britain's Super Investor." You can download the report for free right now. Simply click here.
Further investment opportunities: