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 pound funds. As few as one in 10 of the U.K.'s top 350 companies earns a place in his market-beating portfolios.
The following three companies have notable records as fast dividend-growers over the last four years:
|
Company |
Market Cap (millions of pounds) |
Share price (pence) |
Average Annual Dividend Growth |
Forecast 12-Month Dividend Yield |
|---|---|---|---|---|
|
British American Tobacco |
64,329 |
3,308 |
20% |
3.9% |
|
Homeserve |
701 |
213 |
16% |
5.3% |
|
Chemring |
626 |
324 |
32% |
5.6% |
British American Tobacco
The world's No. 2 tobacco company, British American Tobacco is a top-five holding in Woodford's funds with a weighting of around 6%. BAT raised its dividend by 11% last year, and this year's recently declared interim was also lifted by 11%.
Current growth is below the four-year average of 20%, but 11% is still more than respectable. And with the increasing wealth and tobacco consumption in emerging markets, there's no indication the company's long record of delivering inflation-busting income will end any time soon.
Homeserve
Homeserve, a supplier of emergency plumbing and electricity services, has been in trouble with regulators over aggressive sales and marketing. As a result, the shares are down more than 50% in the past year. Nevertheless, Homeserve is highly cash-generative and was able to raise its latest dividend by 10%.
Analysts aren't expecting the dividend to grow in the year ahead, but I reckon that the shake-up of the company since the scandal broke, as well as its strong international expansion, bode well for the future. Woodford certainly thinks so. His Invesco Perpetual group has been an aggressive buyer of Homeserve shares in the past two months, taking its stake in the company from 23% at the start of July to more than 29% today.
Chemring
Defense group Chemring is another company currently unloved by the market. It's been out of vogue for some time as a result of defense-spending cutbacks. The shares took a further hit this week when the company issued a profit warning. Chemring reported errors in a new planning system being installed at a U.S. subsidiary, further contract delays, and a lower order book.
The shares are down 37% over the past year and would perhaps be lower still but for a "highly preliminary expression of interest" in the company from U.S. private-equity group Carlyle announced earlier this month. Carlyle has until Sept. 14 to decide whether to make a firm offer. An acceptable offer would surely be at something of a premium to the current price. If the bid doesn't go ahead, I can see Chemring's shares recovering in the longer term when its markets improve.
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