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3 Neil Woodford High-Yield Shares

By G. A. Chester – Mar 21, 2013 at 4:31PM

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GlaxoSmithKline, Imperial Tobacco Group, and SSE are three of the master investor's high-income 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 pound 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 over 5%:


Share price (pence)

Dividend yield

SSE (SSE -0.83%)



GlaxoSmithKline (GSK 0.74%) (GSK 0.40%)



Imperial Tobacco (IMB 0.45%) (IMBB.Y 0.60%)



Woodford holds two of the four FTSE 100 utilities. SSE -- formerly Scottish & Southern Energy -- is one of his two. Analyst forecasts put SSE on a juicy 12-month forward yield of 6%, which is the highest income on offer among the utilities.

The company told us within an update during January that it expects to pay out a dividend of around 84 pence for the year ending March 2013 -- in line with its targeted payout of 2% above retail price inflation. Analysts are forecasting the dividend will grow by 4% to 5% a year for each of the next two years.

Woodford has put a lot of faith in the pharmaceuticals sector. GlaxoSmithKline is one of his biggest bets, weighing in at a hefty 8% of his portfolios. According to analyst forecasts, the U.K.'s biggest drugs group is on a healthy forward yield of 5.2%.

Glaxo reported strong cash generation for 2012 when it released its annual results last month. The board said it remains committed to using free cash flow to support increasing dividends. Analysts are forecasting slightly stronger dividend growth for Glaxo than for SSE over the next two years: 5% to 6% annually for Glaxo versus SSE's 4% to 5%.

Imperial Tobacco
Tobacco is another sector that Woodford has backed heavily, and Imperial Tobacco is a top-10 holding in his funds, with a weighting of close to 5%. Analyst forecasts put Imperial on a smoking 5.2% forward yield.

The company told us during January that the first quarter had seen worsening trends in some of its markets, including the EU and Russia. However, the group's four key brands and emerging markets continued to show good growth momentum. Analysts have pencilled in strong dividend growth of 10% for the current year to September, and the same again for 2014.

Woodford excels at finding big dividend-paying winners for his market-beating funds, and two of the three shares I've highlighted are featured 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.


G.A. Chester does not own shares in any of the companies mentioned in this article. The Motley Fool recommends GlaxoSmithKline. 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.

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