20th February 2014
As the arrival of the Verizon shares and cash balance are imminent for Vodafone investors, Helal Miah, investment research analyst at The Share Centre, picks three income stocks to consider…
Vodafone’s share price has had a good run and as the future is slightly less certain due to an increased reliance on other regions, such as troubled Europe, to make up for Verizon’s strong cash flow. We believe the capital distribution is an opportunity to be effectively taking some profits to reinvest elsewhere. Vodafone’s high yield has been attractive for income seekers so we recommend investors look to invest in other blue chip companies paying a good dividend. Reinvesting the solid dividends from these investments over a long-term period should see good capital returns.
GlaxoSmithKline remains our preferred stock in the pharmaceutical sector with a promising pipeline of new drugs and it being less prone to generic competition following patent expirations. The defensive nature of the sector and the stock, and the competitive yields paid to investors make this a core holding for many portfolios. The hoped for future improvement should be helped by new products, diversification in consumer healthcare and biotechnology and increasing exposure to emerging markets.
Royal Dutch Shell ‘B’
Cost efficiencies at Royal Dutch Shell should lead to better cash flows, providing oil prices maintain in their current trading range, which we view as more than likely. Major capital investment programs should also result in increased production capacity. We believe the company gives stability to a portfolio, offering investors relatively stable cash flows and an attractive dividend income. The share price is also likely to be supported by a share buyback program.
BP is still in the realms of transforming itself from the company it was prior to the Gulf of Mexico oil spill and is progressing well. It is nearing the end of its restructuring process and is now a smaller and leaner operation with longer-term prospects set to improve. Management remains committed to improving shareholder returns through share buybacks and increasing the dividend, which currently stands at 4.6%, and is once again gaining investor’s confidence.