After maintaining a steady dividend payment of 28 cents per share (cps) since financial year (FY) 2007, this year Telstra Corporation Ltd (ASX: TLS) is set to pay out 29 cps in dividends. What's more, the dividend is forecast to rise to 32 cps in FY 2016 according to analyst consensus numbers provided by Morningstar. The predictability of Telstra's earnings are basically second to none and it's no wonder the stock is so popular with income-seeking investors. With the stock trading at $5.03, the dividend yield of 5.76% is very good indeed.
Homeloans Limited (ASX: HOM) has a market capitalisation of only $80 million which means it's not on the radar of most institutional investors. The company is involved in the origination and management of home loans and in 2013 Macquarie Group Ltd (ASX: MQG) acquired a near 20% stake in the company.
While statutory revenue and profit did fall in the half year to December 2013, on a normalised basis net profit actually increased from $2.7 million to $3.5 million. Homeloans also paid a fully franked 3 cps dividend which was in line with the prior year. With management providing an upbeat assessment of its outlook for the full year it would seem reasonable to assume that a full year dividend of 6 cps in line with FY 2013 should be maintainable. On that assumption, Homeloans is trading on a dividend yield of 8%.
Contrarian
It doesn't get much more contrarian than the mining services sector right now. Many stocks in this sector paid out dividends in the past 12 months that won't be repeated at the same level in the near future. This has caused the stocks to trade on historic dividend yields which don't provide a guide of what to expect for the future dividend yield.
However while the slowdown is wide reaching and few mining services companies will escape unscathed, it is important to not simply assume no mining services companies will be able to keep their dividends constant (or close to constant). One of the most highly regarded stocks in the sector is Monadelphous Group Limited (ASX: MND). The company is still winning contracts, such as last week when it announced that it had secured $250 million of gas contracts in Queensland.
Its recent interim result showed the company was managing to tread water – a sound achievement compared with many of its peers – with revenue and underlying profit essentially flat and underlying earnings per share and dividends down just 2.6% and 3.2% respectively.
In FY 2013 Monadelphous paid 137 cps in dividends and while the FY 2014 payout is forecast to fall to 122.5 cps, this would still provide investors entering the stock today with a prospective yield of 7.3%.
Foolish takeaway
For investors looking to position their portfolio to provide a steady stream of dividends there are options outside of bank stocks. An added bonus of casting a wider search for investment options is that not only could these stocks provide higher dividend yields but they could also potentially deliver higher dividend growth too.
