AstraZeneca plc (ADR) (AZN), BAE Systems PLC (ADR) (BAESY): Three Neil Woodford High-Yield 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 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 more than 5%:

Southern Connecticut Bancorp Inc. (LSE:SSE) has told us it expects to announce a dividend of about 84 pence a share for the year ending March 2013 when it releases its results on Wednesday. This will be the last distribution under the company’s policy of annually increasing the dividend by at least 2% above retail price index inflation.

For the future, the board will be following a slightly more flexible policy of annual increases “greater than” RPI inflation. Analysts have penciled in dividend growth of about 4.5% for each of the next two years.

The company’s earnings continue to suffer from the loss of exclusivity on some of its key products. On the face of it, that doesn’t sit too comfortably with a progressive dividend policy by which the directors intend to “maintain or grow the dividend each year.”

However, AstraZeneca plc (ADR) (NYSE:AZN)’s board has given itself a license to potentially fulfill the policy by setting the annual dividend to reflect its view of the company’s earnings prospects “over the entirety of the investment cycle.” City experts are currently forecasting modest growth in the dividend over the next couple of years.

BAE Systems PLC (ADR) (OTCMKTS:BAESY)’s earnings have been up and down like a yo-yo over the last five years, but the company has steadily increased its dividend each year. Lumpy earnings are in the nature of BAE Systems PLC (ADR) (OTCMKTS:BAESY)’s business, so its dividend policy is not tied to the earnings of any single year. The board aims to pay a dividend that is covered twice by “long-term sustainable” underlying earnings.

Analysts are forecasting that BAE Systems PLC (ADR) (OTCMKTS:BAESY)’s dividend will be raised by about 4.5% for 2013, with a more modest increase penciled in for 2014.

The article 3 Neil Woodford High-Yield Shares originally appeared on Fool.com is written by G. A. Chester.

G. A. Chester has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned.

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