Ansell, CSL, Commonwealth Bank, Suncorp – Dividend prospects for 2014

With interest rates set to stay low and some commentators even predicting further official cuts by the Reserve Bank of Australia next year, dividends will be just as important to many investors in 2014 as they have been in 2013.

While the S&P/ASX 200 Index (Index: ^AXJO) (ASX: XJO) is on track to post a return for calendar year 2013 of approximately 11%, as always individual stock performances vary widely from this return. The following four companies have all enjoyed significant rallies in their share prices, which has in most cases reduced the forecast yields for financial year 2014.

1)      Ansell’s (ASX: ANN) share price has gained 30% during the year and is currently trading at $19.94. Earnings and dividends are forecast to decline slightly in financial year (FY) 2014 to 99.7 cents per share (cps) and 37.2 cps respectively (according to Morningstar Research). This places the stock on a skinny forecast dividend yield of 1.9%.

2)      CSL’s (ASX: CSL) share price has rallied 23% over the course of 2013 to currently trade at $66.28. Despite an expected small increase in earnings per share (EPS) and dividends in FY 2014, the forecast yield on CSL has shrunk to 1.7%.

3)      Commonwealth Bank (ASX: CBA) shareholders have enjoyed a near 20% rise in their share price this year. With the stock currently trading at $74.42 and the dividend forecast to be increased by 20 cps to 384 cps, shareholders are currently forecast to receive a dividend yield of 5.1%.

4)      Suncorp (ASX: SUN) has had a stellar year and actually outperformed three of its ‘Big four’ banking peers – the exception being National Australia Bank (ASX: NAB) whose share price has rallied 35%. With Suncorp currently trading at $12.74 and with analyst consensus suggesting dividends worth 73.2 cps in FY 2014, the stock is forecast to yield 5.7%.

Foolish takeaway

Investors looking to generate income from their portfolios regularly focus on the dividend yield they can obtain. The benefit of franking credits makes dividends highly appealing, however it shouldn’t be forgotten that there are two components to overall returns, namely dividends and capital gains. A focus on one without the other could be hazardous to an investor’s wealth.

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Motley Fool contributor Tim McArthur does not own shares in any of the companies mentioned in this article.

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