The high-yield ace is bullish on British American Tobacco (LSE: BATS), BAE Systems (LSE: BA.) and Capita (LSE: CPI).
Ace dividend investor Neil Woodford revealed a trio of share tips this morning after reviewing the performance of one of his portfolios.
The high-yield expert, who has delivered gains of 300%-plus during the 15 years to 2011 and currently manages some £20 billion on behalf of retail and institutional investors, provided the three ideas within today's half-year results for Edinburgh Investment Trust (LSE: EDIN).
Mr Woodford said today that "news that the Australian Government had been successful in defending a challenge from the tobacco industry against the introduction of plain packaging had largely been expected, but appeared to act as a catalyst for profit taking in a sector which has performed very strongly over the past few years."
Mr Woodford has been a long-time fan of British American Tobacco (LSE: BATS) (NYSE: BTI.US) and claimed this morning that tobacco shares in general "represent exactly the sort of quality stocks that can deliver attractive profit and dividend growth through a low economic growth environment."
Importantly, Mr Woodford said he did not believe tobacco shares were "valued appropriately" at present. BAT, for instance, offers a potential income of 4.2% at £32 a share, with the dividend forecast to advance a further 10% during 2013.
At the last count, BAT represented 7% of Mr Woodford's Edinburgh trust portfolio.
Mr Woodford had a few words to say about BAE Systems (LSE: BA) this morning. In particular, he reckoned the group's proposed merger with EADS "did not look particularly beneficial to shareholders" and he was no doubt pleased when the deal was called off.
Indeed, Mr Woodford claimed this morning that a standalone BAE "will be a valuable future contributor to the portfolio", which is presumably why the defence contractor's shares still represent 4% of the Edinburgh trust.
Anyone buying BAE shares today at about 300p could be paying just 7 times possible 2012 earnings and be in line for a 6%-plus income. City brokers reckon the dividend could be raised a fraction during 2013 as well.
Finally, Mr Woodford confirmed today that his Edinburgh trust "took advantage of a placing of shares" to increase its investment in Capita (LSE: CPI) during recent months.
He said Capita had issued the additional share capital to allow the company to make further bolt-on acquisitions, and at the time the firm itself said "the current acquisitions environment continues to offer a rare opportunity to broaden the business."
Capita is perhaps not a traditional FTSE 100 (UKX) income share, with a possible yield at a market-average 3.4% available at the 685p Mr Woodford paid in the placing.
However, the outsourcer has a tremendous record of dividend growth -- indeed, the firm's payout has expanded at a 19% average compound rate between 2006 and 2011. So perhaps Mr Woodford is hoping a faster-growing payment can complement some of the other higher-but-slower-growing yields in his portfolio.
Capita currently represents nearly 4% of Mr Woodford's Edinburgh trust.
Other Woodford favourites
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> Maynard does not own any share mentioned in this article.