Three big dividend payers with capital growth prospects

Shares in UK food retailer J Sainsbury tumbled after it cut its dividend. Here are three dividend payers at, or approaching, possible areas of value from a technical perspective.

Vodafone logo
Source: Bloomberg

Berkeley Group Holdings

Dividend Yield: 6.34%

Analyst recommendations: Buy 10; Hold 5; Sell 2

This home developer has been a great long-term investment for anyone lucky to have held shares over the past three years, rising almost 400% in just under eight years. 2016 has seen the firm (and wider market) start on the wrong footing, with the company losing 23% from the December 2015 peak of £37.87.

However, given the long-term trend, another leg higher seems highly likely. The current falling wedge pattern is inherently bullish, marking a countertrend retracement which often provides good opportunity to get into the trend at a more favourable price.

With the shares currently trading at the 200-week simple moving average (SMA), it is clear that a deep pullback of this kind is rare, given price typically fails to retrace enough to reach this indicator. The clear support level of note is £28.08, which represents the high of 2014. Below this, we have the 76.40 Fibonacci retracement at £27.57.

Given the long-term bull market evident over the past eight years, accompanied by a bullish falling wedge, any return to the £28.08 region would seemingly represent a strong ground for upside in the stock. A break back below £24.39 would negate this bullish view.

Vodafone

Dividend Yield: 5.16%

Analyst recommendations: Buy 17; Hold 10; Sell 3

Vodafone has long been an investor favourite owing to its size and stability. The monthly chart shows the volatile period around the 2007-08 financial crisis has given way to a relatively steady uptrend, with the share trading within the lower zone of an Andrews pitchfork. The 50-week SMA has also provided reliable support over recent years. Looking at the stochastic oscillator, the past two occasions that a bullish cross has occurred, it has provided strong buying opportunities.

There have been a number of indecision candles (dojis and spinning tops) in recent weeks, falling into both the 50-week SMA and the pitchfork bottom, suggesting we are going to see a resurgence in Vodafone in 2016. A break back below £1.79 would negate this bullish view.

Tate & Lyle

Dividend Yield: 4.71%

Analyst recommendations: Buy 6; Hold 11; Sell 0

Tate & Lyle has been providing ingredients for the food business since 1921, and its list of products includes sweeteners, starches and corn gluten. There is obvious longevity behind this mature business and it has been able to weather any storms that have come its way.

Its shares rose almost 300% between 2009 and mid-2013, but then fell steadily for the next two years. The stock has regained some ground over the past six months, maintaining a price around the 50-week SMA. The key price here is £6.27, where a breakthrough would provide us with both a new higher high to accompany the recent higher low.

With the 2013 peak some 50% higher than the current price, we could see some substantial gains once the stock gets back on the upward path. The question is when this will happen and the £6.27 level seems crucial to determining just that.

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