Two 5% yielders I’d buy for the new year

Royston Wild looks at a blue-chip dividend hero waiting to make your fortune.

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As the political and economic headwinds battering the UK intensify as we enter the new year, I reckon now could be a great time to buy into brilliant defensive stocks like National Grid (LSE: NG).

The business, like energy suppliers Centrica and SSE, has seen its share price take no little a hammering during the latter half of 2017 as investors have responded to government pledges to put an end to excessive electricity charges.

Whilst I wouldn’t back investment in either SSE or Centrica, however, given a combination of possible price caps and a rising competitive backcloth, I reckon National Grid’s share price fall (it tipped to 27-month lows earlier in December) makes it a compelling dip buy today.

Dividends shooting higher

Of course, the FTSE 100 business is also exposed to the highly regulated environment laid down by Ofgem, and National Grid could find itself in the fallout of any attempts to soothe the pressure on household budgets in the months and years ahead.

Still, I believe that National Grid remains a solid pick for those seeking reliable profits growth year after year. The importance of its wires and pylons does not change regardless of the state of the broader economy, and the company continues to invest heavily each year to expand its asset base (and on both sides of the Atlantic Ocean) to keep earnings on an upward slant.

With earnings expected to edge 5% higher in the year to March 2018 National Grid is predicted to drag the full-year dividend up to 45.6p per share from 44.27p last year. This means that the power play sports a meaty yield of 5.2%.

And expectations of a further 3% earnings improvement in fiscal 2018 drives the dividend projection to 46.8p, in turn nudging the yield to 5.4%.

Get in the fast lane

Motor insurance giant eSure Group (LSE: ESUR) is another monster yielder that could make investors a mint in the new year.

With premiums marching ever northwards, the outlook for the entire car insurance segment is looking pretty rosy. And things are looking particularly peachy for eSure, whose ambitious expansion programme is helping to build its customer base at a tremendous pace (indeed, the number of in-force motor policies jumped 19.6% during July-September, to 1.83m, the biggest quarterly jump since 2013).

As a result, City analysts are expecting eSure to bounce from an anticipated 3% earnings decline in 2017 to punch an 18% bottom-line improvement in the upcoming year. And this is predicted to get dividends marching higher again, too.

In 2017 the insurer is expected to downgrade the full-year dividend to 12.3p per share from 13.5p in the previous period (though share pickers should note that this still yields a formidable 4.7%).

And thanks to next year’s anticipated return to profits growth, eSure is predicted to pay a dividend of 13.6p, meaning that the yield rises to 5.2%.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

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