The Motley Fool

Two 6% dividend stocks I’m happy to buy and forget

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

Stack of new bank notes
Image source: Getty Images.

With a dividend yield of 6.8% at the time of writing, shares in Marston’s (LSE: MARS) look to be the perfect income investment. However, while this market-beating yield might look attractive, it’s sending a warning to investors that the market doesn’t believe the payout is sustainable. Is that the case? 

Robust trading

Over the past 12 months, shares in Marston’s have taken a beating as investors became concerned about the group’s trading outlook. Luckily, as it turns out, rather than Brexit-related issues, Marston’s most significant headwind over the crucial Christmas trading period was the weather. 

5 Stocks For Trying To Build Wealth After 50

Markets around the world are reeling from the coronavirus pandemic… and with so many great companies trading at what look to be ‘discount-bin’ prices, now could be the time for savvy investors to snap up some potential bargains.

But whether you’re a newbie investor or a seasoned pro, deciding which stocks to add to your shopping list can be a daunting prospect during such unprecedented times.

Fortunately, The Motley Fool UK analyst team have short-listed five companies that they believe STILL boast significant long-term growth prospects despite the global upheaval…

We’re sharing the names in a special FREE investing report that you can download today. And if you’re 50 or over, we believe these stocks could be a great fit for any well-diversified portfolio.

Click here to claim your free copy now!

According to today’s trading statement, total group sales for the 16-week period to 20 January 2018 rose 4.9% year-on-year, thanks to the expansion of the pub estate. Like-for-like sales, excluding the impact of two snow-affected weeks, rose 1.1%. Including the effects of the adverse weather, like-for-like sales were down 0.9% in the period. The weather’s impact on comp sales was around 2%, on an unadjusted basis, and management expects this to impact profit for the full-year by £1m. 

Still, despite the snow, today’s update notes that Marston’s had a record Christmas Day with total sales across the firm hitting £4m, 5.4% higher than last year. And looking ahead, management is confident that customers will return to its premises while efforts to contain costs will help keep margins stable. 

The payout looks safe 

All in all, despite the decline in Marston’s share price over the past 12 months, it seems as if the underlying business is continuing to grow, which is great news for income investors. 

Over the past five years, the company has generated an average of £43m per year from operations, including acquisitions and disposals, just enough to cover the average dividend distribution of £40m. For the fiscal year ending 30 September 2017, the group spent more than usual on expansion, meaning that is was the first year in five where cash flow didn’t cover dividend costs. This was mainly a result of the £55m acquisition of the Charles Wells Brewing and Beer Company, although, with a 15%+ return on capital expected from this business in the first year, it looks as if the outlay was not wasted and should complement growth in the years ahead. 

Cash-rich 

Another income stock I’m positive about is Stobart (LSE: STOB). With a dividend yield of just under 7%, this infrastructure and support service business could make a great addition to your income portfolio. 

After selling its investment in Eddie Stobart Logistics, the business is now cash rich and debt free. At the end of August, the group’s net cash had risen to £2.9m from a net debt position of £120.7m in the same period last year. A healthy balance sheet should underpin the firm’s dividend policy as earnings continue to grow. 

City analysts are expecting the company to report earnings per share of 37.4p for the 2018 fiscal year, although this includes the proceeds from the disposal. For 2019, a more conservative figure of 7.9p is projected, which is more than double the 3.7p reported for full-year 2017. 

Even though the company is a dividend champion, its shares are slightly expensive based on its earnings outlook. Specifically, according to estimates for 2019, the shares are trading at a P/E of 33, which might be too costly for some income investors. 

Is this little-known company the next ‘Monster’ IPO?

Right now, this ‘screaming BUY’ stock is trading at a steep discount from its IPO price, but it looks like the sky is the limit in the years ahead.

Because this North American company is the clear leader in its field which is estimated to be worth US$261 BILLION by 2025.

The Motley Fool UK analyst team has just published a comprehensive report that shows you exactly why we believe it has so much upside potential.

But I warn you, you’ll need to act quickly, given how fast this ‘Monster IPO’ is already moving.

Click here to see how you can get a copy of this report for yourself today

Rupert Hargreaves owns no share 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.

Our 6 'Best Buys Now' Shares

Renowned stock-picker Mark Rogers and his analyst team at The Motley Fool UK have named 6 shares that they believe UK investors should consider buying NOW.

So if you’re looking for more stock ideas to try and best position your portfolio today, then it might be a good day for you. Because we're offering a full 33% off your first year of membership to our flagship share-tipping service, backed by our 'no quibbles' 30-day subscription fee refund guarantee.

Simply click below to discover how you can take advantage of this.