3 dividend stocks to buy with 5% yields

Rupert Hargreaves takes a closer look at three of his top dividend stocks with yields of more than 5% in different sectors and industries.

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I am always looking for dividend stocks to add to my portfolio. Here are three income stocks, with yields of 5% or more, that I am considering buying. 

Supermarket income

The first company I would buy is the Supermarket Income Reit (LSE: SUPR). With a dividend yield of 5% at the time of writing, the real estate investment trust (REIT) provides an attractive level of income.

The trust does this by investing in a portfolio of commercial property assets, which it then lets out to retailers such as supermarkets. It owns over 50 supermarkets as a mixture of joint ventures and direct investments. 

Supermarket retailers tend to be large companies with substantial profits. They also tend to commit to properties for years. This is why I like Supermarket Income. Its dividends are backed by income from these property assets, occupied by large, wealthy businesses. 

Unfortunately, that does not make the enterprise entirely risk-free. Higher interest rates or a sudden drop in commercial property values could impact the group’s income stream and net asset value. 

Despite these risks, I would buy the company for my portfolio of dividend stocks. 

Asset management

I would also buy the asset manager Premier Miton (LSE: PMI)

This company has gone from strength to strength over the past five years. It made a modest profit of just under £1m in 2016, but this is expected to hit £19m by 2021. 

The asset manager has been focusing on providing a niche offering to customers, which they clearly appreciate. And as profits have expanded, the group has increased shareholder returns. According to City analysts, Premier Miton will support a dividend yield of 5.3% this year. This is just a forecast at this stage. 

As long as the company sticks to doing what it does best, I think its growth will continue, although I will be keeping a close eye on group assets under management to see if they start declining. This could be a sign that the business has begun to lose its way. 

Other challenges the enterprise may face as we advance include competition and market volatility. Both of these challenges could lead investors to pull their assets from its funds. 

A champion of dividend stocks

The final company I would buy for my income portfolio is the utility provider Telecom Plus (LSE: TEP)

With a dividend yield of 5.5% at the time of writing, the stock looks incredibly attractive from an income perspective. Utility companies also tend to be predictable income payers because services such as energy and gas are relatively defensive.

As well as these utilities, Telecom Plus also offers its customers mobile and broadband packages and cashback on certain purchases.

This gives the group a unique offering, which has helped entice customers driving operating profit growth of 5% per annum over the past six years. 

As the utility sector is highly competitive, I will not be taking this growth for granted. The firm’s expansion could also struggle if energy prices rise significantly and customers start moving elsewhere to find better deals. 

Despite these challenges, as dividend stocks go, I think Telecom Plus ticks all the boxes.

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 considered so you should consider taking independent financial advice.

Rupert Hargreaves 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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