If I had £1,000 that I was looking to invest at the moment, I’d consider splitting it up into three chunks. From there, I’d look to pick the three top dividend shares and invest in each of them. This way, I get to spread my risk around so that my chances of getting some form of income overall is high.
Allocating to the property sector
The first dividend share I’d consider investing in is Barratt Developments (LSE:BDEV). Over the past year, the share price is up 19%. The UK-based homebuilder has benefited greatly from the double-digit percentage house price increase over the past year. However, the business has performed well in its own right, irrespective of house price movements.
For example, I covered the full-year results that were released last month. There was a 36.8% increase in home completions versus the previous financial year, as well as a 3% increase in the gross profit margin. When I consider that the profit margin stands at 21%, it gives me confidence that the business is operating efficiently.
I think the strong finances should enable the dividend to be paid well into the future. It currently has a dividend yield of 4.41%. However, one risk is the correlation to house prices. If we do see a correction in house prices next year, I think the dividend will still be paid but the share price will likely fall.
Making a play on gold
A second company I’d invest a third of my money in is Polymetal International (LSE:POLY). The mining company focuses on gold and silver.
In contrast to Barratt, the share price is actually down 19% over the past year. This is one point that has helped to boost the dividend yield. It currently sits at just over 7%.
The latest Q3 results were steady, but not spectacular. In the nine months through to the end of September, revenue for the year is up 4%. It commented that it is on track to meet production targets for the year. One drag that can be seen on the quarterly results is due to lower commodity prices.
Although this is a risk that I see for this top dividend share, I also see it as a positive. Personally, ahead of a tough winter globally due to Covid-19 and higher energy prices, I think the gold price could rally. I could be wrong here, and a steady winter coupled with higher interest rates could see gold fall.
A sustainable top dividend share
The final stock I’d put £333 into is Phoenix Group Holdings (LSE:PHNX). The insurance company has seen the share price fall 5% over the past year. On the flipside, the current dividend yield is at 7.19%.
The company has a strong focus on the dividend policy for shareholders. In fact, the dividend per share has grown in almost all of the past 10 years. One reason why it can do this is because the nature of the business offers high cash generation. Cash remittances from life companies stood at £872m for the first half of 2021. It’s aiming to have a cash generation target of £1.5bn-£1.6bn for the year.
However, I do need to be careful with the company. The pension policies it buys and manages are exposed to the risk of rising interest rates and a falling stock market, both of which are real risks at the moment.
jonathansmith1 and The Motley Fool UK have 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.