With interest rates still at record lows, I’m looking for high-yield dividend shares to buy for my portfolio in 2022.
The three companies I’m looking at each offer an income of at least 7% — double the FTSE 100 average. They’re all stocks I’d be happy to buy today.
This turnaround looks too cheap to me
My first pick is City brokerage firm TP ICAP (LSE: TCAP). This business is the world’s largest interdealer broker. In simple terms, what this means is that its brokers negotiate complex financial trades between other dealers and investors.
Trading profits are affected by market conditions and the continued trend towards electronic trading. To address these challenges, TP ICAP has increased its electronic trading capabilities and expanded into areas such as energy trading and data analytics.
Profits have been inconsistent in recent years, but since 2018, earnings have been trending higher again. Broker forecasts suggest that profits (and the dividend) should continue to rise in 2022.
Investors are still wary about this stock, which has been in turnaround mode for some time. I’ve been following the story and I think tide is turning. In my view, TP ICAP shares may be too cheap for me to ignore.
Consensus forecasts suggest the stock will pay a dividend of 11.6p per share in 2022, giving an 8% dividend yield. I’d buy the shares for 2022.
A direct play on the UK economy
Property group AEW UK REIT (LSE: AEWU) owns a range of commercial property across the UK. Examples include warehouses, industrial units, offices, and retail parks. AEW specialises in smaller properties in locations where it’s able to upgrade buildings and increase future rental income.
AEW’s portfolio means that, in my view, it’s a direct play on the UK economy. This REIT‘s tenants are mostly small and mid-sized UK businesses, operating in domestic markets. Management policy is to pay a fixed dividend of 8p per share each year, which gives a dividend yield of 7% at current levels.
I’m attracted to this stock as an income buy. But there’s still a risk that Covid impacts could lead to a dividend cut. Falling occupancy is another risk — vacancy levels have risen slightly since late 2019.
This FTSE 100 dividend share yields 7.5%
My third choice is FTSE 100 insurance group Phoenix (LSE: PHNX). This little-known business specialises in life insurance and retirement products. Phoenix also recently acquired the Standard Life brand.
Insurance stocks are popular with income investors as they tend to generate plenty of cash for generous dividends. Phoenix is no exception. The company says it’s on target to generate £1.5bn-£1.6bn of surplus cash in 2021. Shareholders are expected to receive around £485m of this through a dividend of 48p per share.
Broker forecasts suggest Phoenix will deliver a similar performance in 2022, giving this stock a dividend yield of 7.5%.
The main risk I can see is that the business will struggle to find new sources of growth. Most of the company’s income comes from mature policies. It’s not yet clear how successful Phoenix will be at attracting new customers with the Standard Life brand.
Despite this risk, Phoenix’s track record gives me confidence in the firm. I’d be happy to add this high-yield dividend share to my portfolio.