New to investing? 2 high-dividend stocks to buy!

The threat to share investors is rising as the global economy splutters. Here are what I think are two of the best dividend stocks to buy in this climate.

| More on:

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.

Bearded man writing on notepad in front of computer

Image source: Getty Images

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

Severe stock market declines in 2022 have turbocharged dividend yields across the London Stock Exchange. This gives investors a wide variety of top stocks to buy that could significantly boost their returns.

However, things aren’t quite as bright as they appear on the surface. The deteriorating economic landscape means that many of these high-yielding shares will in fact struggle to meet City dividend forecasts.

There are ways that investors can protect themselves, however. This includes finding stocks to buy whose operations remain highly profitable even when economic conditions deteriorate. Finding shares with cash-rich balance sheets and decent dividend cover is another way to avoid dividend disappointment.

2 dividend stocks to buy today

With this in mind, here are two high dividend stocks I’d happily invest my own cash in today.

#1: Topps Tiles

The forward dividend yield at Topps Tiles (LSE: TPT) sits at a market-beating 8%. Its declining share price also means the business trades on a rock-bottom P/E ratio of 6.2 times.

Topps’ share price has collapsed as investors worry about the impact of high inflation on the retailer’s sales. But, so far, the business has remained resilient to these pressures. Latest financials this month showed like-for-like sales up 2.9% in the 13 weeks to 2 July, in line with forecasts.

I’d buy the building products specialist to capitalise on the UK’s bright housing market. I expect sales of its products to remain strong as housebuilding picks up and DIY spending remains robust.

I’d also buy Topps Tiles because of the encouraging steps its taking to build market share. The business hopes to achieve a 20% share by 2025.

Let’s get back to this year’s projected dividend. At 3p per share, it is covered 2 times by predicted earnings, bang on the widely regarded security benchmark. Topps’ strong balance sheet also boosts its ability to pay big dividends (cash and cash equivalents stood at £13.4m as of April).

#2: Central Asia Metals

Like Topps Tiles, commodities producer Central Asia Metals (LSE: CAML) also offers excellent all-round value. As well as providing an 8.2% dividend yield, the firm trades on a P/E multiple of just 5.7 times.

Central Asia Metals is involved in copper, lead and zinc production in Kazakhstan and North Macedonia. And its share price has dropped sharply amid fears over the global economy and falling base metal prices.

I think this provides a great dip-buying opportunity though. I think the copper stock’s share price will rebound sharply when economic conditions recover. I’d also buy Central Asia Metals as demand for its metals from fast-growing industries like electric vehicles and renewable energy looks set to soar.

This year’s projected 18.7p per share dividend is covered 2.2 times by expected earnings. It has also seen a significant uptick in its balance sheet and enjoyed record free cash flow in 2021. I’d buy this high dividend stock today and look to hold it for years.

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.

More on Investing Articles

Investing Articles

Could the JD Sports Fashion share price double in the next five years?

The JD Sports Fashion share price has nearly halved in the past five years. Our writer thinks a proven business…

Read more »

Bus waiting in front of the London Stock Exchange on a sunny day.
Investing Articles

If interest rate cuts are coming, I think these UK growth stocks could soar!

Falling interest could be great news for UK growth stocks, especially those that have been under the cosh recently. Paul…

Read more »

Investing Articles

Are these the best stocks to buy on the FTSE right now?

With the UK stock market on the way to hitting new highs, this Fool is considering which are the best…

Read more »

Petrochemical engineer working at night with digital tablet inside oil and gas refinery plant
Investing Articles

Can the Centrica dividend keep on growing?

Christopher Ruane considers some positive factors that might see continued growth in the Centrica dividend -- as well as some…

Read more »

Smiling family of four enjoying breakfast at sunrise while camping
Investing Articles

How I’d turn my £12,000 of savings into passive income of £1,275 a month

This Fool is considering a strategy that he believes can help him achieve a stable passive income stream with a…

Read more »

Person holding magnifying glass over important document, reading the small print
Investing Articles

2 top FTSE 250 investment trusts trading at attractive discounts!

This pair of discounted FTSE 250 trusts appear to be on sale right now. Here's why I'd scoop up their…

Read more »

Smiling young man sitting in cafe and checking messages, with his laptop in front of him.
Investing Articles

3 things that could push the Lloyds share price to 60p and beyond

The Lloyds share price has broken through 50p. Next step 60p? And then what? Here are some thoughts on what…

Read more »

Young female business analyst looking at a graph chart while working from home
Investing Articles

£1,000 in Rolls-Royce shares a year ago would be worth this much now

Rolls-Royce shares have posted one of the best stock market gains of the past 12 months. But what might the…

Read more »