I bought these 3 FTSE 350 shares for high dividends!

Earlier this week, I bought these three FTSE 350 for extra passive income. Their dividend yields of up to 13% a year look very tempting to me right now.

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Over the past month, my wife and I have been enthusiastically buying FTSE 350 shares. By and large, we’ve bought value stocks (those with low price-to-earnings ratios and high earnings yields). Also, our aim is to increase the passive income earned by our family portfolio. Thus, we’ve concentrated on buying income shares with high dividend yields.

Three new FTSE 350 shares we now own

We bought these three high-yielding stocks earlier this week. Two are from the FTSE 100, while the third is a member of the mid-cap FTSE 250 index.

CompanyAvivaDirect LinePersimmon
BusinessInsurerInsurerHousebuilder
IndexFTSE 100FTSE 350FTSE 100
Share price398.4p200.1p1,859.5p
52-week high606.58p319.4p2,974p
52-week low341.92p184.55p1,717.5p
12-month change-21.6%-32.8%-35.3%
Market value£11.2bn£2.6bn£5.9bn
Price/earnings ratio47.98.37.6
Earnings yield2.1%12.0%13.2%
Dividend yield7.3%11.3%12.6%
Dividend cover0.31.11.0
*Share prices as at late afternoon Wednesday, 27 July 2022

I’ll review these three FTSE 350 shares, starting with Aviva (LSE: AV). It’s the UK’s #1 provider of general insurance and a major player in life assurance and pensions. It has about 18m customers in the UK, Ireland and Canada, and employs around 22,000 staff. Recent changes to insurance regulations have forced insurers now have to offer fairer premiums to existing customers. This has hit the profitability of UK general insurers, dragging down company profits.

As a result, Aviva shares hover close to their 52-week low. But I see this slump as an opportunity to buy into a large, financially sound business at a reasonable price. What particularly draws me to this FTSE 100 share is its chunky dividend yield exceeding 7% a year. Though this is not covered by trailing earnings, it should be fully covered by 2022’s profits.

Like Aviva stock, Direct Line Insurance Group shares have taken a beating in 2022, having fallen almost a third over the past 12 months. As its market value fell, it was relegated from the Footsie to the FTSE 250. Following this price decline, the dividend yield has jumped above 11% — one of the highest in London. Although this is only just covered by trailing earnings, the insurer recently reassured investors that it has no plans to reduce this cash payout for now. Phew.

A punt on property

The third share we bought for extra income is leading housebuilder Persimmon. Again, a declining share price has boosted the property group’s dividend yield to almost 13% a year. Given that this cash yield is barely covered by earnings, I suspect the FTSE 100 firm will cut this payment eventually. But even if were to be halved, it would still be attractive to me as an income-seeking investor.

Finally, it’s important to note that company dividends aren’t guaranteed, so they can be cut or cancelled at any time. In addition, corporate earnings face strong headwinds in 2022-23, due to red-hot inflation, rising interest rates, slowing global growth and the war for Ukraine. Also, I suspect that a consumer recession might be just around the corner. Nevertheless, I’ll still buy quality shares to hold for the long-term!

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.

Cliffdarcy has an economic interest in Aviva, Direct Line Insurance Group, and Persimmon shares. 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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