Is 3% an unambitious dividend yield target, when there are bigger ones out there? Well, I’m looking for relatively safe income stocks to buy for the very long term. And some of my favourites look super cheap.
Safety moat
National Grid (LSE: NG.) has a forecast 5% yield. The shares have dropped 10% over the past 12 months, and I smell a buying opportunity.
Some investors are, understandably, nervous about the long-term future for gas distribution. And I see that as probably the main risk.
But gas will be replaced by electricity, won’t it? That’s not going to stop, it will just shift increasingly to renewable sources. And National Grid has that sewn up too.
If we look back at the dividend history here, we see a record of progressive annual increases stretching back for years.
And that’s the big attraction for me. Yes, there will be risks ahead. But the best long-term dividend shares are often those with strong defensive moats. I see one of those at National Grid.
Essentials
Before I examine an even bigger yield, here’s one that might be among the safest stocks ever. I’m talking about Unilever (LSE: ULVR), with a forecast 3.6%.
It’s not one of the biggest yields. But it’s in the region of the FTSE 100‘s long-term average. And I rate Unilever’s dividend as one of the most dependable.
The stock gained during the pandemic. The boost in sales of cleaning and hygiene products wouldn’t have done any harm at all. But the price has since fallen back a bit from 2020’s peaks.
I see another buying opportunity, especially with dividends well-covered by earnings.
We’re having a tough economic time right now. And that’s going to mean less earnings clarity. So we could see some share price volatility as a result. But Unilever is on my long-term buy list.
Addictive
Imperial Brands (LSE: IMB) is the big one, on whopping 7% forecast dividend. It comes after years of share price weakness. Some might choose not to buy on ethical grounds, but I’m only looking at the investment angle here.
The stock has recovered a bit over the past 12 months. But the shares are still lowly rated by the markets. Any further gains would reduce that big dividend yield, so now could be a good time to buy.
The few poor years are likely down to a feeling that tobacco is on the way out as a product. I might be wrong, and the industry might be destined to end.
But I’m just not seeing it. Much of the world still buys cigarettes in their billions, with premium brands still growing. And the move towards newer tobacco-based products is gaining strength.
Analysts see earnings growing in the coming years. I see a cash cow.
Verdict
These all face their individual risks, which investors need to assess for themselves. But I think these three could make a good start to a long-term dividend portfolio. And I rate them all as cheap now.
