I’m a long-term investor and also a fan of dividend shares that give me regular payments just for holding the shares. As the old adage goes — a bird in the hand is worth two in the bush.
Investing in high-yield stocks can provide a steady income stream and I think this is crucial for my long-term financial security. As I continue to save and invest, I’ve been keeping an eye on FTSE 100 companies that are in defensive or non-cyclical industries that also pay shareholders handsomely.
Here are three stocks that have dividend yields near or above the Footsie 3.6% average that I’m considering buying at the moment.
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High-yield tobacco giant
With a dividend yield of 7.5%, British American Tobacco (LSE: BATS) is one of the highest-yielding stocks in the FTSE 100. The company has a strong track record of returning cash to shareholders, with a consistent dividend payout policy. While tobacco sales may be in decline, the firm is investing in products like vapes and nicotine pouches to deliver future growth.
However, it’s not without risk. While payouts are high, that may be a function of limited opportunities for reinvestment. After all, regulatory risks in terms of government taxes and policy changes, as well as declining traditional cigarette sales, are cause for concern.
Multinational conglomerate
Unilever (LSE: ULVR) is a global consumer goods giant with brands from Dove to Domestos to Cornetto. It tends to deliver relatively steady dividends thanks to its broad product portfolio, which diversifies its earnings.
The stock is currently yielding 3.2%. While that’s not the highest in the market by any stretch, I like its long history of stable payouts. The company has also demonstrated an ability to pass on price increases to consumers, which is a testament to its brand strength and overall strategy.
That said, the company faces margin pressure due to rising input costs and changing consumer preferences. If Unilever struggles to maintain profitability in a high-inflation environment, future dividend growth could slow and impact on yield.
Essential infrastructure provider
National Grid (LSE: NG) is a leading UK energy infrastructure company with an impressive 5.7% yield. I like the essential nature of the services it provides given I am looking to invest through the cycle with a 3- to 5-year minimum time horizon.
However, National Grid does carry a significant debt load as most utilities companies do. That means a ‘higher for longer’ interest environment could hurt overall profitability if it is unable to pass on increases to consumers as anticipated.
One other factor when looking at regulated industries is new regulatory rules. Changes in government and the geopolitical environment can hamper profitability and that could hit future dividends.
Why I’m considering buying
These high-yield dividend shares are just a few that I am considering right now. I think consistent dividend payers can help increase passive income and boost long-term returns.
I currently don’t have the spare funds to invest, but I am interested in adding National Grid shares to my portfolio if its price-to-earnings (P/E) ratio drifts closer to 20 from its current 22.5 level. Outside of these, I’m interested in the pharmaceuticals sector for its defensive qualities given how delicately poised the economy is right now.
