Buying shares that offer a regular dividend payout can be an excellent way to supplement your annual income.
However, not all dividends are created equal, and some payouts are more secure than others.
And it pays to do your research before buying a company for its dividends. Most of the time, when a dividend payout is cut, it is cut without much warning.
Unfortunately, it’s not possible to accurately predict every dividend cut before it happens, but you can reduce the risk of being caught by surprise.
With that in mind, here are five top dividends stocks with payouts that are well covered by income, minimizing the risk of a sudden dividend cut.
Slow and steady
Norcros (LSE: NXR) at present levels, the company’s shares support a dividend yield of 3.4%, and the payout is covered 3.3 times by earnings per share.
Norcros currently trades at a forward P/E of only 8.9 and a 2016 P/E of 8.5. The company’s dividend yield is set to hit 3.6% next year payout cover is expected to remain at 3.3 times.
As the UK’s housing market goes from strength to strength, homebuilders are raking in the cash. Most of this cash is being distributed to shareholders.
Barratt Developments (LSE: BDEV) is a prime example. The company’s shares currently support a dividend yield of 3.9%, and the yield is set to jump to 4.8% next year.
At present, Barratt is trading at a forward P/E of 13.5 and 2016 P/E of 11.5.
The payout is covered twice by earnings per share. Barratt’s earnings per share are set to expand by 18% next year. As a result, payout cover will remain at 2x.
Merchant banking group Close Brothers’ (LSE: CBG) services are in demand. The group’s earnings are set to expand at around 10% per annum for the next two years. Earnings have already doubled since 2010.
At present, Close Brothers is trading at a forward P/E of 13.7 and analysts believe that the company’s shares will support a dividend yield of 3.4% this year. The payout is covered 2.2 times by earnings per share.
Based on current forecasts for growth Close Brothers is trading at a 2016 P/E of 12.3. Next year the company’s dividend yield is set to hit 3.7%, and dividend cover is forecast to remain at 2.2x.
Communications specialist Sepura (LSE: SEPU) has reported rapid earnings growth over the past five years. Although, unfortunately, this has not translated into dividend growth.
Sepura’s earnings per share have risen four-fold since 2011. Further growth is expected in the years ahead.
City analysts believe that Sepura’s earnings per share will grow by 12% this year and then a further 18% during 2016. This kind of growth doesn’t come cheap. Sepura is currently trading at a forward P/E of 21.7.
What’s more, Sepura’s dividend yield of 1.4% leaves much to be desired. However, as the dividend payout is covered 3.6 times by earnings per share, it looks to be one of the safest around.
In my opinion, Bank of Georgia (LSE: BGEO) is one of the market’s most fascinating companies.
A holding company for Georgia’s largest bank by assets, as well as healthcare assets and a property portfolio, Bank of Georgia, is no ordinary bank.
Management is targeting a growth rate of 20% per annum. If this can be achieved, the bank is set to become a top growth stock.
Analysts are forecasting earnings per share growth of 23% for 2016. And based on current projections Bank of Georgia is trading at a 2016 P/E of 7.5.
Further, at present the bank’s dividend yield stands at 3.9% and the payout is covered 2.8 times by earnings per share. Analysts’ figures predict that the bank will support a yield of 4.8% during 2016.
Markets around the world are reeling from the coronavirus pandemic…
And with so many great companies trading at what look to be ‘discount-bin’ prices, now could be the time for savvy investors to snap up some potential bargains.
But whether you’re a newbie investor or a seasoned pro, deciding which stocks to add to your shopping list can be daunting prospect during such unprecedented times.
Fortunately, The Motley Fool is here to help: our UK Chief Investment Officer and his analyst team have short-listed five companies that they believe STILL boast significant long-term growth prospects despite the global lock-down…
You see, here at The Motley Fool we don’t believe “over-trading” is the right path to financial freedom in retirement; instead, we advocate buying and holding (for AT LEAST three to five years) 15 or more quality companies, with shareholder-focused management teams at the helm.
That’s why we’re sharing the names of all five of these companies in a special investing report that you can download today for FREE. If you’re 50 or over, we believe these stocks could be a great fit for any well-diversified portfolio, and that you can consider building a position in all five right away.
Rupert Hargreaves owns shares of Norcros. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.