The Motley Fool

Yielding 8%+, Are These The Best Income Stocks Around? Game Digital PLC, Direct Line Insurance Group PLC & GVC Holdings PLC

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.

Regular income from dividends can revolutionise a portfolio. They can provide income when the stock market is falling or add the icing on the cake when it’s hitting a new high.

However, trying to find dividend yields that are both above-average and sustainable is difficult. For example, Game Digital (LSE: GMD), Direct Line (LSE: DLG) and GVC Holdings (LSE: GVC) all support dividend yields of more than 8%. But the question is, are these payouts sustainable?

5G is here – and shares of this ‘sleeping giant’ could be a great way for you to potentially profit!

According to one leading industry firm, the 5G boom could create a global industry worth US$12.3 TRILLION out of thin air…

And if you click here we’ll show you something that could be key to unlocking 5G’s full potential...

Heading for a cut 

With a dividend yield of 13%, Game Digital’s shares support one of the best yields on the market. That said, the current payout is only covered 1.3 times by earnings per share and City analysts expect the dividend to be cut by around 40% this year. This forecast is based on the fact that Game’s sales are sliding, and during December the company warned that first-half profits would be around a third lower than the same period last year.

With this being the case, it’s clear that investors shouldn’t rely on Game’s current dividend yield of 13%. Nonetheless, even if the payout is cut by 40%, this will still leave Game’s shares yielding 7.4%. 

A special dividend on the cards?

For the year ending 31 December 2015, Direct Line is set to return 41.5p per share to investors for a dividend yield of 10.7% according to City analysts. Part of this cash return followed the company’s sale of its international insurance arm. Management decided to return the extra cash from this deal to investors by a special dividend. And there’s reason to believe that another hefty special dividend could be on the cards for Direct Line’s shareholders this year.

Specifically, management has stated that it will consider returning excess capital to shareholders when it reports full-year results for 2015 on 1 March. Direct Line has a cash-rich balance sheet and the insurer’s risk-based capital coverage ratio was 155.9% at the end of June. Management is targeting a coverage ratio of 125% to 150%. Anything above that level can be considered to be excess capital, which could be returned to shareholders. Excluding any special payouts, Direct Line’s regular dividend yield is forecast at 5% for this year.

Acquisition to boost profits

Finally GVC Holdings, the controversial gaming company that likes to pay out most of its profits to shareholders. GVC’s five-year average dividend yield is around 10%. However, City analysts expect the company to slash its dividend payout by more than 50% this year following a 23% fall in earnings per share. This lower earnings per share figure is largely to do with the higher number of shares in issue following GVC’s takeover of Bwin.party last year. The lower payout will also mean that the payout cover will increase from 1.3 to 2.3 times.

Over the long term however, this deal should only boost GVC’s earnings. City analysts are forecasting pre-tax profit growth of 100% for the enlarged group this year and the company’s dividend payout ratio should return to its previous level after the two gaming companies have completed their integration.

“This Stock Could Be Like Buying Amazon in 1997”

I'm sure you'll agree that's quite the statement from Motley Fool Co-Founder Tom Gardner.

But since our US analyst team first recommended shares in this unique tech stock back in 2016, the value has soared.

What's more, we firmly believe there's still plenty of upside in its future. In fact, even throughout the current coronavirus crisis, its performance has been beating Wall St expectations.

And right now, we're giving you a chance to discover exactly what has got our analysts all fired up about this niche industry phenomenon, in our FREE special report, A Top US Share From The Motley Fool.

Click here to claim your copy now — and we’ll tell you the name of this Top US Share… free of charge!

Rupert Hargreaves has no position in any shares mentioned. The Motley Fool UK has recommended GVC Holdings. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

Our 6 'Best Buys Now' Shares

Renowned stock-picker Mark Rogers and his analyst team at The Motley Fool UK have named 6 shares that they believe UK investors should consider buying NOW.

So if you’re looking for more stock ideas to try and best position your portfolio today, then it might be a good day for you. Because we're offering a full 33% off your first year of membership to our flagship share-tipping service, backed by our 'no quibbles' 30-day subscription fee refund guarantee.

Simply click below to discover how you can take advantage of this.