The Motley Fool

Should you buy these 3 great dividend stocks in February?

With company results starting to flood in, I reckon smart investors should be looking for those offering strong and reliable dividends. Here are three that are looking tasty:

Attractive odds

Shares in William Hill (LSE: WMH) have lost 32% in the past 12 months, as earnings have failed to impress — EPS fell by 17% in 2015 and there’s a further 14% drop on the cards for the year just ended. Increasing regulatory worries have also dogged the business, and the firm recently told us that 2016 profits are likely to be at the lower end of expectations. But I think we could be looking at an oversold bargain here.

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It can be a cyclical business over the short term, but in the long term our species does seem to have a strange compulsion for throwing money away on gambling — and that’s not going to change.

And on the fundamentals front, William Hill shares are on a P/E of a fairly modest 12, and that would drop as low as 10 by 2018 if forecasts turn out. But the key thing for me is the dividend, which should average around 5% over the next three years, and it should be around twice covered by earnings.

Full-year results are due on 24 February.

Solid as houses

I’ve been going on for ages now about how silly-cheap Taylor Wimpey (LSE: TW) shares became after the Brexit vote, and though the share price has since recovered some of its immediate loss, I’m still seeing a bargain. The worry was that Brexit could trigger a house price fall — but we could have one and our builders would still carry on making oodles of cash to hand out as dividends.

Taylor Wimpey’s year-end trading update, ahead of results due on 28 February, told us of “robust trading despite wider macroeconomic uncertainty“, and said “We expect to deliver full year profitability at the upper end of market consensus“. What that should mean is a rise in EPS of close to 20%. Sure, the big earnings growth of recent years is set to slow, but even more modest expansion would still put the shares on a P/E of under nine by 2018.

And the dividend? Well enough covered, and should come in around 6.7%, with forecasts suggesting as much as 9% by 2018 at today’s share price.

A gamble?

My third pick is quite a risky one, and it’s electronics and security systems specialist Laird (LSE: LRD). Laird shares have slumped of late, after the firm announced a £185m rights issue and scrapped its final dividend for 2016 — and I’m still suggesting Laird as a possible dividend choice after that?

Well, firstly, the firm also said that “the Board intends to resume dividends in 2017 based on a dividend per share that is covered 3x by underlying earnings per share“, and even though we’re now looking at 2016 and 2017 providing cash of less than half 2015’s dividend figure, with the share price having crashed that would still yield around 3.5%.

Now, that’s not an exciting yield, but as a rebased level on which to restart a progressive dividend policy, it’s really not bad at all. And with the City forecasting a return to earnings growth, we could be looking at a decent long-term income play here.

Results should be out on 28 February.

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Alan Oscroft has no position in any shares mentioned. 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.