3 dividend stocks that pay you more than Lloyds does (like this 10% yielder)

Royston Wild looks at three stocks he thinks have much better investment potential than Lloyds Banking Group plc (LON: LLOY).

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.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

Regular readers will know that I’m not exactly Lloyds Banking Group’s biggest cheerleader right now.

I’m not bothered that the FTSE 100 bank last week beat profit forecasts for the third quarter. On an annual basis, pre-tax profits still fell 7% to £1.8bn for the July-September period. And, as the Brexit saga drags the UK economy lower, I’m expecting this downward profits trend to continue.

I’m also not attracted by Lloyds’ near-6% dividend yields for this year. In my opinion, the following dividend heroes instead are in much better shape to deliver stellar long-term earnings growth, stocks whose yields also sail past that of the bank.

The 7%+ yielder

Ibstock’s facing up to some profits pain in the immediate future, thanks to production troubles at its brick-making facilities, problems that City analysts believe will translate into an 11% earnings drop in 2018.

While disappointing, my positive take on the business remains robust, thanks to heaving shortages of bricks in the UK. This imbalance will take an age to remedy and thus I remain confident that Ibstock’s bottom line will surge in the years ahead.

In the meantime, the FTSE 250 firm’s balance sheet is thought to be solid enough to support a 15.3p per share dividend for this year, creating a mammoth 7.1% yield. This, combined with its forward P/E ratio of 11.1 times, makes it a great buy right now.

The 8%+ yielder

I’d also happily buy Stobart Group, despite some near-term troubles here too, as well as its high prospective P/E multiple of 40.4 times.

The FTSE 250 business fell to its cheapest level for 19 months last week on news that losses widened to £18m for the March to August period, from £12m from a year earlier, due to troubles at its civil engineering business.

City analysts may be forecasting an 84% earnings slump in the year to February, but I’m convinced that the longer-term outlook remains strong. At its Energy division, volumes of biomass continue to surge, while rising passenger numbers at London Southend Airport — which jumped 37% in the first half to 838,742 travellers — bodes well for profits at its Aviation arm.

In the more immediate term, Stobart is thought to be robust enough to pay an 18.5p per share dividend for this year, resulting in a chubby 8.6% yield.

The 10% yielder

PayPoint takes the prize, though, for the business with the biggest forward dividend yield of the lot (well, in this article at least). City boffins are anticipating an 84.6p per share reward for the fiscal year ending March 2019, a figure that creates a show-stopping 10% yield.

The small-cap, whose technologies provide a range of retailer services, as well as the capacity for customers to make payments, is expected to record a 1% earnings fall this year. The profits picture is much rosier further down the line, however, as adoption of its retail gizmos takes off across Britain (it remains on course to have its groundbreaking PayPoint One terminals in 12,400 shops by the end of the current fiscal year).

At current prices, PayPoint carries a prospective P/E ratio of 13.4 times. This makes the business an absolute steal, in my opinion.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Royston Wild owns shares in Ibstock. The Motley Fool UK owns shares of PayPoint. The Motley Fool UK has recommended Lloyds Banking Group. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Investing Articles

Could the JD Sports Fashion share price double in the next five years?

The JD Sports Fashion share price has nearly halved in the past five years. Our writer thinks a proven business…

Read more »

Bus waiting in front of the London Stock Exchange on a sunny day.
Investing Articles

If interest rate cuts are coming, I think these UK growth stocks could soar!

Falling interest could be great news for UK growth stocks, especially those that have been under the cosh recently. Paul…

Read more »

Investing Articles

Are these the best stocks to buy on the FTSE right now?

With the UK stock market on the way to hitting new highs, this Fool is considering which are the best…

Read more »

Petrochemical engineer working at night with digital tablet inside oil and gas refinery plant
Investing Articles

Can the Centrica dividend keep on growing?

Christopher Ruane considers some positive factors that might see continued growth in the Centrica dividend -- as well as some…

Read more »

Smiling family of four enjoying breakfast at sunrise while camping
Investing Articles

How I’d turn my £12,000 of savings into passive income of £1,275 a month

This Fool is considering a strategy that he believes can help him achieve a stable passive income stream with a…

Read more »

Person holding magnifying glass over important document, reading the small print
Investing Articles

2 top FTSE 250 investment trusts trading at attractive discounts!

This pair of discounted FTSE 250 trusts appear to be on sale right now. Here's why I'd scoop up their…

Read more »

Smiling young man sitting in cafe and checking messages, with his laptop in front of him.
Investing Articles

3 things that could push the Lloyds share price to 60p and beyond

The Lloyds share price has broken through 50p. Next step 60p? And then what? Here are some thoughts on what…

Read more »

Young female business analyst looking at a graph chart while working from home
Investing Articles

£1,000 in Rolls-Royce shares a year ago would be worth this much now

Rolls-Royce shares have posted one of the best stock market gains of the past 12 months. But what might the…

Read more »