As the last quarter of 2019 gets under way, I’m looking for FTSE 100 shares with robust dividend yields that are likely to do well in the coming months. Here are my five picks:
Warren Buffet is a big fan of insurance companies. If you also believe that insurance stocks should belong in a diversified portfolio, then you may want to study the fundamentals of Aviva. It is a large, diversified, and highly-rated global insurer. Management has recently provided a realistic roadmap for how the group will drive growth and cash generation in its core markets. And since early September investors seems to be taking notice.
There are various metrics that analysts use to value insurers. Aviva’s trailing P/E ratio stands at 6.7, which compares extremely well with the average P/E multiple of the general insurance industry in Europe. The group’s price-to-book (P/B) ratio of 0.84 also appeals to value investors, with a number under 1.0 indicating a potentially undervalued stock. And the current dividend yield is an eye-popping 7.8%.
For most people, the end of the year means more shopping than usual, both in-store and increasingly online. Therefore, our readers may want to do due diligence on DS Smith, a global packaging company headquartered in London.
The group’s product portfolio includes packaging for consumer products, e-commerce, promotion, transit and industrial packaging. Its dividend yield stands at 4.5% and the shares are expected to go ex-dividend on 3 October. Its trailing P/E ratio of 17 would also encourage me to buy the dips.
The third company on my list is HSBC Holdings. As a global bank, about three-quarters of the group’s profit comes from mostly corporate clients in Asia. Amid continued Brexit uncertainties and US-China trade war rhetoric, 2019 has been a difficult year for most banks, including HSBA.
Yet at this point, most of the negative news is already priced into the share price. The bank’s trailing P/E ratio is about 8.8 and its dividend yield stands at 5.3%. Those value investors who consider buying into the shares are likely to be handsomely rewarded in a few years, I think.
As one of UK’s largest cigarette manufacturers Imperial Brands stock is on the radar of many dividend investors. Its yield is 5.8%. Part of the reason for the high dividend yield is that the share price has not done well over the past several years. The tobacco sector has been hit badly since 2017. And within the past 52 weeks, IMB is down about 15%.
In July, the group announced a new dividend and capital allocation policy as well as plans to boost growth. Going forward, I expect the share price of about 2,000p to act as a floor for the company and its strong brand holdings to continue to the contribute to the balance sheet. Its trailing P/E stands at about 13.
Investors in SSE have faced a nervous first half in 2019. But things may be beginning to look brighter for the group, one of UK’s largest electricity and gas suppliers. It has recently sold its troublesome energy services division, which supplies 5.7m households, to Ovo Energy. And management is likely to use most of the proceeds to reduce debt on the books.
With a trailing P/E ratio of 9.1 and dividend yield of 8.4%, SSE deserves investors’ attention, I feel.
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tezcang has no position in any of the shares mentioned. The Motley Fool UK has recommended DS Smith, HSBC Holdings, and Imperial Brands. 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.