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This FTSE 100 stock is yielding 15%! Incredibly, it may even be sustainable

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A good, solid, high-yielding stock is an investor’s dream, and there are plenty of them on the FTSE 100 today.

Here are the two biggest of all, comfortably paying more than 10%. Perhaps surprisingly, they might even be sustainable.

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Evraz shows its steel

Experienced investors will know to be wary of double-digit yields, so how should you approach the enormous 15% payout from Russia’s largest steel producer Evraz (LSE: EVR)?

The share price is down 40% in the last six months, although it is still almost 200% higher than five years ago, against average growth of just 13% on the index. Mining stocks can be volatile, but these movements are extreme.

The recent drop can be traced to moves by Alexander Abramov and other top shareholders to sell around 25.4m shares in March, with little explanation. Investors have also been deterred by falling steel prices, due to global growth fears and shrinking demand from China.

Despite this, my colleague Rupert Hargreaves makes a strong bull case, as the company aims to maximise shareholder returns

As well as being the highest-yielding stock on the FTSE 100, Evraz is also one of the cheapest, trading at just 5.8 times forward earnings. Those earnings look set to fall sharply, with a forecast drop of 44% in 2019, and another 7% in 2020. Despite that, the forecast dividend of 46.57p per share for 2021 is still covered by anticipated earnings per share of 67.14p, giving cover of 1.44. The forecast 2020 yield is 12.1%.

The group, with a market cap of £5.66bn in GBP, generated free cash flow of $692m in the first half of the year, up from $661m in 2018, although lower steel and coal prices slashed net profit from $1.145bn to $344m. The strong Russian steel market, vertical integration and efficiency improvements should all bolster the group. Total debt dropped by $112m to $4.5bn, which is high, but not overwhelming. We may learn more in this Friday’s trading report, but if you want a stonking yield, Evraz could just be worth a closer look. And I’m as surprised as you by that conclusion.

Taylor Wimpey

Building group Taylor Wimpey (LSE: TW) offers the second-highest yield on the FTSE 100, a forecast 11.9%. Cover here is lower at 1.1 times earnings, but again, a double-digit yield doesn’t set alarm bells ringing as it usually would.

Taylor Wimpey, like the rest of the UK housebuilding sector, has been hit hard by Brexit fears, but as no-deal prospects diminish, it could swing back into favour. Its first-half results showed profit before tax dipping only slightly from £301m to £299.8m, while the group boasts net cash of £392m.

There is massive demand for housing and this looks set to continue as the UK population climbs towards 70m, reflected in Taylor Wimpey’s strong order book of more 10,000 homes on 30 June 2019, which is 10% higher than the previous year. Total value: £2.37bn.

There is good visibility on dividends, including a 2020 special worth £360m, or 11p a share, to be paid next July. Next year, dividends are expected to total £610m, or 18.6p per share. Earnings are slowing after a strong run, but that yield is still to buy for.

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Harvey Jones has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. 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.

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