January has flown by, and if you didn’t have a chance to have a sit down and review some good investment opportunities, you’re probably not alone. We’re always ready to help at The Motley Fool so I’ve been on the hunt for some stocks that look attractive from a dividend yield point of view.
Below are three firms that I believe are in the sweet spot.
British American Tobacco
The current dividend yield of British American Tobacco (LSE: BATS) sits at 6.05%. It has long been seen as a staple for income investors, and as my mother would always say to me “if it ain’t broke, don’t fix it”.
Fundamentally, the business is in good shape, with the share price giving double-digit returns over the past year. Critics who said that the firm would become a dinosaur due to the move to e-cigarettes are being proved wrong, with the business actually seeing this move as an opportunity and putting large investment into Vype and Vuse, its two vaping brands.
Only a few weeks ago, the share price was boosted further following confirmation that the firm is complying with all US guidelines for the tightening regulation around vaping. This should allow the company to be agile in keeping up with the shifting sands of the vaping market, avoiding unnecessary fines or a hit to sales.
The well known supermarket chain operator J Sainsbury (LSE: SBRY) continues to be a strong investment for those looking for a large dividend yield as its yield currently sits at 5.53%.
I like this firm at the moment, not only from the perspective of generating income, but also as a play on the UK economy. In my opinion, domestic firms could really outperform peers this year due to the cloud of uncertainty being lifted regarding Brexit. Added to this is a potential rebound in consumer sentiment and demand from any interest rate cut from the Bank of England, which we could see before the summer.
With the share price around the 200p mark (the supermarket chain’s five-year low being around 180p), this could be an opportune time to lock in the yield, especially if you have a similarly bullish outlook for the UK this year and beyond.
As the world’s largest advertising company, the WPP (LSE: WPP) share price is quite sensitive to global sentiment. To this end, the price has lost a fairly large 11% since the start of 2020, with some of this being down to the tragic outbreak of the coronavirus and subsequent sell-off in equity markets. Firms with global exposure such as WPP have been particularly hard hit.
Yet from a dividend yield point of view, a lower share price boosts the yield, and so it currently sits at 6.35%. I think this presents an attractive point to buy in, not just for the income, but also to hopefully gain from share price appreciation over the longer term.
My only word of warning for WPP investors is that of the three firms, it is the most vulnerable to a further price shock if socioeconomic factors flare up even more in the short term. So if you do look to buy in, remember that this investment would be all about holding for the long term.
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Jonathan Smith and The Motley Fool UK have 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.