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Stop saving & start investing! Three 5% dividend stocks I’d buy today

You probably have a cash savings account. These used to be a good way to make money. But with best-buy interest rates hovering around 1.3% these days, making money from cash savings is pretty difficult.

This is why all of my retirement savings are invested in the stock market. My plan is to build a portfolio of dividend stocks that will provide long-term gains and a reliable income when I’m older. Today I want to look at three companies I’d buy for such a portfolio.

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Profit from gold

My first pick is gold miner Centamin (LSE: CEY), which owns the Sukari gold mine in Egypt. As I’ve explained before, I’m not tempted to own gold directly. But I think Centamin has a good track record, with double-digit profit margins and a six-year history of cash-backed dividends.

Management recently fought off a takeover bid from Canadian firm Endeavour Mining. Investors have mixed views on whether Centamin should have engaged with Endeavour, but in my view, the company remains an attractive investment as a standalone firm.

The board plans to declare a total dividend of 10 US cents (approx. 7.7p) for 2019, giving the stock a yield of around 5.8%. I’d expect a similar payout in 2020. In my view, Centamin provides an attractive way to gain exposure to gold, while still enjoying a reliable income. I rate CEY shares as a buy.

Best-in-class pick?

Car insurance firm Admiral Group (LSE: ADM) is a well-known name. But what you may not realise is what an outstanding investment this stock has been. Admiral shares have doubled over the last six years and risen by 840% since the firm’s IPO in September 2004.

Throughout this period, shareholders have also enjoyed generous dividends. These have been made possible by an unusual business model that generates a return on equity of over 50% in most years.

My colleague Rupert Hargreaves recently explained why this business is so unusually profitable. But all you really need to know is that as a general rule, Admiral pays out almost all of its earnings as dividends each year.

Admiral shares currently trade on about 18 times forecast earnings and offer a dividend yield of 5.5%. Given the group’s track record, I think that’s a fair price to pay. I’d be happy to buy the shares for a long-term investment portfolio.

This turnaround yields 5.1%

My final pick is more unusual. FTSE 250 retailer Dixons Carphone (LSE: DC) is the owner of Currys PC World. But the group has faced problems over the last couple of years, mostly relating to its Carphone Warehouse mobile phone business.

With sales of more than £10bn each year, I believe Dixons Carphone is strong enough to survive the threat from online-only retailers such as Amazon. Recent trading has supported this view, with sales of electricals up over Christmas, despite tough market conditions.

CEO Alex Baldock says that a new mobile phone offering is due to launch later this year. This is expected to support a return to profit growth during the second half of 2020.

The market seems to be gaining confidence in Mr Baldock’s plans. The shares have gained 20% over the last six months, but still look affordable to me on 10 times 2020 forecast earnings. With a dividend yield on offer of 5.1%, I continue to rate Dixons Carphone as a buy.

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John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Roland Head owns shares of Dixons Carphone. The Motley Fool UK owns shares of and has recommended Amazon. The Motley Fool UK has recommended Admiral 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.