It’s been an awful start to the month for Lloyds Banking Group investors.
In an age of low economic growth in the UK — and even lower interest rates — ‘The Black Horse Bank’ hasn’t been a decent pick for those seeking ripping earnings growth for some time now. Instead, it was the promise of big dividends that kept stock pickers piling in.
So news today that Lloyds was one of several banks to cancel dividends has gone down like a bucket of cold sick. Sure, it may help save an economy battered by the coronavirus outbreak. It is estimated that canning shareholder payouts for 2019 and 2020 will boost the banks’ lending capacity by £8bn.
But it’s another disappointing blow for UK investors, individuals who continue to be battered by a steady stream of dividend cuts as firms frantically try to build cash. Estate agents Savills and stockbroker finnCap are another couple of London-listed companies to have just cut dividends.
Share investors clearly need to be on their guard like never before (well recent history at least).
That’s not to say investors should sell everything and run for the hills. Far from it. Indeed, there are many great dividend payers that should continue to thrive in spite of the virus. There are some that could even receive a profits boost from the current difficulties in the global economy.
Take Sylvania Platinum (LSE: SYL) as an example. It’s a producer of platinum group metals (PGMs) like platinum, palladium and rhodium. These are popular safe-haven commodities in times of severe macroeconomic, geopolitical and social unrest like these. This AIM-quoted company should therefore ride the likely rise in metal prices in the months ahead.
Don’t think that Sylvania is just a great pick for the current time, however. Thanks to rising auto emissions standards all over the world, the long-term demand outlook for its product looks pretty robust too. Palladium and platinum are widely used to clean up exhaust fumes in catalytic converters.
So what makes the South African digger such a great pick for income chasers? Well, City analysts are forecasting a 5p per share dividend for the current fiscal year (to June 2020). This results in a mighty 13.1% yield.
And unlike Lloyds, Sylvania has the balance sheet strength to make good on broker projections. It’s so financially robust, in fact, that it followed through on another share buy-back exercise just today. The low-cost producer has zero debt on its books and has the sort of cash flows to make jaws drop. It had a cash balance of $33.8m as of December as a result, up significantly from $20.2m a year earlier.
Whether or not you’ve been burnt by Lloyds’ decision to cut dividends, Sylvania is a great income play for these troubled times.
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Royston Wild has no position in any of the shares mentioned. 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.