Last week the oil major Shell decreased its dividend. Given that it hadn’t cut its dividend since the Second World War, this was a rather drastic step. It’s far from the only company whose management has felt this step was necessary.
In a shrinking field of higher-yielding shares, there are some that still stand out as investments which could combine both income and sustainable growth.
Dividend yield benefitting from an up and down market
In a volatile market, there are several reasons to like the shares of the spread-betting company IG Group (LSE: IGG). One is the yield. At 5.8%, it is far higher than the average of the FTSE 250. That is even before many other companies used coronavirus as a way to cut their dividends, often entirely.
Another is that market volatility makes IG Group more profitable as more customers place bets on anything from stock market indexes to commodities to individual share prices.
The company has provided an update to the market that it has seen increased trading volumes and consequently updated its revenue targets. That’s very welcome for investors.
It’s little wonder the shares had a very strong April and have bounced back to past where they started the year. But it’s not something most shares have been able to achieve.
Analysts have been revising up their target prices. I think IG Group shares could well be worth investing in. Especially if markets continue to be volatile.
Made of gold
Given recent market volatility and concerns that the worst might not be over, some investors may think gold-miner Centamin (LSE: CEY) is a sensible investment. I’d agree. Not because I know what will happen next with the gold price or the economy, but because the shares and the yield are attractive irrespective of what happens next.
The shares have a dividend yield of 5.2%, which should be fairly safe as the gold price has been rising. Analysts at Berenberg have recently increased the price target and kept the shares’ ‘buy’ rating.
The analysts also foresee that production will dip in the second quarter, but they reckoned the third quarter should offset this. This means it’s predicted the miner will achieve its guidance of 510koz to 540koz for the year.
The Egypt-focused miner also has a strong balance sheet with $379m (£307m) of cash and liquid assets.
I think Centamin’s shares will do well and at a time when many dividends are being cut. Its dividend looks to be a safer pair of hands. This is why I think the shares are worth investing in.
I expect both of these higher-yielding shares to be able to keep paying out to shareholders, on the proviso that the virus doesn’t impact business for too long.
Centamin relies on the gold price, but as a safe haven that ought to do well when the stock market falls. Even when the market rises, I think it’s a good company and the dividend will be paid to investors.
IG Group likewise benefits in the current market but should do well long-term as well.
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Andy Ross owns no share 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.