Many big companies have suspended their dividends this year. They’re anxious about paying out cash until the outlook for the post-lockdown economy becomes clearer. Despite this, there are still some dividend shares to buy with high yields.
Today I want to look at three stocks with dividend yields over 8% that I’d buy today.
This newcomer has potential
My first pick is FTSE 100 insurance and asset manager M&G (LSE: MNG). This business was spun out of insurer Prudential last year, to allow the Pru to concentrate on its faster-growing Asian business.
The shares have performed poorly so far and currently trade on just seven times forecast earnings.
However, M&G’s legacy life insurance business provides very stable cash flows. Capital generation is expected to total £2.2bn by 2022, most supporting the dividend. Alongside this, M&G aims to generate fresh growth in its asset management business by expanding its product offering and entering new markets.
Unlike some rival firms, M&G maintained its final dividend for 2019 and paid out a total of £410m to shareholders on 29 May.
Analysts expect a similar payout for 2020, giving the stock a forecast yield of around 11%. My analysis suggests this should be achievable. I rate M&G as a share to buy at current levels.
A cash machine
Not everyone is comfortable investing in tobacco stocks. But these ‘sin’ stocks remain highly profitable. They also generate a lot of spare cash, most of which is returned to shareholders.
Although Imperial Brands (LSE: IMB) recently cut its dividend by one third, the new payout still gives the stock a forecast yield of around 9.5%. Although this would normally be a warning sign, I don’t think that’s the case here.
The group’s free cash flow in recent years suggests to me that the new payout will be comfortably affordable. It will also allow Imperial to speed up debt reduction, which I welcome for the greater security it should give shareholders.
This is an old business in a sector that’s facing decline. But it’s one of the biggest players in the market, with a decent brand portfolio and very strong cash generation. For pure income investors, I believe it could make sense to buy shares in Imperial.
A share to buy today?
The largest shareholder of mining and steel group Evraz (LSE: EVR) is Russian billionaire (and Chelsea football club owner) Roman Abramovich. Mr Abramovich owns almost 29% of the company. My sums suggest his dividend payment last year was about $314m.
Perhaps because of its concentrated ownership, Evraz pays out most of its earnings as dividends each year, only retaining the cash it needs to support its operations and service its debt. I’d guess this is what major shareholders such as Mr Abramovich really want.
I’m sometimes cautious about Russian stocks, but Evraz is a FTSE 100 member and also operates in the US. Rightly or wrongly, I think this reduces the risk that political problems will affect this business.
Analysts expect Evraz to pay around $0.40 per share in dividends for 2020, giving the stock a forecast yield of 10%. This payout could vary depending on how the global economy recovers from the COVID-19 lockdown. But I still see this as a share to buy for high-yield investors.
With global markets in turmoil as the coronavirus pandemic tightens its grip, turning to shares to generate income isn’t as simple as it used to be…
As the realities of ‘life under lockdown’ begin to bite, many of the stock market’s ‘go-to’ high-yielding companies have either taken an axe to their dividend pay-outs… or worse, opted to suspended them altogether – for the near-term at least.
With so many blue-chip and mid-cap companies scrambling to hoard cash right now, where are we income investors to turn for decent yields?
Fortunately, The Motley Fool is here to help…
Our analyst has unearthed what he believes could be a very attractive option for income- seeking investors – a company that, in his view, boasts a ‘reliably defensive’ business model, combined with a current forecast dividend yield of 4.2% to boot!*
But here’s the really exciting part…
This business even has form in riding out this kind of situation, too… having previously increased sales and profits back in 2008 and 2009 when the world was gripped in the deepest economic crisis since the Great Depression.
*Please be aware that dividends are variable and not guaranteed.
Roland Head owns shares of Imperial Brands. The Motley Fool UK has recommended Imperial Brands and Prudential. 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.