It’s been a tough year for investors who rely on dividend stocks for their income. But, as a dedicated income investor, I’ve been keeping track of companies which have kept up their payouts, or quickly restored them.
Today, I want to look at three high-yield dividend stocks I’d buy without hesitation.
This quality business looks cheap to me
Like many big financial firms, Direct Line Insurance Group (LSE: DLG) suspended its dividend payments in April as the coronavirus pandemic escalated.
However, it soon became clear that Covid-19 would only have a limited impact on this motor insurer. After all, most people continued to need their cars, even in lockdown. Direct Line’s policy numbers fell by just 1.7% during the first half of the year, while operating profit was only 3.4% lower.
Having demonstrated the stability of its business, Direct Line declared an interim dividend in August, along with a catch-up payment to make up for the loss of the 2019 final dividend. This provided a chunky cash payout for shareholders — including me — in September.
Direct Line’s share price remains relatively weak and this dividend stock trades on just 11 times forecast earnings. At this level, the shares offer a forecast yield of 8.8% for 2021. I may buy more over the coming months.
Another safe 8% dividend stock?
My next high-yielder is FTSE 100 tobacco stock British American Tobacco (LSE: BATS). Obviously, this business comes with some ethical concerns but, leaving these aside, BATS’ forecast dividend yield of 8.4% looks pretty safe to me.
In recent years, the company’s dividend payouts have been covered comfortably by surplus cash. I expect this to continue. Profits edged higher during the first half of the year and the company’s impressive profit margin edged up to 43.7%.
The only slight risk I can see is that the firm’s efforts to repay debt are making limited progress. Net debt fell by just 2.8% to £44,237m during the first half of this year. BATS could speed up this process if the dividend was cut. However, I think such a drastic decision is unlikely, unless new problems emerge. I’m certainly happy to continue holding this dividend stock.
60% dividend growth in 2020?
Not all businesses have been suffering from falling demand this year. One growth area has been the gold market, where near-record gold prices have supported strong profits growth for miners.
The biggest gold producer listed on the London market is FTSE 100 firm Polymetal International (LSE: POLY). This £8.3bn firm operates in Russia and Kazakhstan, but has been listed on the LSE since 2011 and — in my view — has a solid track record.
An increase in gold production has been timed well to coincide with higher gold prices. Polymetal’s gold output rose by 5% to 1,200,000 ounces during the first nine months of this year. But the firm’s revenue has risen by 26% to $2,019m over the same period.
City analysts expect the firm’s profits to double this year and are forecasting further growth in 2021. A dividend payout of $1.33 per share is forecast for this year, 60% more than last year’s total dividend of $0.82 per share.
At current levels, Polymetal shares offer a forecast yield of 5.8% for 2020, rising to 8.2% in 2021. Although I’m cautious about gold, I’d be happy to buy this dividend stock for my portfolio.
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Roland Head owns shares of British American Tobacco and Direct Line Insurance. 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.