3 dividend stocks with 6% yields to buy

This Fool is thinking about buying these dividend stocks for his portfolio, all of which offer dividend yields of 6% or more.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

I think dividend stocks can be a helpful tool for generating income, although as dividends are paid out of company profits, I do not view it as a guaranteed income stream. 

Companies may have to reduce or eliminate their distributions if profits collapse. 

Still, I am comfortable with this level of risk.

Here are three dividend stocks with yields of 6% I would buy today.

Income champion

The first company on my list is the life insurance and pension consolidator Phoenix (LSE: PHNX).

The group’s business model is based on the idea that size is everything. It buys up books of old pension and life insurance policies from other companies and then consolidates them.

Using this approach, Phoenix can reduce costs and generate positive cash flow. Management can then return some of this additional cash flow to investors. 

At the time of writing, the stock supports a dividend yield of 6.8%. That looks extremely appealing to me in the current interest rate environment. The company has scope to acquire more books of business as we advance, which suggests to me the dividend could grow further in the years ahead. 

That’s why I would buy the company for my portfolio dividend stocks today.

However, this stock might not be suitable for all investors because it has a complex balance sheet. A change in interest rates or regulations could reduce the amount of money the company can return to investors. This could force management to cut the dividend.

A champion of dividend stocks

Another company I would buy for my portfolio is the telecommunications giant Vodafone (LSE: VOD). 

This company currently offers a dividend yield of 5.9%. Analysts expect the payout to increase in the next financial year, which could leave the stock with a yield of 6.1%. I should note that this is just a projection at this stage, and the increase is not guaranteed.

Still, I’m excited by the firm’s potential. Vodafone has been investing heavily in its infrastructure over the past few years, which has helped reinforce its position as one of Europe’s largest telecommunications companies. I think this should help underpin the group’s growth as we advance. 

Key risks to the company’s dividend include a need for higher capital spending. This could force management to divert cash away from the payout into new telecoms equipment. The company also has a lot of debt, which could become problematic if interest rates rise. 

Profit growth

The final company I would buy for my portfolio of dividend stocks is steel and iron ore producer Evraz (LSE: EVR). 

The global demand for steel is rising as companies and governments try and spend their way out of the coronavirus crisis. This could lead to rapid profits growth for the group in the year ahead. Based on current growth projections, analysts believe the stock could support a dividend yield of 6.9% in the current financial year.

This enterprise is a bit riskier than the other businesses highlighted above. Its income is linked to economic growth and commodity prices, both of which can be volatile. That’s why the company’s dividend yield is currently so high. Some investors would clearly rather not own Evraz. 

Still, I would buy the company for my portfolio of dividend stocks based on its dividend potential. 

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Rupert Hargreaves has no position in any of the shares 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.

More on Investing Articles

Person holding magnifying glass over important document, reading the small print
Investing Articles

The market is wrong about this FTSE 250 stock. I’m buying it in April

Stephen Wright thinks investors should look past a 49% decline in earnings per share and consider investing in a FTSE…

Read more »

Black father and two young daughters dancing at home
Investing Articles

1 FTSE 250 stock I own, and 1 I’d love to buy

Our writer explains why she’s eyeing up this FTSE 250 growth phenomenon, and may buy more shares in this property…

Read more »

View of Tower Bridge in Autumn
Investing Articles

The FTSE 100 is closing in on 8,000 points! Here’s what I’m buying before it’s too late!

As the FTSE 100 keeps gaining momentum, this Fool is on the lookout for bargains. Here's one stock he'd willingly…

Read more »

Investing Articles

3 ideas to help investors aim for a million-pound Stocks & Shares ISA

The UK has a growing number of Stocks and Shares ISA millionaires, and this plan may be one of the…

Read more »

Illustration of flames over a black background
Investing Articles

2 red-hot UK growth stocks to consider buying in April

These two growth stocks are performing well, but can they continue to deliver for investors through 2024 and beyond?

Read more »

Charticle

Is JD Sports Fashion one of the FTSE 100’s best value stocks? Here’s what the charts say!

The JD Sports Fashion share price remains a wild ride during the first quarter. Could it be one of the…

Read more »

Investing Articles

Could the JD Sports Fashion share price double in the next five years?

The JD Sports Fashion share price has nearly halved in the past five years. Our writer thinks a proven business…

Read more »

Bus waiting in front of the London Stock Exchange on a sunny day.
Investing Articles

If interest rate cuts are coming, I think these UK growth stocks could soar!

Falling interest could be great news for UK growth stocks, especially those that have been under the cosh recently. Paul…

Read more »