As FTSE 100 companies are becoming more confident about their prospects, dividends are rising. This makes it a good time for me to make income investments. Not only because I think there is a likelihood that dividends can rise even further over time, but also because stock markets are buoyant. So there is an opportunity to earn a higher passive income but also make capital gains. Here are three such stocks.
#1. Imperial Brands: surprising share price growth
Consider the example of the FTSE 100 tobacco biggie Imperial Brands (LSE: IMB). It had one of the highest dividend yields even before the pandemic, but its share price was in almost free-fall for years before that. Something has shifted for it now. Its share price has actually risen by 12.5% over the past year. And it has a huge dividend yield of 8.9%.
It is possible that its share price will not increase consistently. Maybe it has risen only because it fell too far in last year’s crash and is still making its way up. Moreover, its structural issues persist. Some consumers are shifting away from smoking and smoking alternatives face policy roadblocks, leaving its future uncertain.
Still, I think there is merit to considering it. As long as its share price does not fall dramatically, I can be a net gainer just because of my passive income from it.
#2. Persimmon: an unexpected dividend stock
Housebuilder Persimmon is another stock with a high dividend yield of 8.2%. Because of supportive policy measures, last year turned out to be hugely positive for property companies as housing markets boomed. FTSE 100 real estate companies have reported robust updates, and these include Persimmon. Its share price rallied until a month or so ago, but even after falling a bit, it still remains elevated.
I think there is a risk to the stock, because the property markets can slump after the stamp duty holiday is fully withdrawn. If the economy does not pick up as expected, this will be even more so. As a result, 2022 may not be as kind to it as the past year has been. I will be on the lookout for developments on these, but for now, this is a good income stock for me to buy.
#3. Evraz: rewarding FTSE 100 stock
The FTSE 100 miner and steel producer Evraz is another rewarding stock, and not just in terms of income, which is at around 6% right now. But the even better part about it is that its share price has more than doubled in the last year.
Proposed taxes by Russia on exporters could impact it negatively. Moreover, metal prices have been buoyed by strong Chinese demand. If that slows down, and infrastructure creation in the US takes time to kick in, commodity exporters like Evraz can be impacted. However, these risks may not play out and it could continue to be a good stock for me to hold, like it has been in the past year.
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Manika Premsingh owns shares of Evraz. The Motley Fool UK has recommended Imperial Brands. 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.