“Someone is sitting in the shade today because someone planted a tree a long time ago” — Warren Buffett
Investors often start from modest beginnings. But through hard work, persistence, canny decision making and patience, they can become rich.
That’s what dividend investing is all about: carefully choosing companies that are stable and consistently producing earnings year-on-year, and then holding on to these firms, come crises and panics, and slowly collecting and reinvesting those dividend cheques. Then, through the miracle of compounding, the value of your investments increases. You thus get rich, but slowly.
And here I will examine 3 businesses to see if they are the ideal additions to your high-yield portfolio.
Aviva
I’m a big fan of Aviva (LSE: AV) as an investment. In recent years this company has been turned around, having cut costs and renewed its focus on providing high quality financial products that are popular with consumers.
My car is insured through Aviva, and innovations such as the Aviva Drive app, that monitors your driving performance and can give you a discount on your insurance, show the fresh thinking that this firm is bringing to insurance.
It is an international company with operations in the fast growing markets of Asia, and profits are on the up. Eps is predicted to go from 22.30p to 53.81p in 2017. And with the share price off recent highs, the company is very reasonably priced, with a 2016 P/E ratio of 9.48 and a dividend yield of 5.45%.
Amec Foster Wheeler
Amec Foster Wheeler (LSE: AMFW) is an international engineering, project management and consultancy firm that employs more than 40,000 people in 55 countries.
Last year the share price crashed, and now stands at one third of its all time high, because the firm turned to a loss in 2015. Much of Amec’s business is in the oil, gas and mining industries that have been hit hard by falling commodity prices.
But this company also has a substantial clean energy business, particularly solar, that is set to grow further.
That’s why this is an unusual firm, in that it is partly old economy, and part new economy. To succeed in the commodity bear market to come, it will need to move rapidly towards the new economy model.
Yet a forecast 2016 P/E ratio of 8.02, with a dividend yield of 4.88% looks tempting, and this might just be worth a punt.
ICAP
ICAP (LSE: IAP) is a broking company. It is actually a business that is in transition. It is in the process of selling its global hybrid voice broking and information business to Tullett Prebon, subject to regulatory approval. After this transaction has taken place, the remaining firm will trade as NEX Group plc, a focused electronic and post trade group.
So investors will receive shares in rival broker Tullett Prebon as well as NEX Group. With both ICAP and Tullett cheaply priced, I think this will be a good deal for shareholders.
ICAP is certainly at a reasonable 2017 P/E ratio of 17.09, and offers a dividend yield of 5.07%, and I think is worth adding to your income portfolio.