Regular readers of my articles will know that, unlike many investors on the hunt for chubby dividend yields, I am far from convinced to invest in Lloyds Banking Group.
As I noted last time out, the threat created by the slowing UK economy concerns me greatly and I feel that the FTSE 100 bank might not be able to keep delivering the terrific earnings and thus dividend growth of recent years.
Throw a spike in PPI provisions into the equation, and suddenly Lloyds’ 5%+ yields look a little less convincing. In my opinion there’s plenty of better Footsie-quoted income stocks to choose from, including the two I mention here:
A golden selection
A recent downdraft in gold prices has obviously been mirrored by a decline in the share value of precious metals diggers like Randgold Resources (LSE: RRS).
This is a great buying opportunity, in my opinion. There’s no shortage of macroeconomic and geopolitical drivers at the moment that could send bullion prices skywards again, from President Trump’s escalating trade wars and muddled Brexit negotiations through to signs of overheated stock markets.
But aside from these positive near-term factors, in the years ahead, gold’s role as an industrial metal as well as an investment vehicle should go from strength to strength as usage in the electronics, healthcare and chemicals segments steadily grows.
Randgold has already proved its mettle (no pun intended) as a great growth dividend stock, the digger having quadrupled shareholder rewards during the past five years.
And with earnings expected to keep rising at an impressive pace — advances of 10% and 14% are forecast for 2018 and 2019 respectively — it should come as no surprise that further impressive progress is anticipated by City brokers.
Last year’s 200 US cents per share dividend is predicted to rise to 293 cents in the current period and again to 399 cents in 2019. Thus this year’s 3.8% yield leaps to a terrific 5.2% for next year.
Gold has been a classic dual-role metal for centuries and I am convinced demand is only set to get bigger. Randgold may be expensive on a forward P/E ratio of 23.3 times but I reckon the miner is still an exceptional buy for long-term investors.
The 6%+ yielder
Legal & General Group (LSE: LGEN) is another big yielder which, thanks to a rich recent history of profits growth, has enabled dividends to grow at a fantastic rate too (65% over the past five years, to be precise).
Though a rare 8% profits dip is predicted for 2018, City analysts still believe the financial giant has what it takes to lift the dividend again. The 16.4p per share payout currently anticipated is up from 15.35p last year and yields a stunning 6.3%.
We can look to Legal & General’s robust balance sheet and surging cash flows as the cause for such optimism. This, combined with an estimated 10% profits rebound next year, leads to expectations of another dividend rise to 17.5p, too, meaning the yield marches to 6.7%.
Right now Legal & General can be picked up on a forward P/E ratio of 9.4 times. Given that demand for the company’s investment products looks dead set to keep on thriving, this reading (not to mention its stunning yields) makes it too good to miss.