Stock market conditions are uncertain. The US-China trade war blows hot and cold. Brexit is on the horizon. Environmental concerns are growing. And recent figures suggest the UK economy could be slowing down.
Where should we be putting our cash?
If you want complete safety, you can put your spare money in a Cash ISA. But this is pretty much guaranteed to make you poorer.
I prefer to accept some risk and invest my cash in the stock market, where much higher returns are available. Here are three of my suggestions for dividend shares to buy today.
We can’t manage without this
Shares in oil and gas giant Royal Dutch Shell (LSE: RDSB) have fallen by nearly 10% over the last year. The stock now offers a dividend yield of 6.6%, well above the FTSE 100 average of 4.5%.
City forecasts suggest that this dividend payout should be comfortably covered by earnings and surplus cash this year. So why is Shell stock so cheap?
One reason is this year’s weaker oil price. Another reason is that some investors are avoiding the oil sector due to environmental concerns. They fear that this business could be heading for a long-term decline.
However, all the forecasts I’ve seen suggest that oil and gas will remain important for several decades.
Shell is taking steps to position its business for peak oil demand and a more sustainable future. With the shares trading on 11 times forecast earnings and that chunky 6.6% dividend yield, I think the shares offer good value.
Another essential service
Motor insurers like Direct Line Insurance Group (LSE: DLG) are also out of favour with investors at the moment. The whole sector is struggling with rising repair costs for modern cars.
At the same time, tough competition means that insurers’ ability to increase their prices is limited. Another source of pressure is that government bond yields are extremely low, making it hard for insurers to generate low-risk returns on premium cash.
However, FTSE 100 firm Direct Line is one of the bigger players in this sector and has a track record of stable profitability and generous shareholder returns.
I reckon that this company is well positioned to weather the difficult market conditions.
Broker forecasts put the stock on a forward price/earnings ratio of 10, with a prospective dividend yield of 9.7%. Although I’m not sure the dividend is sustainable at this level, I think Direct Line remains a very attractive buy for income.
I’d bank on this
For more than 150 years, HSBC Holdings (LSE: HSBA) has played a key role in global trade between China and Europe.
The group is going through a challenging period at the moment, thanks to political tensions and the growth of rival Asian banks. Ultra-low interest rates are also making it harder for banks to make money. But I’m confident HSBC will survive these challenges, as it has done before.
In the meantime, I believe that the shares offer a good buying opportunity for long-term investors. At about 600p, the HSBC share price is trading close to its tangible net asset value of 582p. The dividend yield has risen to 6.9%, which looks sustainable to me based on current trading.
HSBC is unlikely to be a rapid growth stock. But if you’re looking for a reliable income, I think it could be good choice.