It’s been a tough year for investors who rely on dividend stocks for their income. But, as a dedicated income investor, I’ve been keeping track of companies which have kept up their payouts, or quickly restored them.
Today, I want to look at three high-yield dividend stocks I’d buy without hesitation.
This quality business looks cheap to me
Like many big financial firms, Direct Line Insurance Group (LSE: DLG) suspended its dividend payments in April as the coronavirus pandemic escalated.
However, it soon became clear that Covid-19 would only have a limited impact on this motor insurer. After all, most people continued to need their cars, even in lockdown. Direct Line’s policy numbers fell by just 1.7% during the first half of the year, while operating profit was only 3.4% lower.
Having demonstrated the stability of its business, Direct Line declared an interim dividend in August, along with a catch-up payment to make up for the loss of the 2019 final dividend. This provided a chunky cash payout for shareholders — including me — in September.
Direct Line’s share price remains relatively weak and this dividend stock trades on just 11 times forecast earnings. At this level, the shares offer a forecast yield of 8.8% for 2021. I may buy more over the coming months.
Another safe 8% dividend stock?
My next high-yielder is FTSE 100 tobacco stock British American Tobacco (LSE: BATS). Obviously, this business comes with some ethical concerns but, leaving these aside, BATS’ forecast dividend yield of 8.4% looks pretty safe to me.
In recent years, the company’s dividend payouts have been covered comfortably by surplus cash. I expect this to continue. Profits edged higher during the first half of the year and the company’s impressive profit margin edged up to 43.7%.
The only slight risk I can see is that the firm’s efforts to repay debt are making limited progress. Net debt fell by just 2.8% to £44,237m during the first half of this year. BATS could speed up this process if the dividend was cut. However, I think such a drastic decision is unlikely, unless new problems emerge. I’m certainly happy to continue holding this dividend stock.
60% dividend growth in 2020?
Not all businesses have been suffering from falling demand this year. One growth area has been the gold market, where near-record gold prices have supported strong profits growth for miners.
The biggest gold producer listed on the London market is FTSE 100 firm Polymetal International (LSE: POLY). This £8.3bn firm operates in Russia and Kazakhstan, but has been listed on the LSE since 2011 and — in my view — has a solid track record.
An increase in gold production has been timed well to coincide with higher gold prices. Polymetal’s gold output rose by 5% to 1,200,000 ounces during the first nine months of this year. But the firm’s revenue has risen by 26% to $2,019m over the same period.
City analysts expect the firm’s profits to double this year and are forecasting further growth in 2021. A dividend payout of $1.33 per share is forecast for this year, 60% more than last year’s total dividend of $0.82 per share.
At current levels, Polymetal shares offer a forecast yield of 5.8% for 2020, rising to 8.2% in 2021. Although I’m cautious about gold, I’d be happy to buy this dividend stock for my portfolio.