Surging inflation and rising interest rates mean that I want to maximise the income from my dividend shares portfolio. I’ve been looking for high-yield stocks I could buy that might help my portfolio generate more cash.
Of course, dividends are never guaranteed and stocks are no substitute for cash savings. But the income available from good quality dividend shares is generally much higher than from savings accounts. For me, that makes shares an attractive investment at the moment.
A defensive 6.8% yield
My first choice is British American Tobacco (LSE: BATS). This FTSE 100 tobacco group carries some ethical and regulatory risks, but I think that BATS’ increasing focus on lower-risk products such as vapes goes some way to reducing these concerns.
For now, the reality is that this business is one of the largest in the tobacco sector and enjoys stable profits and strong cash generation. British American generated £7.2bn of surplus cash in 2021, of which £4.9bn was returned to shareholders.
Fortunately, British American was also able to reduce its debt levels by around 10% last year. The group’s leverage has been a concern for me in the past, but I’m increasingly comfortable with the situation.
The BATS share price has risen by nearly 25% so far in 2022, but the stock still offers a generous 6.8% dividend yield. With the shares trading on less than 10 times forecast earnings, I’d be happy to add British Americanto my portfolio at current levels.
Dividend shares: a property pick
I’m a fan of using real estate investment trusts (REITs) to generate a property income from my share portfolio. One UK REIT I’ve been following for a while is NewRiver REIT (LSE: NRR).
NewRiver owns regional retail property around the UK. The company’s sites are typically local or regional retail parks, and shopping centres in small and mid-sized towns.
It’s been a difficult few years for the group. Even before the pandemic, conditions were tough for retail landlords. To add to NewRiver’s problems, it had too much debt, in my view.
CEO Allan Lockhart now seems to have pulled off a difficult turnaround. He’s sold a number of properties, cut debt, and restored the dividend. Occupancy in NewRiver’s remaining portfolio is over 95%, and new rental rates are rising.
NewRiver still has a few problem sites. But the shares offer a forecast yield of 7% and I believe the business is now on a sound footing. I’d be happy to buy this dividend share for extra income.
A safe 8% yield?
Insurer Chesnara (LSE: CSN) buys life insurance and pension policies from other companies, and runs them to maturity.
This specialist business model generates plenty of cash, most of which Chesnara returns to its shareholders. As a result, this insurer is currently one of the highest-yielding stocks on the London market, with a forecast yield of 8%.
One risk I can see is that Chesnara could gradually run out of new acquisition opportunities. The business might then go into decline unless management pursued a new strategy.
However, there’s no sign of this yet, and a 17-year track record of dividend growth gives me confidence in Chesnara’s experienced management. I own plenty of insurance stocks already, but if I was buying an insurer today, Chesnara would definitely be on my shortlist.