With inflation growing markedly, high-yielding dividend shares are looking even more attractive to me than normal. Here are three blue-chip shares on my list of dividend shares to buy for my portfolio. Each has a dividend yield of 8%, or higher.
M&G
Asset manager M&G (LSE: MNG) is the first name on my list, currently offering an 8.8% yield. Dividends are never guaranteed, but the firm’s aim is to maintain, or increase, its payout. If it does that, locking in today’s yield could prove to be a lucrative source of passive income for me in future.
The M&G business model is attractive because it manages large sums of money, so even a fairly modest commission can lead to a decent profit. Last year, for example, the company reported an operating profit before tax of £721m. Its post-tax profit was lower than that, due to investment valuation fluctuations.
One risk I see is the possibility of clients withdrawing funds if investment returns are poor. That could hurt M&G’s earnings.
Set against that is a positive recent trend in growing client funds. The company’s long-established reputation and brand name could help it grow its business in coming years. That will hopefully be good news for dividends.
Direct Line
Another company with a well-recognised brand name is the insurer Direct Line (LSE: DLG). It also makes the shortlist of dividend shares to buy now for my portfolio. After a cool investor response to its first quarter results last week, the Direct Line share price looks cheap to me. It has fallen 19% in the past year. After that fall, the yield on these shares has been pushed up to 9.6%.
What could go wrong? Well, recent pricing changes in the insurance industry could be bad for profitability in the industry generally. Direct Line saw its revenues decline in the first quarter by 2.4% compared to the same quarter last year. Even worse, the number of policies in force fell 8.7%.
But I think the business has a strong foundation and believe it can weather the challenges of pricing changes. Its substantial dividend is an incentive for me to buy and hold these income shares for my portfolio.
Imperial Brands
The third name on the list of dividend shares to buy now for my portfolio is tobacco company Imperial Brands. Although the number of cigarette smokers continues to decline in most markets, enough keep puffing to help Imperial generate substantial cash flows. On top of that, its premium brand portfolio gives it pricing power. So it can seek to offset some of the impact of declining cigarette volumes by pushing up prices.
The company cut its dividend in 2020. I am hoping that cut, a debt reduction and new business strategy mean the dividend is now more sustainable than it used to be. That would be good news for shareholders, given Imperial’s 8.4% yield.
Dividend shares to buy now
I like this trio of dividend shares as options for my portfolio for more than just their 8%+ yields. They each have well-recognised businesses that could form the basis of ongoing financial success. That is important because it is what could help them keep paying dividends in future.