With inflation now topping 7%, I find the appeal of regular income from dividend shares especially strong. I have been looking for dividend shares to buy and hold in my portfolio. Here are three I would consider purchasing, each with a current dividend yield of 7% or higher.
Legal & General
Shares in insurer Legal & General (LSE: LGEN) have dropped 7% over the past year. Meanwhile, the company has raised its dividend. That means that the Legal & General yield is now a smidgen above 7%.
Will that continue? According to the company, there ought to be annual dividend increases in coming years. In reality, dividends are never guaranteed. Legal & General kept its dividend flat during the pandemic, but at least it did not cancel it like many competitors. But the dividend is always at risk, for example, it could be cut if new insurance pricing rules lead to lower profits.
However, I see no particular reason right now to expect that the company will not deliver on its plan to keep growing the payout. I think long-term support for dividends could come from the business’s large customer base, deep industry experience, and iconic brand. I see the share price pullback as a potential buying opportunity for my portfolio.
Imperial Brands
The tobacco maker Imperial Brands (LSE: IMB) is another income share I would consider buying for my portfolio at the moment.
The positive factors here include a yield of 8.9%, strong cash generation outlook, and a premium brand portfolio that can help support price rises without losing lots of customers. But in the long term, the tobacco market is changing. Cigarette usage is falling and non-cigarette products have so far typically been less profitable. That is a risk for Imperial, as it could hurt revenues. While pricing power can help sustain profits, if sales fall enough then profits may also fall.
That is why the company has been trying to build cigarette market shares in key countries. Its next-generation product development has met with mixed success but over time could help add new revenue streams to compensate for falling cigarette sales. Meanwhile, the company’s large cash flows help support its chunky dividend.
Jupiter Fund Management
One share I have been eyeing for my portfolio lately is fund manager Jupiter (LSE: JUP). I already own some fund and investment managers yielding more than 7%, such as Abrdn and M&G, but Jupiter’s 10% yield beats them both.
The issue here is: how sustainable is it? Like Abrdn, Jupiter has cut its dividend in recent years to make it easier to fund. But the double-digit yield suggests some investors are nervous that it may need to cut it again in future. I do see a risk of customer withdrawals leading to lower profits.
But I also see some positive aspects to the company. It has a large customer base and strong brand that could help it win new business.
Most of the slide in assets under management in the first quarter was down to negative market returns, not customers pulling out money. Indeed, in the institutional business, there was a net inflow of cash. The much larger retail and wholesale business continued to see funds flow out. But if Jupiter can keep its customers, I think profits should remain healthy. That could help support its juicy dividend.