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Today I am going to take a look at three dividend stocks with a yield of over 9%. These are three of the highest earnings in the UK market, so I want to make sure these payouts are sustainable.
However, with high inflation and rising interest rates, I want to maximize profits from my portfolio. While dividends are not a substitute for cash savings, they give me useful passive income that I can reinvest in stocks or even withdraw if I need to.
Markets around the world are swaying from the current situation in Ukraine … and with a lot of great companies trading at prices that look “discount”, now may be the time for experienced investors to buy some potential deals.
But whether you’re a novice investor or an experienced professional, deciding which stocks to add to your shopping list can be a daunting prospect in such unprecedented times.
Fortunately, a team of analysts at The Motley Fool in the UK has shortlisted five companies that they believe can still boast significant long-term growth prospects despite global shocks …
We share the names in a special FREE investment report that you can download today. We believe these stocks can be great for any well-diversified portfolio with the goal of building wealth in the 50s.
Five-star yield 11%?
FTSE 100 house builder Persimmon (LSE: PSN) has just announced its first five-star HBF customer satisfaction rating in its history. This suggests that changes made by CEO Dean Finch to improve build quality are working.
Like most of its competitors, Persimmon says demand for new homes is still high. Average selling prices have risen by 2% this year. The company expects to build 4-7% more homes in 2022 than in 2021.
For me, the big uncertainty is whether the UK economy is slowing down – and the housing market. This could put pressure on persimmon profits.
However, I think the book of persimmon orders for £ 2.8 billion and a debt-free balance sheet should provide some protection against that risk.
The company plans to pay a total dividend of 235 pence per share in 2022, giving a projected return of 11%. From what we know today, this payment seems pretty safe to me.
Buy the opposite?
Managing the fund Management of the Jupiter Foundation (LSE: JUP) ended last year strongly: management fees rose 18% and record assets under management of £ 60.5 billion.
Unfortunately, this year the conditions were tougher. In the first quarter, Jupiter’s assets under management fell to 55.3 billion pounds as stock prices fell and customers took the money.
Fund managers tend to suffer in a downturn when investors tend to withdraw cash. Obviously, there is a risk of deteriorating market conditions. However, as a stupid investor, I believe that you need to stay invested and not try to time the market.
Jupiter’s share price has fallen 30% over the past year, but the company still earned 31% of last year’s profits and expects to return to earnings growth in 2023. The projected yield of 9.7% this year should be covered by profits.
I would be happy to add shares of Jupiter to my portfolio today.
Dividend shares I bought earlier
I already have one 9% return. Direct Line Insurance Group (LSE: DLG). Shares of this car and home insurance specialist fell last week after the company said premiums were not keeping up with rising claims costs.
This year also saw the entry into force of new UK rules, which prohibit insurers from offering new customers cheaper rates than customers with an extension. But Direct Line claims their impact is expected, with higher premiums and fewer switching customers.
It seems positive to me. I am also encouraged by the latest investment in technology in the new pricing platform. Direct Line CEO Penny James expects this to boost profits, which are already pretty healthy.
In the end, I expect insurance premiums to rise in line with inflation. At the same time, according to brokers, Direct Line earnings this year should be equal, supporting the payment of dividends of 23.7 pence per share.
Based on these estimates, Direct Line shares could yield 9.9% at current levels.