Interest rates of 0.5% arent going to make anyone rich thats why an increasing number of investors are turning to dividend stocks to bolster income.
However, with most investors following the same line of thought, buying shares for income, dividend yields have been depressed. As a result, its becoming hard to build a dividend portfolio with an attractive yield and suitable level of income.
But there are opportunities out there. Here are five companies that all support a dividend yield of more than 5%.
SSE(LSE: SSE), like all utilities, has attracted a significant amount of negative press over the past 12months.
Still, its hard to pass up SSEs attractive dividend yield, which at present levels stands at 5.8%. Management has committed SSE to inflation-linked dividend payout increase for the next few years, so current predictions indicate that the company will support a yield of 6.1% during 2016. The payout is covered around one-and-a-half times by earnings per share.
To help fund the dividend payout, management has decided to sell off a selection of SSEs non-core businesses. Additionally, the group has frozenhousehold electricity and gas prices in Great Britain until at least January 2016, which should help boost customer numbers.
Life insurer and savings provider,Legal & General(LSE: LGEN) currently offers a dividend yield of 4.5%, which is below my 5% threshold. However, City analysts are currently expecting the financial services company to hike its payout by 13% next year, pushing the dividend yield up to 5.1%. Its expected that this dividend payout will be covered one-and-a-half times by earnings per share.
Whats more, along with a 13% hike in the full-year dividend payout, City forecasts indicate that Legal & Generals earnings per share will rise at a rate of 10% per annum for the next two years. So, not only does the company support an attractive dividend yield but it is also growing steadily.
Taylor Wimpey(LSE: TW) is one of the UKs largest housebuilders, and thanks to the UKs booming property market, the company is now a solid income stock.
Taylors management intends to return 250m, or around 7.7p per share to investors during 2015. After taking in to account this cash return current figures suggest that Taylors shares will support a dividendyield of 7% during 2015, nearlydouble the FTSE 100 average of around 3.8%.
As well as this attractive dividend yield, the company only trades at a lowly forward P/E of 8. And for growth investors, Taylors earnings per share are expected to rise 33% next year, which means that the company trades at a PEG ratio of 0.2, indicating growth at a reasonable price.
Motor insurerAdmiral Group(LSE: ADM) has become a dividend champion over the past few years and according to forecasts, this is set to continue. In particular, the City is forecasting that Admiral will support a dividend yield of 7.3% next year.
Unfortunately, some analysts have started to question the sustainability of Admirals payout. The company had to tap reserve funds to pay the dividend in full this year as income from operations fell short of expectations. What really shocked analystswas the fact that the company then decided to borrow 200m in bonds to boost its capital position.Analysts have interpreted the bond issue as a sign that the insurer cannot afford the hefty dividend payout.
Nevertheless, Admirals management has stated that the dividend is safe for the time being, as low rates within the reinsurance market are helping keep the companys costs down.
Embattled high street retailer,Debenhams(LSE: DEB) may seem like an attractive income investment but the companys current dividend yield of 5.3% ishard to ignore. That said, City analysts have pencilled in a small dividend cut next year, a reduction of around 10p is on the cards, although the company will still offer a yield of 4.9%. The payout will be covered at least twice by earnings per share.
Recent declines have left Debenhams shares trading at a forward P/E ratio of 9 and despite issuing a profit warning last year,City analysts believe that the companys trading performance has picked up over the summer months.
The key to success
It’s no secret that dividends are the key to getting rich slowly. However, you need to be careful as not all dividends are created equally and some can be cut at a moments notice (Tesco).
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Rupert Hargreaves has no position in any shares mentioned. The Motley Fool UK owns shares in Tesco. We Fools don’t all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.