Dividend stocks can be a pivotal part of a retiree’s investment strategy, providing a steady stream of income to fund their lifestyle while potentially beating inflation. Yet, when searching for dividend shares to buy, the dividend yield is a key financial metric to consider. While high-yield stocks may seem appealing, it’s essential to also assess the sustainability of dividends and the overall financial health of the company. Here are three dividend shares worth considering that offer yields higher than the FTSE 100 average of 3.6%.
British American Tobacco:
– British American Tobacco (LSE:BATS) may raise ethical concerns due to its industry, but its impressive 7.5% yield is hard to overlook.
– With a low forward P/E ratio below nine and a consistent history of dividend growth, British American Tobacco presents a strong investment case.
– Despite declining smoking rates and increased regulations, the company’s pivot to smokeless products and a projected return to profitability in FY24 show promise for its future growth.
– Commitment to dividend growth in sterling terms and expectations of generating £50bn of free cash flow by 2030 suggest a sustainable dividend strategy.
Legal & General:
– Legal & General (LSE:LGEN) shares offer a massive 8.8% dividend yield, making it a favourite among UK dividend investors.
– The company aims to deliver £5bn in dividends and share buybacks over the next three years, supported by a strong balance sheet and a rising Solvency Coverage Ratio.
– While a low dividend coverage ratio raises concerns, the group’s focus on defence stocks amid geopolitical tensions could be a growth driver for the share price.
Victrex:
– Victrex (LSE:VCT) is a FTSE 250 dividend share with a 6.1% yield, specializing in high-performance thermoplastics.
– Despite recent challenges in trading conditions, the company’s new Chinese factory and its strategic position in the manufacturing industry offer reasons for optimism.
– Vulnerable to economic shocks and Trump’s tariff policies, Victrex’s potential revival through its Chinese market expansion and solid Q1 performance make it a dividend stock worth considering.
In conclusion, when seeking dividend shares for your portfolio, consider a balance of yield, sustainability, and growth potential. Evaluate the company’s financial health, commitment to dividend growth, and its ability to navigate industry challenges to make informed investment decisions.
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