19 income stocks - should you buy into all of them?

Dividends can be quite appealing for shareholders, but which companies offer the biggest?

Article updated: 2 October 2018 8:00am Author: Michael Baxter

Talk is that the market is looking a tad frothy, some are drawing parallels with the build-up to 2008. Things may or may not be that bad, but hedging bets never seems to be a bad idea — and investing in high dividend stocks is a possible answer.

I was quite surprised to see how many stocks are paying dividends over six and a half per cent, based on a trailing 12-month yield. Here are 19 of them: BT, Centamin, Centrica, Crest Nicholson Holdings, Dixons Carphone Warehouse, Evraz, Galliford Try, Greene King, Intu Properties, Kier Group, Marston’s Plc, NewRiver REIT, Persimmon, Plus500, RDI REIT, Standard Life Aberdeen, Stobart Group, SSE and Vodafone.

Really big payers:

Of this number, Evras, Plus500, Persimmon, Intu, Centamin, Centrica, Galliford Try, Marston’s Plc and NewRiver REIT, are on course for dividends over seven per cent.

Of these companies, only Evraz has seen shares rise over the last 12 months — clearly dividends are not everything.

The Share Centre gives opinion on FTSE companies and a few others. — It has Vodafone, Marstons and NewRiver REIT as buys.

Buy them all?

Diversification is essential to investing — no one knows anything for sure, I mean that both philosophically (is what we call reality real?) and from the point of view of share tipping. For what it’s worth, I suspect that the world around us, what we call reality, is in fact real. But tipping shares can never be wholly perfect. The key is to be right more often than you are wrong.

Selecting companies on their dividend yield is not a bad start. But when I peruse the list, I can’t help but feel that some companies pay high dividends out of desperation.

The big dividend payers

The biggest dividend payers on the list are Evras and Plus500 — dividends over ten per cent. Evras, a steel and mining company strikes me as risky — it has a lot going for it, but with a focus on Russia and certain former Soviet Union countries, its downside lies with political tensions with the West and boardroom fighting and allegations of corruption. The Share Centre has it as a hold, but the share price history is impressive— with shares confounding critics for years.

Plus500 strikes me as an even bigger risk. It is a financial trading firm concentrating on ‘contracts for difference’ with bitcoin. In short, it applies speculative trading practices to focus on a highly speculative area. As a bitcoin cynic, I have an instinctive aversion, but that may not be a reason to ignore. After-all, the customer’s traders can bet on bitcoin crashing — the risk lies with this particular market place drying up altogether.

House builders and retail

I worry about house builders. I reckon there are strong parallels between the housing market today and in the build-up to 2008.

But the thing about diversification is opening yourself up to different sectors. The Share Centre lists Persimmon as a hold. The Crest Nicholson share price has had a torrid time of late, but is the worse behind it? Related to this sector is Galliford Try, a construction and house building company that has been hit by the recent slowdown in construction.

At face value, Intu operates in an worrisome area — it owns ten of the top 25 shopping centres in the UK. After-all, there is the well publicised crisis on the high street. But how much of the down side is already built into the share price? The merits of this stock boil down to your view of the future of the high street. Perhaps more interesting is NewRiver REIT, a property development company focussing on UK retailing, especially food and shops offering value to consumers.

Leisure

Marstons developed franchise style pubs which focus on higher margin food and drinks. It has plans to expand with new built pubs and accommodation lodges. I am more dubious about Greene King, not sure it has managed to jump with the changes in this market place. Still, since it’s the company behind Ruddles County, it may be worth raising a glass to it.

Tech

What I like about Vodafone is that not only is it a high income payer, it’s one of the companies tipped to potentially do well from 5G — just wish it could provide a better signal to my house.

Other thoughts

There are the classics of course, BT, SSE, Centrica and Dixons. These are well known stocks, some of which, Dixons and BT for example, have had a poor run. Maybe the worst is over — BT could benefit from 5G.

Finally there is one commodity that might do well if we really do suffer some kind of financial crash — whether it is mild or of a 2008 scale. And that is gold. Egyptian gold miner Centamin could be interesting.


These views are those of the author alone and do not necessarily reflect the view of The Share Centre, its officers and employees

Michael Baxter portrait photo
Michael Baxter

Economics Commentator

Michael is an economics, investment and technology writer, known for his entertaining style. He has previously been a full-time investor, founder of a technology company which was floated on the NASDAQ, and a director of a PR company specialising in IT.