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As a veteran value investor, I’m always looking out for dividend stocks that offer high cash yields. Ideally, I look for high-quality, established companies with strong cash flow that share trade at low multiples of earnings and offer market-beating dividend yields.
Here are six high-yielding stocks I’m looking at right now.
Six highest dividend stocks
These six income generating stocks offer some of the FTSE 100 the highest cash yield in the index (for context, the Footsie itself offers a dividend yield of around 3.8% per annum):
| Company | Sector | stock price | 12 month change | Market value | Dividend yield |
| M&G | Asset management | 217.5 pp | +22.0% | £5.1bn | 8.5% |
| Vodafone | Telecommunications | 100.7 p | -16.7% | £27.1bn | 7.7% |
| Imperial brand | Tobacco | 1,988.5 p | +33.8% | £18.5bn | 7.1% |
| British American Tobacco | Tobacco | 3,110.5 p | +4.4% | £69.6bn | 7.1% |
| Rio Tinto | mining | 5,973 pp | -0.8% | £99.8bn | 7.1% |
| Legal & General | Asset management | 263.6 pp | +10.3% | £7.8bn | 7.1% |
As a FTSE 100 company, all of these companies are significant businesses. The smallest, M&Gworth more than £5bn, when the biggest, mega-miner Rio Tintois a nearly £100bn Goliath.
What’s more, these six dividend stocks have had mixed returns over the past 12 months. worst player, The Vodafone Group, has lost six values. Meanwhile, the star player is Imperial brandwhich has seen its share price rise by more than a third in the past year.
Amazingly, four of these six income stocks offer the same (historical) dividend yield of 7.1% annually. Two of these companies – Imperial Brands and British American Tobacco – is a cash-generating business that regularly generates profits, income, and cash dividends.
The next dividend payer on M&G shares is the asset manager, which pays 8.5%. To me, this seems like a worthy reward for the constant risk of owning this ‘boring’ stock.
I already own three of these stocks
My husband bought shares in three of these six companies last year. Today, our family portfolio includes shares in Legal & General Group, Rio Tinto, and Vodafone. We buy these dividend stocks to generate cash, with the goal of holding them for the long term.
I would also buy the remaining three stocks (BAT, Imperial Tobacco, and M&G) for their market-beating dividend payments. However, my wife, who values ESG (environmental, social, and governance) factors in her investment strategy, does not want tobacco stocks in the family portfolio.
Therefore, although British tobacco stocks have been good long-term winners, I have no plans to buy BAT and Imperial Tobacco at the moment. Then again, I’m very interested in M&G as an addition to our portfolio. Indeed, I am looking forward to buying this dividend stock shortly after the new tax year begins on April 6th.
Finally, two warnings. First, future dividends are not guaranteed – they can be cut or canceled at any time. Second, it looks like the UK economy will enter recession this year, which could reduce corporate earnings. But as a dividend investor, I’m in it for the long haul!
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