My February stock picks are dividend yield heroes

At the end of each month, I make time to review the market and pick dividend yielding heroes that will strengthen my portfolio.

Once a month is enough to do a review. It stops me obsessing over minor price changes every day. Instead, I focus on long-term trends that are key to a good investment strategy.

Here are our top picks for February.

Building growth

The fluctuating share price has produced some impressive dividend yield figures persimmon (LSE: PSN), most recently over 16%, but I take a realistic approach in choosing a housebuilder as an investment.

A trading update on 2022 performance said new home completions were up 5% year-on-year, and average sales prices were up 5%.

Group Chief Executive David Finch said this year saw a strong performance, despite “headwinds”. These include supply constraints and a more challenging sales environment, with rising interest rates, mortgage rates, inflation and weaker consumer confidence.

It’s a short-term issue that will weigh on sales moving forward, but he believes long-term demand for new homes remains strong.

I tend to agree, not least because there is a national housing stock shortfall of over one million homes. More homes are needed, and I think this will continue to increase demand in the long term.

Furthermore, I am concerned about future economic challenges already reflected in the share price. Right now, it’s around £14 – less than the lowest it’s been during the pandemic.

There is a risk that the share price may fall again as the housing market cools during 2023. Also, in the global economic crisis of 2008, the dividend yield fell to almost nothing.

However, I believe there are significant long-term gains in stock prices and returns. If it yields a dividend of around 4-8%, based on the current share price, then I’ll be happy.

Digging for diamonds

Back in October of last year, The Motley Fool’s Royston Wild chose Anglo American (LSE: AAL) is a great value stock that he is interested in after the price drop.

He chose well, because the investment at that time would have increased by 30% by now. I think there is still good news to come, especially in terms of a strong dividend yield of more than 5%.

There is risk, as pre-Covid dividend yields were lower. If I look at the 2018 result as a share of the current share price, it will be 2%.

However, I think there are a number of key factors that will drive its growth, with its extensive mining portfolio including desirable commodities, including platinum and diamonds (Anglo American owns 85% of De Beers Group, a global diamond company). It is also involved in crop nutrition.

Key to growth will be Peru’s Quellaveco copper mine, one of the world’s largest undeveloped copper deposits. As production increases, it is expected to increase global production by 10%. This should drive future profits and dividends.