Passive income from dividend stocks form a core part of my strategy. That’s especially true right now with inflation reaching levels not seen in the UK for decades. As a result, I’m looking for shares that will help me negate the impact of inflation on my portfolio.
So here are five high-dividend stocks I’ve bought or am considering buying for my portfolio.
Phoenix Group
Not everyone will have heard of life insurance specialist Phoenix Group, but its owns household names like Standard Life and ReAssure. Buying in at today’s price, I could expect a dividend yield of 7.8%. Better still, the payments are unlikely to decrease in the near future as the dividend was only upped in March. The blue-chip insurer increased the dividend after a bumper year. Cash generation for the year to 31 December 2021 was £1.72bn, well above internal targets of between £1.5bn and £1.6bn.
Passive income stocks: our picks
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Rio Tinto
This FTSE 100 mining giant fell today but has seen impressive growth this year on the back of soaring commodity prices. If I were to buy in today, I could expect a 9.75% dividend yield. Housebuilder Persimmon is the only company on the index to surpass that figure. Rio Tinto is actually expected to be the index’s single biggest dividend payer in 2022, paying out £7.4bn, according to broker AJ Bell. It’s worth noting that Rio Tinto said on Wednesday that iron ore shipments were lower than expected in Q1 and highlighted geopolitical risks to their business, including Chinese lockdowns and Russia’s war in Ukraine.
Direct Line
Direct Line made £343m in post-tax profits in 2021. That wasn’t its best year but the performance led it to increase its dividend. I could expect a hefty 8.9% dividend yield if I bought shares in the company today. Direct Line is also buying back shares. For me that represents a vote of confidence in the company’s operations. The firm has been on a downward trend in terms of its share price and profit data in recent years. However, I’m confident in the long-term profitability of the firm and its sector. The need for insurance isn’t going to disappear overnight.
Persimmon
I think homebuilders are a great place to look for undervalued shares with great dividends. Persimmon is the first on this list and it’s the highest payer on the FTSE 100. Buying in today, I can expect a whopping 10.7%. The shares are trading at 2,200p, a 31% discount compared to this time last year. Inflation, interest rate rises, and the cladding crisis have all weighed on the share price. But I’m confident of the long-term prospects here and think the company will be a good stock to hold.
Barratt Developments
Here’s another housebuilder. Barratt Developments is offering a 5.7% dividend yield. That’s the lowest on this list but still some way above the FTSE 100 average. The dividend is backed by strong performance too. Pre-tax profit rose to £812.2m in 2021, buoyed by a strong property market, up from £491.8m in 2020. The 2021 data is comparable with pre-pandemic figures. The Leicestershire-headquartered firm has maintained a healthy dividend coverage ratio in recent years.
Like Persimmon, further interest rate rises could impact demand for homes and revenue in the short term. But in the long run, I think demand for new homes will only increase.
