Dividend stocks can be a great source of passive income. They can also be used as a way of taking on the battle against inflation.
Many investors will be drawn to the ‘usual suspects’ for their dividend fix, namely FTSE 100 companies. However, I think looking further down the market spectrum can also be a good idea. Here are three less-well-known shares I’d be prepared to buy today.
Liontrust Asset Management
Like many other listed companies, fund manager Liontrust (LSE: LIO) hasn’t had the greatest of starts to 2022. Actually, that’s an understatement. Its share price has now tumbled 24% year-to-date, most likely due to concerns that profits will fall due to people pulling their money out of the market.
Should you invest £1,000 in Prudential right now?
When investing expert Mark Rogers has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets. And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Prudential made the list?
That’s said, it’s still up 34% over the last 12 months. And, of course, the beauty of investing for dividends is that I can take such volatility in my stride so long as the passive income keeps rolling in.
Importantly, Liontrust has consistently hiked its annual payout by a double-digit percentage for many years. Analysts have the company returning 64.1p per share in the current financial year. At today’s share price, that equates to a yield of 4%. It’s also sufficiently covered by profits, making a cut unlikely.
That said, investors need to be aware that the fund management industry is notoriously competitive and there’s always a risk Liontrust may need to cut fees to help retain clients.
Redde Northgate
Redde Northgate (LSE: REDD) provides “mobility solutions and automotive solutions” to businesses. It also strikes me as a great source of dividends.
The £1bn-cap company looks set to return 19.4p per share to holders in FY22, giving a chunky yield of 4.9%. This should help holders to keep up with rising costs. Like Liontrust, the payouts are safely covered by expected earnings. With the exception of 2020, Redde Northgate is also a regular dividend hiker.
The shares aren’t exactly expensive either, changing hands for nine times forecast earnings. That’s despite the company’s value rising 45% over the last 12 months!
I suppose one thing to bear in mind here is that Redde Northgate may need to replenish its fleet of vehicles every now and then. That could end up reducing margins significantly, especially at today’s prices.
Synthomer
Chemicals firm Synthomer (LSE: SYNT) is a final secret stock offering a tempting dividend yield. It’s a leading supplier of aqueous polymers that are used in things such as latex gloves.
Just like the aforementioned asset manager, Synthomer’s share price has been on a downer since the beginning of 2022. In the last 12 months, it’s fallen 22%. On a positive note, this does leave them looking cheap at just seven times expected earnings.
Unfortunately, the dividend is expected to fall by 22% this year. However, I’m including it here for two simple reasons. First, the yield is still expected to be 5%, which is a far more passive income than I’d get from a cash savings account. Second, this payout looks thoroughly secure based on predicted profits.
Similar to Redde Northgate, a risk with Synthomer is that supply chain hold-ups may impede growth. This may explain why the shares have been out of form recently.
Notwithstanding this, the vast majority of brokers covering the company remain positive. This suggests now might be as good a time as any for long-term investors like me to load up.
