3 Of The Best Dividend Stocks That Money Can Buy: Banco Santander SA, Debenhams Plc And Glencore PLC

These 3 stocks could prove to be superb buys for income-seeking investors: Banco Santander SA (LON: BNC), Debenhams Plc (LON: DEB) and Glencore PLC (LON: GLEN)

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With interest rates being at historic lows, dividends continue to be of utmost importance to a great many investors. And the prospects of an interest rate rise seem slim, since the onset of deflation means that the Bank of England would find it incredibly difficult to justify one — even though the UK economy is performing well, the main aim remains price stability.

Furthermore, even if rates do begin to rise within the next year or two, the rate at which they will move upwards is likely to be very, very slow. That’s because policymakers remains fearful of a recession and an economic slowdown, and are likely to err on the side of caution and keep monetary policy as loose as possible for as long as possible.

Top Yields

None of this is helpful for savers or those seeking an income from their cash balances. However, while one door closes, another has opened in the form of dividend-paying shares. In fact, despite the FTSE 100 being close to an all-time high, there remains a number of high quality companies, in several sectors, offering superb yields.

Should you invest £1,000 in IAG right now?

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A notable example is Santander (LSE: BNC) (NYSE: SAN.US). It currently yields 3.3% and, while this may not be among the best yields in the index, the bank took the decision to cut dividends this year in order to increase reinvestment in the business and put itself on a stronger financial footing. A a result, its dividend appears to be highly sustainable and, with a dividend coverage ratio of 2.5 times, there is significant scope for it to increase – especially if, as expected, the global economy continues to offer a positive long term outlook.

Price Falls

While the FTSE 100 has risen close to an all-time high, not all stocks have performed quite so well, and this means that their yields are now highly enticing. For example, Glencore (LSE: GLEN) has seen its share price fall by 46% during the last five years, while Debenhams (LSE: DEB) is still down by 16% since the start of 2013 despite a strong recent run. As such, the two companies offer yields of 4.1% and 3.7% respectively — both of which are better than the 3.5% offered by the FTSE 100.

Looking Ahead

Furthermore, Glencore and Debenhams are expected to increase their shareholder payouts by 7.6% and 3.5% respectively over the course of the next year. This provides investors in the two companies with significant real terms growth in their income at a time when interest rates are showing little sign of moving upwards.

And, with Santander set to increase its dividends by 6.8% next year, all three companies offer a realistic alternative to holding cash, with their improving yields indicating financial health and good value, as well as a growing income for their shareholders.

Pound coins for sale — 31 pence?

This seems ridiculous, but we almost never see shares looking this cheap. Yet this Share Advisor pick has a price/book ratio of 0.31. In plain English, this means that investors effectively get in on a business that holds £1 of assets for every 31p they invest!

Of course, this is the stock market where money is always at risk — these valuations can change and there are no guarantees. But some risks are a LOT more interesting than others, and at The Motley Fool we believe this company is amongst them.

What’s more, it currently boasts a stellar dividend yield of around 10%, and right now it’s possible for investors to jump aboard at near-historic lows. Want to get the name for yourself?

See the full investment case

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Peter Stephens owns shares of Debenhams. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

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