Are Aviva plc, Direct Line Insurance Group plc and Interserve plc 3 dividend dynamos?

Aviva plc (LON: AV), Direct Line Insurance Group plc (LON: DLG) and Interserve plc (LON: IRV) are 3 companies you should add to your high-yield portfolio.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

It’s time to scan the ranks of the FTSE 100 and FTSE 250 to find the highest yielding shares in the UK stock market. Instead of choosing any and every dividend stock, I have a few criteria that I use to filter these companies.

Firstly, I am avoiding firms that seem to have very high incomes, but are on cyclical downturns. That includes principally commodity companies – oil, gas and mining businesses. Because these are likely to see their earnings, and thus their dividends, tumbling.

I am also steering clear of shares that lack consistency in their profitability, because then the income could be cut at any time. Instead we want companies that are likely to increase the amount of money they make and the amount they return to shareholders.

Should you invest £1,000 in British American Tobacco 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 British American Tobacco made the list?

See the 6 stocks

So here are my current 3 high yield picks.

Aviva

Insurance company Aviva (LSE: AV) was in the wars during the Credit Crunch and the Eurozone crisis, but it has emerged stronger, and highly profitable. It is a global insurer, with businesses in the UK, Europe, Canada and Asia. And it is set to grow earnings steadily over the next few years.

The 2016 P/E ratio is just 9.73, while the dividend yield is a stonking 5.31%, which is well covered by Aviva’s earnings. Eps is set to progress from 21.80p in 2013 to 53.78p in 2017. That is an impressive rate of growth, and the low rating for this firm means this is the ideal time to buy in.

Direct Line

Direct Line Insurance Group (LSE: DLG) is another insurance company, and its Direct Line brand is still one of the most famous in the UK. It was spun out of Royal Bank of Scotland in 2012, and the stock price has been trending upwards since then.

This is a premium insurer, and instead of leaking sales to low cost insurers, it has actually been garnering more business year-on-year. Eps is tracking upwards from 22.58p in 2013 to 29.48p in 2017. The growth has been steady, and it’s been consistent.

What’s more, this is a share that is still reasonably priced, with a 2016 P/E ratio of 13.19 and a 6.86% dividend yield. With so much cash being generated and returned to shareholders, this looks to be a no-brainer investment.

Interserve

The thing about many stock market bargains is that they often appear unannounced and without fanfare. You need to do your own research to unearth these companies.

Interserve (LSE: IRV) is one of those firms. You may never have heard of it (I certainly hadn’t), yet it has impressive investment credentials. It is a support services and construction company valued at nearly half a billion pounds.

The share price has been sliding, yet this is a company that is still hugely profitable. Seeing this immediately flagged up to me that this was a buy.

The eps was 38.20p in 2013, and is expected to increase to 75.78p in 2017. And the fundamentals are cheap, with a 2016 P/E ratio of just 7.25, with a dividend yield of 7.65%.

The important thing to note is that the income seems to be well covered by profits. That’s why this unknown firm is one of the buys of the moment.

5 Shares for the Future of Energy

Investors who don’t own energy shares need to see this now.

Because Mark Rogers — The Motley Fool UK’s Director of Investing — sees 2 key reasons why energy is set to soar.

While sanctions slam Russian supplies, nations are also racing to achieve net zero emissions, he says. Mark believes 5 companies in particular are poised for spectacular profits.

Open this new report5 Shares for the Future of Energy — and discover:

  • Britain’s Energy Fort Knox, now controlling 30% of UK energy storage
  • How to potentially get paid by the weather
  • Electric Vehicles’ secret backdoor opportunity
  • One dead simple stock for the new nuclear boom

Click the button below to find out how you can get your hands on the full report now, and as a thank you for your interest, we’ll send you one of the five picks — absolutely free!

Grab your FREE Energy recommendation now

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.

Prabhat Sakya has no position in any shares mentioned. 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.

More on Investing Articles

Investing Articles

Can the Rolls-Royce share price hit £13 in the coming year?

After a stunning couple of years for the Rolls-Royce share price, can it keep up its recent momentum? This writer…

Read more »

Calendar showing the date of 5th April on desk in a house
Investing Articles

Here’s how a £20k ISA could produce £1,580 of passive income in the next year

A Stocks and Shares ISA stuffed with dividend shares can be a lucrative source of passive income. Christopher Ruane explains…

Read more »

Investing Articles

Prediction: 12 months from now, £5,000 invested in Tesla stock could be worth…

Tesla stock has endured a miserable year so far, falling by 29%. Muhammad Cheema takes a look at how it…

Read more »

Investing Articles

See what £10,000 invested in Tesla shares at their mid-December peak is worth today 

As the world absorbs the full scale of Donald Trump's tariffs, Tesla shares are reeling. Investors who bought the stock…

Read more »

Hand flipping wooden cubes for change wording" Panic " to " Calm".
Dividend Shares

2 ‘safe’ LSE dividend stocks to consider as global markets sell off

As global markets experience high levels of volatility due to economic uncertainty, investors are piling into these ‘safe-haven’ dividend stocks.

Read more »

Investing Articles

US stock market rout: an unmissable opportunity for investors?

His tech-heavy portfolio has been smashed by Trump’s tariffs. However, Dr James Fox believes there could be some opportunities in…

Read more »

Investing Articles

After a 13% ‘Trump tariff’ fall, is the Barclays share price too cheap to miss?

Does the Barclays share price fall mean we should all panic and run screaming from the stock market? Nah, of…

Read more »

Mature Caucasian woman sat at a table with coffee and laptop while making notes on paper
Investing Articles

2 investment trusts to consider for a Stocks and Shares ISA

These two investment trusts have a different focus -- but our writer sees both as worth considering, one more for…

Read more »