2 dividend stocks I’d buy and hold for the next five years

These dividend stocks look to be great buys for the long term.

| 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.

Image: Kingfisher: Fair Use

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.

Every investor loves dividends but finding the market’s best dividend stocks is not easy. That’s why the top ones are worth their weight in gold.

Rank Group (LSE: RNK) is an excellent example. Today the company announced a 12% hike in its full year dividend payout alongside its full year results. For the period, pre-tax profit fell to £79.7m from £85.5m in the year ago period. On an underlying basis, however, pre-tax profit rose because last year’s figures were flattered by a £10m exceptional gain from the disposal of freehold buildings.

The operator of Grosvenor Casinos and Mecca Bingo is struggling to grow in the “challenging” UK retail environment. But the group’s online business is growing rapidly with its digital business reporting 63% growth in operating profit for the year. That’s compared to a 1% fall in like-for-like revenues offline.

Should you invest £1,000 in Kingfisher Plc 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 Kingfisher Plc made the list?

See the 6 stocks

Dividend growth 

It’s Rank’s dividend growth potential that really makes this company a great income stock. For example, the dividend payout is covered 2.1 times by earnings per share leaving plenty of room for growth and flexibility if earnings start to slide. City analysts believe the company will increase its payout further next year to 8.1p giving a yield of 3.6% of current prices.

Over the past four years, management has increased the payout by 59%, and if this trend continues for the next four years, I estimate shares in the company will support a payout of 11.6p by 2022, giving a dividend yield of 5% at current prices. 

With earnings per share of 16.1p predicted for the financial year ending 30 June 2018, even if Rank’s earnings per share do not grow over the next five years, a dividend of 11.6p is still realistic.

Falling sales 

Kingfisher (LSE: KGF) is sliding today after the company reported its second quarter results for the three months to the end of July. Like-for-like sales declined by 1.9%, or by 1.7% in constant currency terms. On a reported basis, total group sales increased 4%. Still, despite these downbeat sales figures management remains confident the company can hit City earnings targets for the next two years as cost-cutting and efficiency savings help improve margins. 

Analysts are projecting a 4% decline in earnings per share for the year ending 31 January 2018, but growth is expected to pick up in the year after with earnings expansion of 15% projected.

Plenty of cash for dividends

Just like Rank, Kingfisher looks to be an attractive long term income stock. The shares currently support a dividend yield of 3.5%, and the payout is covered 2.2 times by earnings per share. The per share payout is projected to rise 12% next year, and if the company hits City growth forecasts as expected, dividend cover will rise to 2.3 times. What’s more, the company had £641m of net cash on the balance sheet at the end of fiscal 2016, adding further support to the payout.

As well as the dividend, management is also returning cash to investors via a £600m share buyback. So far, £368m of this total has already been returned and considering the group’s healthy cash generation, when the current plan is completed I would not rule out further cash returns.

5 stocks for trying to build wealth after 50

The cost of living crisis shows no signs of slowing… the conflict in the Middle East and Ukraine shows no sign of resolution, while the global economy could be teetering on the brink of recession.

Whether you’re a newbie investor or a seasoned pro, deciding which stocks to add to your shopping list can be a daunting prospect during such unprecedented times. Yet despite the stock market’s recent gains, we think many shares still trade at a discount to their true value.

Fortunately, The Motley Fool UK analyst team have short-listed five companies that they believe STILL boast significant long-term growth prospects despite the global upheaval…

We’re sharing the names in a special FREE investing report that you can download today. We believe these stocks could be a great fit for any well-diversified portfolio with the goal of building wealth in your 50’s.

Claim your free copy 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.

Rupert Hargreaves has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

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 »

Investing Articles

Deutsche Bank reiterates Buy rating on 9.6% yielding FTSE 250 stock that was “most shorted in UK”

Our writer investigates why a major broker remains optimistic about a FTSE 250 stock that was once the most shorted…

Read more »

Investing Articles

2 things to remember when stock markets are turbulent

US trade policy has rattled the stock markets in New York, London and elsewhere. Our writer outlines a couple of…

Read more »

Investing Articles

Are Trump’s tariffs a once-in-a-lifetime chance for ISA investors to get rich?

The £20,000 Stocks and Shares ISA limit will reset on 6 April. Smart investors could use current market volatility to…

Read more »

Investing Articles

Here are the latest Persimmon share price and dividend forecasts

Our writer looks at the latest forecasts for the Persimmon share price and considers what level of dividend the stock…

Read more »