In my view only the most courageous, or foolhardy, of investors would consider ploughing into Lloyds Banking Group ahead of 2019.
Time and again I’ve spelled out the risks to Britain’s banks posed by our upcoming European Union withdrawal and in particular a shocking no-deal Brexit.
Some of the tension for Lloyds shareholders, though, was relieved after Bank of England stress tests last week showed that the bank would have the financial strength to withstand a disorderly exit. That said, an environment where loan impairments could spike and a revenues collapse could happen remains very much on the table and as such the financial giant still carries too much risk.
2019 threatens to be another catastrophic year for Lloyds and its share price. I’m happy to therefore ignore its 6% dividend yields and buy into these FTSE 100 big-yielders instead.
Silver star
I believe that Fresnillo (LSE: FRES) is a share that may not just survive, but may spectacularly thrive, over the next year and possibly beyond.
The evolving political chaos in the UK and on the broader continent is not the only issue that stock investors need to be mindful of. A possible resumption of hostilities between President Trump and China on trade; the likelihood of more Federal Reserve rate rises; cooling economic activity in the eurozone and the growth markets of Asia… The list goes on.
There’s clearly plenty to chew over now and keep our nerves on tenterhooks in the coming months (or even years). And in this environment I believe precious metals should remain in strong demand, a scenario that of course plays into the hands of gold and silver producers like Fresnillo. Bullion prices remain stable around $1,230 per ounce and look ready to move higher again.
The near-term production outlook may be mixed — the Footsie firm has upgraded its gold output estimates for 2018 but sliced its silver targets in recent months — but in the longer run, steps to expand production at its world-class Mexican assets also bode well for Fresnillo’s profits outlook next year and beyond.
The 8.6% yielder
City analysts expect the digger’s earnings to rise 8% next year and this supports predictions of a 32 US cent dividend, a figure that yields an inflation-bursting 3%. It’s a great share to load up on today, in my opinion, but if you’re looking for larger yields, you might want to give Direct Line Insurance Group (LSE: DLG) a look instead.
In 2019 a 28.4p per share dividend is expected over at the insurance colossus, a figure that yields a stunning 8.6%. And this is underpinned by predictions of a 4% earnings uplift.
It’s not difficult to see why the number crunchers are so upbeat, either. The pricing outlook for Direct Line’s motor insurance division for next year is robust, and demand for its home insurance and rescue products is also on the rise. The FTSE 100 company is a blue-chip whose share price could properly thrive in 2019 and beyond.
