7.2%+ yields! Are these the best dividend stocks to buy right now?

These UK shares offer vast dividend yields of 7.2% and 8.5%! Could they be among the best income stocks for me to buy today?

| 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.

Hand holding pound notes

Image source: Getty Images.

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.

Inflation’s soaring in the UK right now. The consumer price inflation gauge has struck its highest in almost a decade, at 3.2%. Economist consensus suggests it’s going to go much higher too, as supply chain problems worsen and fuel costs soar. Predictions of 4%-plus by the end of the year are now the norm.

It’s clear UK share investors like me need to do their research to make a decent real return in this climate. With this in mind, here are what I think could be two of the best dividend stocks to buy to guard against surging prices.

7.2% dividend yields!

Glencore (LSE: GLEN) is one of the best dividend stocks to buy from the FTSE 100 right now. Not only do yields here sit at an impressive 4.7% and 7.2% for 2021 and 2022 respectively, projected dividends are covered 2.8 times and 1.9 times by anticipated earnings through this period.

Should you invest £1,000 in Direct Line 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 Direct Line made the list?

See the 6 stocks

These are in and around that sought-after reading of 2 times, a level that AJ Bell’s experts describe as “ideal [as] profit is double the amount the company is paying out to shareholders.”  They say that a reading of 2 times or above means a stock “can continue to invest in the business and has scope to maintain its dividend payment in a bad year.”

I think demand for Glencore’s vast range of commodities could fly as the global economy steadily recovers over the next few years. Moreover, I reckon colossal global investment in green technology could supercharge consumption of its metals and minerals and drive profits even higher.

I think the FTSE 100 firm’s a great buy for me, despite the threat posed by a possible crash in the Chinese real estate market to its profits.

One of the best insurance stocks to buy?

I also think Direct Line Insurance Group (LSE: DLG) could be one of the best stocks to buy to protect against runaway inflation. Yields here sit at an eye-popping 8.5% and 8.2% for 2021 and 2022 respectively.

Now Direct Line doesn’t have the sort of impressive dividend cover as Glencore. In fact, projected payouts are barely covered by estimated earnings. However, this FTSE 250 business has considerable financial reserves to call upon to meet these forecasted payouts.

Its strong balance sheet in fact has also encouraged Direct Line to embark on a share repurchase programme. Excellent cash generation during the first half left it with a solvency capital ratio of 195% after dividends and share buybacks, up 4% year-on-year.

I also like the company’s dividend prospects as its operations are ultra-defensive, meaning that earnings are relatively stable during good times and bad. This gives it the confidence to maintain a generous dividend policy, even when the broader economic outlook darkens.

Consumer spending on general insurance remains strong at all points of the economic cycle. And Direct Line is a market leader, thanks to its colossal brand strength. I’d buy this dividend stock, even as climate change threatens to push its costs steadily higher.

AI Revolution Awaits: Uncover Top Stock Picks for Massive Potential Gains!

Buckle up because we're about to dive headfirst into the electrifying world of AI.

Imagine this: you make a single savvy investment in some cutting-edge technology, then kick back and watch as it revolutionises entire industries and potentially even lines your pockets.

If the mere thought of riding this AI wave excites you and the prospect of massive potential returns gets your pulse racing, then you’ve got to check out this Motley Fool Share Advisor report – 'AI Front Runners: 3 Surprising Stocks Riding The AI Wave’!

And here’s the kicker – we’re giving you an exclusive peek at ONE of these top AI stock picks, absolutely free! How’s that for a bit of brilliance?

Get your free AI stock pick

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.

Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has recommended Greencore. 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

Young woman working at modern office. Technical price graph and indicator, red and green candlestick chart and stock trading computer screen background.
Investing Articles

Here’s the Tesco share price forecast for the next 12 months!

Tesco's valuation has dropped to multi-year lows after recent share price weakness. Is now the time to consider buying the…

Read more »

Illustration of flames over a black background
Investing Articles

Just released: March’s higher-risk, high-reward stock recommendation [PREMIUM PICKS]

Fire ideas will tend to be more adventurous and are designed for investors who can stomach a bit more volatility.

Read more »

Investing Articles

I asked ChatGPT for the best FTSE 100 investment trust to buy… here’s what it said

There aren't many FTSE 100-listed investment trusts and according to ChatGPT there’s only one winner. Dr James Fox explores.

Read more »

Investing Articles

How much should investors put in an ISA to achieve the average UK wage in passive income?

Millions of Britons use the Stocks and Shares ISA as a vehicle to build wealth, but a successful investor can…

Read more »

Investing Articles

2 cheap FTSE dividend stocks to consider buying for an ISA

The deadline for using up the Stocks and Shares ISA allowance is almost upon us. Paul Summers has spotted two…

Read more »

Investing Articles

£20k in a Stocks and Shares ISA? Here’s how an investor could target £1,342 in passive income each month

Christopher Ruane explains how a long-term approach to investing a Stocks and Shares ISA could generate a four-figure monthly income.

Read more »

Shot of an young Indian businesswoman sitting alone in the office at night and using a digital tablet
Investing Articles

Millions are missing out on ISA account benefits! Here’s what I’m doing now

Swathes of people are missing the chance to supercharge their returns with a Stocks and Shares or Lifetime ISA account.…

Read more »

Hand flipping wooden cubes for change wording" Panic " to " Calm".
Investing Articles

Here’s my plan to survive and thrive in a stock market correction

A falling stock market can be an opportunity, but investors need a plan. Stephen Wright shares his strategy for taking…

Read more »