With April beginning this week, I have been looking for income-generating ideas on the stock exchange. Here are some high dividend stocks I would consider buying in the coming month, with an eye on holding them for their long-term passive income potential.
Imperial Brands
The tobacco maker Imperial Brands is the owner of Gauloises and Winston among other well-known brands. The company has a large business across dozens of markets. Last year it reported sales of £32.8bn, a little bit higher than the prior 12 months.
Profits after tax came in at £2.9bn. The company generated substantial cash to fund its dividend and the yield is 8.5%. I think the biggest threat to the yield is a decline in cigarette smoking. That could hurt revenues and profits. Imperial has been building a portfolio of non-traditional tobacco products that might help it maintain the dividend even if cigarette sales collapse.
Direct Line
The financial services group Direct Line has a consistently profitable business. Last year, post-tax profits slipped 1% to £446m. That is still sizeable. It reflects the benefits of the company’s iconic brand and large customer base.
The dividend increased by 2.7%. That means the Direct Line yield is now a tasty 8.3%. Inflation could mean claim settlement costs eat into profits. But I would be happy to buy and hold this dividend payer for my portfolio today.
M&G among high dividend stocks I’d buy
Another name on the list of high dividend stocks I would buy for my portfolio is investment manager M&G.
The company’s recognised name helps attract and retain clients. Doing that is important for its profitability and indeed one risk is that if clients move their funds elsewhere, M&G will see lower profits. But last year it managed to increase assets under management.
As with many high dividend stocks, this is a very cash generative business. After a tiny dividend increase last year, the shares yield 8.1%.
Synthomer
With a current yield of 9.7%, chemical company Synthomer looks appealing to add to my ISA. Last year did see a big dividend jump, though, so the prospective yield could well be lower. But I think demand for the sorts of aqueous polymers the company produces is likely to remain high.
After a 34% decrease in the Synthomer share price over the past year, I think now is a buying opportunity for my portfolio. One risk is a global recession hurting profitability. In the depths of the 2009 financial crisis, the shares fell to less than a tenth of today’s price. But from a long-term viewpoint, I like the company’s established business and am attracted by its yield.
Income & Growth Venture Capital Trust
The Income & Growth venture capital trust currently yields 10%. With its model of investing in early stage companies, results and therefore dividends tend to move around a lot. Sometimes the companies perform well, while in other years the trust suffers from its holdings doing badly.
But with a diversified portfolio, proven track record in selecting businesses in which to invest, and a double-digit yield, I would consider adding Income & Growth to my portfolio today.
