I enjoy searching for high-quality growth stocks to buy and hold for the long term. However, it can also be interesting to seek stocks that pay shareholders a sizeable dividend. Dividends are paid from company earnings and allow shareholders to earn income by merely holding the stock.
I’ve scoured the FTSE 250 index to find three dividend shares with 5%+ yields. A yield is calculated by taking the dividend cover as a proportion of the share price. Why am I adding these firms to my portfolio? Let’s take a closer look.
Dividend share #1: A FTSE 250 asset manager
Jupiter Fund Management (LSE:JUP) is an asset management business operating in the UK, Europe, and Asia.
It most recently had a dividend yield of 6.7%. This equated to dividend cover of around 17.1p per share. The current share price is 195.6p.
For 2021, the company increased profits to £216.7m. This constituted growth of around 21%, year on year, following the pandemic.
Furthermore, the firm’s assets under management increased by around 3%. This gives me confidence given that competitors, like Ashmore, saw assets under management decline over the same period.
However, the business still had net outflows of £3.8bn, showing the continued impact of macro events on client demand.
Dividend share #2: Micro Focus International
Secondly, Micro Focus International (LSE:MCRO) is a software and technology services company. At the time of writing, it is trading at 381.1p.
Its most recent dividend yield was 6.4%, or ¢29 per share of dividend cover. For the year ended October 2021, pre-tax losses narrowed to $517.8m from $2.9bn.
As a potential investor, this gives me confidence that the firm is swiftly recovering from the struggles of the pandemic. It is important to note, however, that past performance is not necessarily indicative of future performance.
Despite this, revenue over the same period dropped by around 5%. This is something I would like to see improve in the near future.
Nonetheless, the business successfully refinanced about $1.6bn of debt on better terms. This should make the company more efficient in the future.
Dividend share #3: Moneysupermarket.Com
Finally, Moneysupermarket.Com (LSE:MONY) is a price comparison website for products like insurance. It currently trades at 171.2p.
It most recently had a dividend yield of 5.4% and dividend cover of 11.71p per share. While this yield is slightly lower than the previous two companies, it is still competitive.
For the three months to 31 December 2021, revenue from its money segment was up 37%, while the travel segment rose 796%, owing to increased international travel.
Many believe that the firm will inadvertently benefit from the cost-of-living crisis, because more people will be using the comparison site to find the best deals to reduce their expenditure.
However, investment bank Barclays reduced its target price from 260p to 220p in April, because it believes there is “more upside on several other stocks”.
Overall, these three companies could provide me with a source of income alongside my growth stocks. In addition, each of the businesses look to be in better shape after the pandemic. I will be buying shares in all three firms soon.
