Dividend stocks provide me with a source of passive income with relatively little time taken on my part. And as inflation hits record levels, I’m increasingly looking at dividend stocks to ensure my portfolio can continue to grow ahead of rising prices.
I have a varied portfolio of passive income shares, but today I’m looking at five ultra-high-dividend paying stocks that I’ve got on my watchlist.
Persimmon
Persimmon has the highest dividend yield on the FTSE 100. At today’s price, the yield would be around 11.2%. The strong dividend comes on the back of stellar year for housebuilders but there might be some short-term pain for the industry. Higher interest rates could dampen demand for new homes while Persimmon has had to put aside £75m for dangerous cladding removal. These factors have weighed on the share price. I’d like to see more data on UK property demand before I buy, although I’m bullish on long-term UK property demand.
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Synthomer
Synthomer stock boomed during the pandemic as demand for latex gloves surged. But now the share price has returned to pre-pandemic levels. The group is now going through a period of change, after a recently completed acquisition in the US that created a new adhesives division. There’s also a new chief executive.
Synthomer’s latest trading update reported an “encouraging start to the year”. In a post-pandemic world, you’d imagine that demand for its product will remain strong. Analysts have reinforced this forecast. The firm is also a very attractive passive income option. Based on the company’s latest annual dividend and the current share price, Synthomer has dividend yield of 10.3%. I think this could be a good addition to my portfolio.
Steppe Cement
Steppe Cement isn’t well known, but the Kazakh cement manufacturer currently offers a 10.7% dividend yield. 2021 was a strong year for the company as the Kazakh property market came close to overheating. The market is expected to cool in 2022 but long-term demand should stay strong. One problem is the spread between the buying and selling price for this stock. It’s on my watchlist for now.
Direct Line
Direct Line is a dividend big-hitter. Last year, it made £343m in post-tax profits and raised its basic dividend slightly. At today’s price, the insurer is offering a 9.4% yield. The company recently announced a share buyback which, for me, represents a vote of confidence in future operations.
Regulation changes and fintech entries could hurt Direct Line’s market share and profitability, but with its little red telephone logo, Direct Line a well-known and trusted brand. However, I’d like to see revenue move in the right direction before I buy.
Diversified Energy Company
Diversified Energy Company is a lesser-known gas and oil company focusing on mature wells. It’s the world’s biggest owner of natural gas wells, with over 60,000 in its portfolio. The FTSE 250 company recorded full-year production of 119,000 barrels of oil equivalent per day in 2021, up 19% on 2020. December production rate reached 139,000 barrels per day, up 35% over December 2020. With Brent Crude sitting above $100 a barrel, 2022 could be a good year for DEC if these rates are maintained.
However, it also has to cap its wells which could prove expensive and raises concerns about the long-term profitability of the business.
Currently, the Diversified Energy yield is 9.2%.
