Dividend shares can be great ways to acquire a passive income stream. From time to time, I trawl the market indices to find companies that tend to pay high dividends. I’ve found two such firms that have dividend yields greater than 5%. Let’s take a closer look.
Sainsbury
The J Sainsbury (LSE:SBRY) share price has been volatile in recent times. In the last year, it’s down 23.5%, while over the past three months it’s fallen 12%. At the time of writing, the shares are trading at 216p.
The FTSE 100 supermarket firm has an attractive dividend policy. For the year ended March 2022, it paid a total dividend of 13.1p per share. At the time, this equated to a dividend yield of 5.3%. As a potential investor, the prospect of this income stream is attractive. Nevertheless, I’m also aware that dividend policies may be subject to change.
Lately, the business has been responding to the cost-of-living crisis by investing £500m to lower the prices of essential items. This is also part of a plan to match the prices of budget retailers, like Lidl and Aldi.
This move comes amid a report by Kantar, which forecasts that the average annual grocery bill could increase by nearly £400 in 2022. This is higher than previous estimates.
On the other hand, underlying sales fell by 4% during the first three months of 2022, indicating that customers are starting to feel the pinch of higher bills and inflation.
Despite this, investment bank JP Morgan cites the company’s strong cash flow generation as a reason to remain optimistic.
Vodafone
Vodafone (LSE:VOD) shares have been remarkably resilient in the face of recent market sell-offs. Over the past year, the share price is up 9%, while over the last six months it’s gained 12%. At the time of writing, the shares are trading at 128p.
For the year ended March 2022, the FTSE 100 telecommunications firm paid a dividend of ¢9 per share. At that time, this equated to a dividend yield of 6.1%.
For the 2022 fiscal year, revenue increased by 4% to €45.6bn. Much of this is down to its innovative, and cost-effective, 5G rollout.
Of course, I know that what happened in the past doesn’t guarantee anything similar in the future. And the business faces threats from inflation, both in costs and the pressure rising prices puts on customers. Furthermore, the company is operating in a highly competitive environment, which is making it difficult for Vodafone to improve its profit margins.
Yet overall, I think that investing in both of these firms could provide me with a steady income stream from dividends. While they both face threats, the 5%+ yields are too attractive to resist and I’ll be adding both companies to my portfolio soon.
