It looks like 2023 could be a great year for dividend stocks. But those with the biggest yields have been changing. And I think the outlook is better than ever.
Vodafone offers the biggest on the FTSE 100 right now, with a yield over 10.5%. But that’s due to a big plunge in the share price. I’d avoid it for now.
But I see three with yields of 9% and more, which I think could be among the best to buy at the moment.
M&G
The M&G (LSE: MNG) share price has held up in the past year. And it’s only down a bit since the asset manager was spun off from Prudential in 2019.
The way the economy has gone, I see that as pretty good.
Right now, the dividend yield stands at a big 9.7%. Investing £1,000 per year at that rate could net me £16,500 in 10 years. I’d like some of that.
But why aren’t investors piling in and pushing the share price up?
It’s all about that economy thing. There’s a lot less cash free for people to buy shares with now, and that harms the prospects for firms managing investments.
But that should only be a short-term risk, I think. And I see good long-term cash prospects here.
Phoenix
Next comes Phoenix Group Holdings (LSE: PHNX), with a 9.4% dividend yield. Again, I’d say the risks to its sector — insurance — are very similar to the investment business.
This time we do see some share price falls. Phoenix shares are down 10% in the past year, and down 22% over five years.
But that gives us today’s dividend boost, though some folk will fear that the predicted payment might not actually happen.
First-half results won’t be with us until September. So the share price might be a bit volatile in the next few months while we wait.
But so far, City analysts expect to see growing dividends in the next few years.
My verdict? I can see some short-term pain here. But it’s one of my top sectors for long-term gain.
Tobacco
Finally, British American Tobacco (LSE: BATS) is on a 9% forecast yield. The share price had been riding high in 2022, but it’s gone off a cliff again in 2023.
The shares are down 30% over five years. And, the world is turning away from tobacco, isn’t it?
Well, in a June first-half update, the firm predicted 3%-5% revenue growth in 2023. And that’s after the impact of shedding its Russian and Belarusian businesses.
The highlight for me is that the board expects operating cash flow conversion in excess of 90% this year.
Global tobacco volumes look set to dip around 3% in 2023. And there’s long-term risk to the industry, for sure. But British American still looks like a cash cow to me, and I think it could stay that way for a good few years yet.
These three all have their own risks. But I think they could all offer good long-term cash for patient dividend investors.
