Finding an income stock that’s paying a generous dividend is great. And to judge whether it’s truly generous compared to other stocks, I like to use the dividend yield calculation. This also helps because I can compare the yield of a company a year ago versus what it is today. Here are two that have seen their yields shoot up recently.
Greedy when others are fearful
The first company is one that’s very topical right now. Burberry (LSE:BRBY), the luxury goods firm, currently has a dividend yield of 5.11%. This has more-than-doubled from the 2.25% of the same time last year.
Part of the reason for the increase in the dividend yield has come from a falling share price. The stock is down 47% over the past year, with 17% of that coming in just the past month. Earlier this month, the company released a profit warning for the full year. It saw a 7% fall in revenue in the key holiday trading period versus the prior year.
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Granted, these points are risks to owning the stock going forward. Yet when I take a step back, I see this as an opportunity to be greedy when others are fearful.
For a start, the company is still going to report an operating profit of £410m-£460m. This would be lower than the £657m last year, but still is nowhere near to posting a loss. I think this protects the dividend payment.
With the stock trading at the lowest levels since the 2020 pandemic market crash, I think it’s a good time to research and possibly buy the stock for future income.
Time for a turnaround
The second one to consider is Barclays (LSE:BARC). The global bank has experienced a 55% jump in the dividend yield over the past year, rising from 3.5% to 5.43%. Over the same period, the share price has dropped by 23%.
Part of the increase in the yield has come from higher dividend per share payments. The total in 2021 was 6p, which rose to 7.25p in 2022. It’s expected to increase again when the full-year results come out.
This is encouraging for income investors, but the share price fall also needs to be noted. The bank has struggled to keep up with peers. It has one of the lowest price-to-book ratios in the sector at just 0.4! This reflects the share price relative to the book value (total assets minus total liabilities). By comparison, a value of 1 would be where the share price equals the book value.
Despite the problems the bank has endured, I think it’s now becoming very undervalued. Next month, the CEO will outline his strategy plan to revamp the company. I believe this could be the start of a turnaround in the share price, which is why I bought some Barclays shares at the beginning of this week.
