The coronavirus pandemic has caused many companies around the world to abandon their dividend payouts, and rightly so. Normally, during times of economic uncertainty, most companies eliminate dividend payments to ensure financial stability and reduce volatility. As such, it’s not easy to find high-yield stocks with low risk right now. This issue is particularly painful for investors when interest rates around the world are at historic low levels.
But, if you’re willing to take a calculated risk with higher-yield stocks, then I think there are good opportunities in the market right now. With that in mind, here’s a look at two high-yield dividend stocks (that are also a bit risky) I’d consider buying for 2021.
Evraz: one of the high-yield dividend stocks I’d buy
The first stock I’d consider buying for next year is Evraz (LSE: EVR), the miner that’s also a major steel producer. Frankly, investing in Evraz isn’t suitable for many investors. It’s using a lot of debt to finance its operations, so it carries a relatively high level of risk. But at the same time, Evraz is offering an annual dividend yield of around 9%, which is well above the FTSE 350 average yield of slightly more than 2%. This makes Evraz one of the highest-yielding stocks in the UK at the time of writing.
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But there’s more than that. The share price of the company, of which Roman Abramovich is the biggest shareholder, has made an impressive recovery from the low levels it was trading at in March. In fact, it’s among the few companies that will end 2020 with a positive year-to-date return of around 17%.
Looking ahead to 2021, as Covid-19 vaccines are rolled out, it’s very likely that demand for steel and mining commodities will be on the rise next year. The World Steel Association predicts that global demand for steel will increase by 4.1% in 2021. With that yield of around 9% and the bullish momentum seen in the last months, I think Evraz could be one of the best high-yield dividend stocks to buy with an eye on its additional share price appreciation potential.
High-yield oil stock
Normally, I would be a bit sceptical about a company with an annual dividend yield of above 10%. If any company is willing to pay such a high yield, it’s generally an alarming sign for investors. But here, I actually think Diversified Gas & Oil (LSE: DGOC) appears to be in a good position to continue its positive momentum in 2021.
First, I’m currently pretty bullish on the oil and gas industry. As I ‘ve written before, I reckon oil companies like Petrofac could be heading back to profitability next year. In my view, the same applies to Diversified Gas & Oil.
Second, the company is doing pretty well. In September, it joined the FTSE 250 index as well as the FTSE All-Share Index. Then, in its Q3 trading update, DGOC raised its adjusted EBITDA from $64m in 2019 to $75m in 2020, announced $221 million of available liquidity, and pointed to a notable reduction in its net debt. Consequently, DGOC shares have finished the year with a positive return of above 7%. In my view, this could be an under-the-radar investment for 2021.
