One FTSE 100 stock I currently like the look of is Direct Line Group (LSE:DLG). The Direct Line share price has been on a downward trajectory for some time now. However, I see longer-term value in what I believe to be a great business. Let’s take a closer look at it.

Insurance provider

As a quick reminder, Direct Line is an insurance company specialising in personal insurance products such as car, home, travel, life, and pet. It also provides insurance to SMEs. Operating under many brands, it also has extensive partnerships with many other financial organisations too.

So what’s happening with the Direct Line share price currently? Well, as I write, the shares are trading for 181p. At this time last year, the stock was trading for 262p. This is a decline of 30%. Since the first week of September, it has lost nearly 16% in value. This is due to the recent change in government, volatility here in the UK economy, and the recent, ill-fated mini-budget announced last week.

Short-term challenges to note

Despite my bullish attitude towards Direct Line, it does face some credible headwinds in the shorter term. Soaring inflation, the rising cost of materials, and the government’s response, which was to raise interest rates, has hurt it, and many other financial services businesses. For example, Direct Line has seen a material increase in the number of claims it is processing. This has led to it having to increase pricing, which has affected investor sentiment.

A positive aspect of Direct Line is its position as a dividend stock. In times of economic volatility, dividends can be cut to conserve cash and navigate stormy waters. Even if this happens, I believe it would be a shorter-term issue for me.

Why the Direct Line share price is calling me

Firstly, I believe Direct Line’s position in the insurance market is pivotal in terms of its longer-term recovery and success. It has a diversified business model and good brand power, coupled with several strategic key partnerships. All these facets should help boost growth, performance, returns, and investor sentiment in the longer term.

Earlier I mentioned Direct Line’s passive income opportunity. At current levels, the dividend yield stands at close to 12%. This is three times the FTSE 100 average of 3%-4%. Even if the dividend was cut due to recent issues, I would be confident it would surpass this average.

Last but not least, Direct Line has a strong balance sheet. This is crucial for me as a potential investor as it tells me the company has enough cash in the coffers to cope with the current headwinds. This could also keep the company paying out some form of dividend.

In conclusion, I believe Direct Line shares are in for a tough time in the shorter term. In fact, so are many other insurance and financial services organisations. However, I believe it has the tools, experience, brand, and cash to overcome these issues and be a great long-term buy for my portfolio.

I have decided to add Direct Line shares to my holdings imminently. They look more attractive to me since they fell and currently trade on a price-to-earnings ratio of just 10.

The post The falling Direct Line share price has made it even more attractive! appeared first on The Twelfth Magpie.

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Jabran Khan has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

With a spare £500, I’d buy shares in both companies today — here’s why. 

Imperial stock: 8.68% dividend yield

Imperial Brands has the third-highest dividend yield in the FTSE 100 index, behind Rio Tinto and Persimmon. The Imperial share price has increased by 9% over the past year. The stock currently trades at a reasonable price-to-earnings ratio of 5.39. 

Tobacco stocks typically carry high dividend yields due to low capital expenditure and high profit margins. Rather than reinvesting their impressive cash flows into the business, they often distribute regular dividends to shareholders. 

There are potential moral concerns surrounding investing in Imperial stock, given the adverse health implications for consumers of its products. Moreover, creating a smoke-free generation has been a longstanding goal of the Department of Health.

The UK may one day follow in New Zealand’s footsteps. The Pacific country recently announced a ban on anyone born after 2008 from purchasing cigarettes. As UK sales make up 9% of the group’s net revenue, this could seriously threaten the Imperial Brands share price, despite efforts to diversify away from combustible tobacco with a focus on vapour and oral nicotine products. 

This wouldn’t dissuade me from buying Imperial stock, however. I see the fact that it has one of the highest dividend yields in the FTSE 100 as reasonable compensation for the long-term risks.

The company also posted encouraging financial results for 2021. Operating profit increased by 15.2% and basic earnings per share were up by 89.5% on 2020. Crucially, Imperial’s dividend increased by 1% to 139.08p per share in line with the company’s progressive dividend policy. 

Direct Line stock: 8.2% dividend yield

Direct Line is one of the top ten FTSE 250 stocks when it comes to dividend yields. The Direct Line share price is down 10% over the past year. I see this as an attractive entry point to take a position in the insurer. 

At £314.8m, motor insurance produced 54% of Direct Line’s operating profit for 2021. I believe consumer demand for its insurance products will remain strong, despite rising inflation and squeezed household budgets.

After all, driving is an essential feature of many people’s lives and car insurance is mandated by legislation. Additionally, Direct Line is a familiar household brand thanks to the company’s advertising campaigns. 

The introduction of new FCA pricing rules in January has caused uncertainty in the insurance market, leading to hikes in premiums. Direct Line acknowledges this risk in its financial results and the company has conducted scenario testing to mitigate this. 

Considering its downtrodden share price and a dividend yield over 8%, I’d buy shares in Direct Line now.  

Dividend yields for passive income

If I invested £500 evenly between the two stocks, I’d expect to receive £42.20 a year in passive income at current dividend yields.

There is speculation that Chancellor Rishi Sunak may cut the current £2,000 dividend allowance in the Spring Statement. To protect my total dividend income from future tax changes, I’d buy these equities in a Stocks and Shares ISA before the upcoming ISA deadline on 5 April. 

The post 8.2%+ dividend yields! I’d buy these 2 passive income stocks with £500 appeared first on The Twelfth Magpie.

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Charlie Carman does not own shares in any of the companies mentioned. The Motley Fool UK has recommended Imperial Brands. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, ie Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Fortunately, I think this is easily beatable. In fact, I’ve found a couple of stocks that should generate a far higher amount of cash for me.

6% dividend yield

The first high-yielding dividend stock to discuss is fund manager Jupiter Asset Management (LSE: JUP). Right now, shares in JUP can be picked up for 9 times earnings. That looks a great deal to me.

While certainly not the highest in its industry, operating margins of 27% are far better than many FTSE 250 constituents achieve. Recent years aside (due to the pandemic), the company also generates strong returns on capital — just the sort of thing I look for when selecting stocks. 

But, of course, it’s the dividends we’re interested in here. On this measure, JUP knocks it out of the park. 

Analysts currently have Jupiter returning 17.1p per share for FY21. Using the current share price, this becomes a yield of 6.5%. For perspective, that’s over 10 times what I’d get from the best instant access Cash ISA. 

It gets better. Based on earnings estimates, this cash return should also be covered 1.7 times by profit. As such, I doubt a dividend cut is on the horizon anytime soon. 

Obviously, never say never. As last year showed, firms can be quick to amend their policies on distributions in the event of severe headwinds. Stocks in the financial sector that Jupiter belongs are particularly vulnerable in this regard.

Another big yielder from the FTSE 250

A second FTSE 250 stock offering what appears to be a very enticing income stream is insurer Direct Line (LSE: DLG). It’s down to yield 24.3p per share this year. Using the current share price (305p, as I type), that gives a stonking dividend yield of 8%! 

In addition to this super payout, the company trades on what looks to be a cheap valuation (12 times earnings). That seems a whole lot more palatable compared to some stocks.

However, there are also a few things I’d need to be aware of before pulling the trigger. Unlike Jupiter, returns on capital are very low. The share price performance certainly isn’t worth shouting about either.

DLG shares are actually down 17% since 2016. Contrast this with the FTSE 250’s 34% rise and it seems clear to me that, based purely on capital gains, this stock won’t make me rich anytime soon. On top of this, dividend cover looks stretched (one times profits). Hopefully, this will prove temporary. 

Still, I’d be happier to buy DLG shares over hoarding cash. Keeping some money on the sidelines for emergencies and in preparation for the next correction/crash is never a bad thing. However, having an abundance for too long would be a spectacularly bad financial decision on my part.

Equities, while certainly higher risk, are nearly always a better option if I can ride out the inevitable waves of volatility.

All things considered, I’d be more comfortable buying more JUP than DLG for my portfolio. Then again, an 8% yield isn’t to be sniffed at, so long as I also had exposure to other sectors. 

The post 2 FTSE 250 stocks with 6%+ dividend yields! appeared first on The Twelfth Magpie.

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Paul Summers has no position in any of the shares mentioned. The Motley Fool UK has recommended Jupiter Fund Management. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

That’s why I’m considering adding either Aviva (LSE: AV) or Direct Line Insurance Group (LSE: DLG) to my portfolio. 

But which insurance stock is a better buy right now?

Aviva

This multinational British business boasts more than 30m customers across 16 countries. In the UK, its home market, it is the largest general insurer and a leading life and pensions provider.

The Aviva share price has had a strong 12 months. It has risen 64% from 243p to 400p today despite a tough 2020.

I really like this stock because of its reputation as a dividend hero. It pays out a 6% yield, which amounts to 14p on its 14 May payment date. Dividend payments are important for me when planning my portfolio for retirement.

The FTSE 100 firm is also taking steps to exit non-core foreign markets and focus on its UK, Irish, and Canadian operations. This drive saw it axe Polish and Italian operations last month. More such moves are expected to boost its balance sheet and create a leaner earnings-producing machine.

However, the insurance industry is an unforgiving one. As a life insurer, the company’s outlook is tied to interest rates. A sudden rise in rates could negatively impact its balance sheet, which would likely harm shareholder returns. This risk, and the general complexities of insurance, suggest this stock might not be suitable for all investors.

For me, however, despite it being difficult to value insurance shares accurately, Aviva seems cheap. With a low price-to-earnings ratio of just 8, I really like the look of this top UK share right now.

Direct Line Insurance

Among one of the UK’s largest insurers and a big competitor to Aviva, Direct Line Insurance is in my sights right now. 

It has been a very rocky 12 months for Direct Line, with its share price fluctuating between highs of 346p and lows of 258p. However, it has jumped almost 15% from 265p a year ago to over 300p today.

My bullish sentiment for this FTSE 250 share is based on its impressive 7% dividend yield. I also believe that recent earnings growth will continue. Direct Line enjoys a substantial competitive advantage in the insurance market due to its size. Economies of scale allow it to serve customers at a lower cost than competitors can, increasing profit margins.

Likewise, I am excited by its plans to invest in new insurance software. This will allow it to follow similar business models employed by the likes of Lemonade in the US, which uses AI software to price insurance more accurately and profitably.

My main concern with this business is that it has struggled to grow in recent years. The motor insurance market is competitive, making it hard to hike prices. It risks getting caught in a pricing war as more insurance options become available, potentially hurting its bottom line. I believe Direct Line’s brands should provide a long-term advantage, but I could be wrong.

Overall, I believe that these are two great stocks to invest in. However, Direct Line CEO Penny James’ commitment to innovation excites me just enough to give Direct Line my full interest. 

The post Should I invest in Direct Line Insurance or Aviva shares right now? appeared first on The Twelfth Magpie.

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Jamie Adams has no position in any of the companies mentioned above. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

I was therefore delighted by yesterday’s news that Direct Line Insurance Group (LSE: DLG) was restoring its dividend. It is a reminder that shareholders can still generate the income they need by investing in top UK income stocks.

The car insurer didn’t just declare an interim 2020 dividend of 7.4p, it increased the payout from last year’s 7.2p. CEO Penny James also declared a special dividend of 14.4p as a “catch-up of our cancelled 2019 final dividend”. I like to see companies looking after shareholders like that.

Top FTSE 100 income stock

The move reflects the board’s continued confidence in Direct Line’s capital position and earnings, as it now has a clearer idea of the impact of travel and business interruption on claims. It also benefited from a massive 70% drop in motor insurance claims during the lockdown.

Direct Line has got through the first phase of the pandemic without accessing Government support, or laying off staff. This financial resilience makes it a tempting FTSE 100 stock to pop into your portfolio, and others agree. Yesterday, the Direct Line share price rose 5.33%, today it’s up another 3%. It remains below its pre-crisis peak, trading at around 11 times earnings. So it isn’t too expensive.

Direct Line has taken a hit from coronavirus, with first-quarter losses of £25m on travel insurance, and £10m for business insurance. First-half pre-tax profits fell 9.5% to £236.4m, mostly due to by £30.4m of bad weather costs and £15m for one-off restructuring.

If you are looking to invest £2k or any other sum, I’d consider the Direct Line share price and another FTSE 100 stock that was causing a stir yesterday.

BP remains a dividend income hero

The BP (LSE: BP) share price actually jumped around 7% after the oil giant announced that it was halving its dividend. Normally, you would expect a FTSE 100 stock to crash when delivering news like that.

Instead, it came across as good news. First, investors were braced for bad news, and were relieved to get it out of the way. Second, it still leaves BP yielding around 5.4%. Third, the board aims to maintain the dividend at this level going forwards, returning any additional surplus cash via share buybacks.

Finally, it should help preserve cash after making a $6.7bn loss in the second quarter due to the falling oil price, and help fund the company’s shift into green energy.

The FTSE 100 stock is up another 4.5% today, as investors absorb the news. The BP share price is still down 40% on its January high, making now a tempting entry point. Its future looks more sustainable in a number of ways.

It is ironic that the Direct Line dividend increase makes this FTSE 100 stock look like a top income buy, because BP’s dividend cut has had the same effect. If I had £2k to invest, I would consider splitting my money between them, to provide diversification inside a Stocks and Shares ISA.

The post Direct Line’s dividend is back! I’d split £2k between this FTSE 100 stock and the BP share price appeared first on The Twelfth Magpie.

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Harvey Jones has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Time to step up

The share price is up 16% over the past three months but stalled today, after its interim results revealed a drop in underlying profit before tax from £245.5m to £202.5m, while statutory revenue fell from £2.25bn to £2.19bn.

First-half results were nonetheless in line with expectations, with underlying revenue flat at £2.46bn, after allowing for the impact of “step downs”, resulting from big projects like the aircraft carriers coming to an end.

Chief executive Archie Bethel said performance was good across most of the group, with its “strong” Marine division offsetting some weakness in Aviation. The £2.75bn FTSE 250 group has increased its order book to a record £18bn, due to significant recent wins, including building the Type 31 warship for the UK’s Royal Navy and providing training to London’s Metropolitan Police Service.

Foreign fields

Babcock continues to expand internationally, including new Aviation operations in Norway and Canada, and amphibious assault ships for the Australian Navy. Its pipeline of opportunities has increased to £16bn as a result of increased bidding activity across all its markets, taking the total to £34bn, its highest ever.

Babcock now expects underlying revenue of around £4.9bn and underlying operating profit of between £540m and £560m. Despite today’s underwhelming market reaction, I thought the Babcock share price looked like a buy even before I realised it was trading at just 7.3 times forecast earnings, with a price-to revenue ratio of just 0.6.

Even better, the forecast yield is 5%, with cover of 2.7. A return on capital employed of 20% looks pretty solid as well.

Babcock has been subject to a shorting attack by a mysterious group called Boatman Capital Research, and today’s results show growth is slow, but I still find it highly tempting at the current low valuation.

Direct action

Here’s another embattled FTSE 250 stock, Direct Line Insurance Group (LSE: DLG), its share price having fallen almost 20% over the last year.

Motor and home insurance are tough sectors these days, as comparison sites turn them into commodity products sold largely on price, while squeezing the recurring income insurers have traditionally generated from auto-renewing customers. Direct Line refuses to appear on comparison sites, which makes it heavily reliant on its brand name to drive business.

The £3.78bn group now trades at a bargain valuation of 9.9 times forward earnings, but be warned, City analysts calculate those earnings will fall 17% this year, and 3% next. That may be reflected in today’s low price, but falling revenues are always a concern.

Bouncing back

Direct Line still lifted its interim dividend by 2.9% in July, and the forecast yield is now a whopping 10.1%. It is only covered once by earnings, and may be cut next year, but that would still leave the stock fulfilling its traditional role of offering a generous level of income.

Both FTSE 250 companies have had a bumpy time and I cannot promise it will be smooth roads from here, but I also suspect both have been oversold. The trick is to buy them before they recover, rather than afterwards.

The post I’d buy these 2 high-yielding FTSE 250 bargains before their share prices recover sharply appeared first on The Twelfth Magpie.

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Harvey Jones has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Dixons Carphone

Dixons Carphone (LSE: DC) dropped out of the blue-chip index in May 2017 and has been ringing up wrong numbers ever since.

The electrical and telecoms retailer, formed in 2014 by the merger of Dixons Retail and Carphone Warehouse Group, is down almost 30% over the last 12 months, and 67% over three years.

It has been hit hard by tough competition, notably from Amazon, while the weaker pound has driven up the cost of imported electrical items, making the group yet another victim of the squeezed UK retail sector.

The mobile phone market is no longer the growth monster it once was, as the likes of Apple struggle to come up with a new killer function. The biggest pull of the new iPhone 11 Pro is three cameras instead of one. Don’t all rush. Accordingly, Dixons’ Q1 mobile sales fell 10%, as more people cling to their old hardware, buy unlocked handsets, or SIM-only deals.

Dixons Carphone’s market cap has shrunk to £1.3bn but many will be tempted by its low valuation of just 8.4 times forecast earnings, and big fat juicy yield of 5.6%, covered 2.1 times. Against that, you have to weigh the group’s rising net debt and falling cash flows. As the Brexit squeeze on consumer sentiment intensifies, I suspect this stock could prove a bad call.

Direct Line Insurance Group

Direct Line Insurance Group (LSE: DLG) crashed into the FTSE 250 in September after the share price took another downward lurch following a 10.8% drop in first-half pre-tax profits to £261.3m. This is a long-term slide, with the Direct Line share price trading 20% lower than three years ago. 

The group has been hit by the Financial Conduct Authority’s regulatory probe into car and home insurance pricing, amid long-standing complaints that new customers get a much better deal than existing ones. While the FCA is not explicitly targeting Direct Line, it has been hit notably hard because it makes most of its money from these two markets, against less than 20% of profits at globally diversified rivals such as Aviva and RSA Insurance Group.

Competition for motor insurance customers is also tough, as comparison sites intensify the focus on price, to the point that Direct Line refuses to appear on them, which shuts off an awful lot of customers.

Direct Line nonetheless has a strong brand and modest debt. Two other factors count in its favour. First, the £4bn group is trading at just 10.8 times forward earnings, which suggests many of its recent troubles have been factored into the share price. Second, it yields a bumper 9.5%.

In March, management announced a 2.9% hike in the final dividend to 14p, but almost halved the special dividend to 8.3p. With cover down to one, today’s payout it is unlikely to be sustainable. However, given the dizzyingly high yield, it is likely to remain an attractive dividend income stock even if the payout is trimmed again.

The post £1,000 to invest? I’d shun this FTSE 250 faller in favour of this bargain 10% yielder appeared first on The Twelfth Magpie.

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Harvey Jones has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Investors have been selling for a couple of reasons. Firstly, Direct Line is also set to leave the FTSE 100 at the end of September. As a result, it’s likely fund managers, who are not allowed to hold stocks outside the index, have been selling over the past few weeks. On top of this, Direct Line is also suffering from declining earnings expectations. EPS are set to decline 15% this year, according to City forecasts.

However, despite this downbeat outlook, the stock is still expected to support a dividend yield of 9.7%. On top of this, even after factoring in the earnings decline, shares in this household name are still trading at a highly-attractive multiple of just 10 times forward earnings. In my opinion, the combination of the company’s low valuation and market-beating yield is just too good to pass up.

Risk vs reward

Another high-yield dividend stock that’s also on sale today is iron ore pellet producer Ferrexpo (LSE: FXPO). This is an interesting business. For the past five years, the company has been on a roller-coaster ride of falling profits and scandal. Investors haven’t stayed around to find out what will happen next. They’ve been eager to jump ship, which is why the stock is currently dealing at a forward P/E of just 2.8.

This valuation says quite a lot about Ferrexpo. Investors don’t seem to be happy to take on the risk of investing here. Nevertheless, company stock owners who’ve stayed with it over the past five years have been well rewarded.

Including dividends, the shares have produced a total return of 13% per annum, outperforming the FTSE 100 by a substantial margin of 8% per year. City analysts are expecting more of the same going forward. They’ve pencilled in a dividend yield of 8.7% for the company this year and 8.1% for 2020. This return could be worth the risk of investing in Ferrexpo.

Undervalued property

The final company I’m going to profile is real estate investment trust RDI (LSE: RDI). This is another unloved income champion which seems to have fallen out of favour with the market.

Investors have been selling shares in real estate investment trusts with any exposure to commercial property since the Brexit vote in 2016. RDI is no exception. The stock has lost around a third of its value since the beginning of September last year.

The good news is, these declines have taken shares in the business down to a level that looks too good to pass up. It’s currently dealing as a price to tangible book ratio of just 0.5 and a forward P/E ratio of 8.6. On top of this, the shares yield 11%.

These numbers suggest RDI could be worth up to 100% more than its current price when confidence returns to the real estate market. In the meantime, investors can pick up that juicy 11% dividend yield.

The post 3 high-yield dividend stocks I’d buy that are on sale today appeared first on The Twelfth Magpie.

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Rupert Hargreaves owns no share mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

That doesn’t mean you should shun them yourself. Patient, long-term investors are happy to give embattled companies time to recover, especially if they have strong balance sheets and pay attractive dividends, as these two do.

Direct action

Direct Line Insurance Group (LSE: DLG) is a bit of a car crash, judged by its share price, which is down 15% over the last six months while long-term performance has also been weak. It’s a household name, so why the struggle?

As a motor insurer, it operates in a highly competitive market. It has made the decision to shun price comparison sites, and only take direct custom. It’s a bold move that may help the group withstand the race to the bottom on premiums, but also means sacrificing business.

Gross written motor premiums fell by 2.2% in the first half, although they were offset by a rise in revenues from its commercial and rescue operations, while home held steady.

Direct Line suffered a 10.2% drop in first-half operating profit to £274.3m, although that beat consensus forecasts. The market response looks harsh, given that the £4.12bn group remains on course to hit its 2019 financial targets and has a proven track record of profitability.

Cheap and cheerful

Management did cut its special dividend from 15p to 8.3p in March but it still offers a whopping forecast yield of 9.6%. That is covered just once by earnings so isn’t entirely secure, but the group has a strong capital position with a solvency capital ratio of 180%. Better still, the Direct Line share price currently trades at just 10.7 times forward earnings, well below the FTSE 100 average of around 17 times.

Brexit hovers and earnings growth projections look unexciting, but if the dividend holds and you reinvest your payouts, you will double money in just over seven years, and can treat any share price growth as a bonus.

Tough viewing

My other bargain FTSE 100 pick is another household name, broadcasting group ITV (LSE: ITV). This has been through an even tougher time, down 20% over the past six months and almost 50% lower than it traded five years ago.

This has left the £4.33bn group trading at just 8.5 times forward earnings, making it even cheaper than Direct Line. Last month’s half-year results were “modestly better than expected”, with online revenues up 18% despite tough comparatives, while Love Island provided a “strong finish” to the half.

However, total external revenue fell 7% to £1.48bn, total advertising revenue fell 5% (while beating guidance) total ITV Studios revenue dropped 6% to £758m, although this was expected and deliveries are weighted to the second half.

ITV continues to deliver cost savings and its joint BBC venture Britbox is due to launch in the UK in Q4. The group also boasts a solid balance sheet, is delivering cost savings and has committed to a full-year dividend of at least 8p per share. The ITV share price now comes with a forecast yield of 7.6%, with cover of 1.6.

Direct Line and ITV could prove a winning high-income recovery play, if you give them time.

The post These 2 FTSE 100 stocks yield 7% and look terrific bargains to me appeared first on The Twelfth Magpie.

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• Should I buy ITV shares for my ISA ahead of the World Cup?
• With dividend yields averaging above 7%, are these 2 UK shares worth considering?

Harvey Jones has no position in any of the shares mentioned. The Motley Fool UK has recommended ITV. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Lifetime income

My first pick is Phoenix Group (LSE: PHNX). Over the past few years, this company has grown into one of the largest life insurance businesses in the UK, mostly through acquisitions. Its biggest deal so far was the £3.2bn acquisition of Standard Life Aberdeen’s insurance arm, which is already yielding fantastic returns.

Management had initially expected to generate £720m of synergies from the deal, but now this target has been hiked to £1.2bn. It’s also predicting £3.8bn of cash generation between 2019 and 2023.

This cash generation should easily cover Phoenix’s dividends to investors over the time frame. At the time of writing, the stock supports a dividend yield of 6.3%, far above the FTSE 100 average of 4.3% and, with cash generation increasing, it looks as if this distribution is here to stay.

On top of this attractive level of income, shares in Phoenix are also dealing at the EV/EBITDA ratio of 4.1, below the market average of 11.2.

Turn around play

My next pick is WPP (LSE: WPP). Even though it specialises in producing marketing plans for global companies, WPP has struggled to market itself over the past 12 months. Management turmoil and falling earnings have resulted in an investor exodus.

However, I believe the stock has been oversold. It’s currently dealing at a forward P/E of just 9.6 which, considering current City growth projections, looks cheap. The City has pencilled in a decline in earnings per share of 4.6% for 2019, although analysts are expecting growth to return in 2020.

And while you wait for a recovery, the stock supports a dividend yield of 6.2%, which is covered 1.7 times by earnings per share. Considering all of the above, I think it’s worth investing in this marketing giant as it starts its recovery process. Although the market seems to be assuming the worst if growth returns, I reckon there could be bigger returns for shareholders from here.

Direct profits 

The final company I’m going to profile is Direct Line (LSE: DLG). The UK car insurance market is fiercely competitive, but Direct Line is one of the largest in the space and, as a result, is well positioned to hold its own in the market, in my opinion.

That said, the one thing the firm can’t control is the rising cost of claims, which is hitting profits across the home and car insurance market across the UK. Rising costs will push earnings per share lower by 16% in 2019, according to the City.

This isn’t ideal, but Direct Line’s strong balance sheet means it’s well positioned to weather these headwinds. The strong balance sheet also means the company can afford to return the majority of its profits to investors.

Indeed, even though they’re predicting a decline in earnings this year, analysts have pencilled in a prospective dividend yield for the company of 8.3%, making it one of the most attractive income stocks in the FTSE 100. I think it’s worth making the most of this opportunity while it lasts.

The post 3 FTSE 100 stocks yielding 6% I’d buy and hold for 10 years appeared first on The Twelfth Magpie.

More reading

• How much would I need to invest in this FTSE 100 dividend star to aim for £15,401 a year in second income?
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• Yielding 6%+ for a decade, how have Standard Life shares become a FTSE 100 dividend machine?
• Here’s how someone could start investing with a spare £20 a week
• Could £300 a month and UK dividend shares yielding 5% really grow to £176,436?

Rupert Hargreaves owns shares in Standard Life Aberdeen. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.