Mining for FTSE 100 dividends        

One FTSE 100 dividend-payer I’d consider is Rio Tinto (LSE:RIO). In its last financial year, it paid dividends that amounted to a yield of 6.1%. I like that it’s a consistent source of passive income. I calculate its average dividend yield over five years to be 5.5%.

In addition, analysts expect earnings to grow by 27% this year. I’m comfortable that Rio will be able to continue paying consistent dividends over the next few years at least.

It’s a good time to be buying this FTSE 100 mining giant, in my opinion. Demand for commodities could be supported by a global economic recovery following the pandemic. Furthermore, several countries, including the US, are planning to spend more on infrastructure.

That said, iron ore prices are approaching multi-year highs. Any decline over the coming years could affect Rio’s earnings and the level of dividend payout.

Building income

Persimmon (LSE:PSN) is one of my favourite FTSE 100 homebuilders. I would describe it as a quality growth and income stock. It demonstrates quality with a pleasing 21% return on capital. In addition, it offers an operating margin of nearly 24%.

Persimmon has committed to pay total dividends of £2.35 per share in 2021. At the current share price, this equates to a dividend yield of over 7%.

This sounds pretty appealing to me. A word of warning, however. To sustain this generous dividend, Persimmon will need to ensure it grows its earnings. If it can’t, then the dividend could be at risk of being cut.

I’m currently optimistic about the housebuilding sector. Government-led home-buying and stamp duty incentives should help to support house prices, but such incentives are always at risk of being withdrawn.

Overall though, I think Persimmon shares offer a good balance between passive income and growth. I’m happy to continue holding them in my Stocks and Shares ISA.

A riskier FTSE 100 income share

Evraz (LSE:EVR) is a metals and mining company that’s part of the FTSE 100. It predominantly manufactures steel and iron ore. Most of its earnings are derived from Russia, Asia, and North America.

I would consider Evraz for a position in the passive income portion of my portfolio for several reasons. Firstly, it offers a current dividend yield of 5.6% that’s forecast to grow to almost 8% this year.

Its share price recovered strongly from the height of the pandemic-induced market panic a year ago. At the time of writing, its one-year share price gain is 160%. Helped by a rebound in steel prices, Evraz delivered “solid operating and financial results”.

That said, the rapid rise in steel prices might not be sustained. The rise was mainly due to short supply as demand started to recover in the second half of 2020. Any weakness in global steel prices could have an impact on earnings, in my opinion. In turn, the forecasted dividend could be affected.

All things considered, I would still consider Evraz for a position as part of my diversified ISA portfolio.

The post 3 FTSE 100 stocks I’d buy for passive income appeared first on The Twelfth Magpie.

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Harshil Patel owns shares in Persimmon. 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.

Evraz

Russian steel producer Evraz (LSE: EVR) is quite some stock. Right now, it looks set to yield an incredible 13.7%, the highest on the entire index. Of course, this will start alarm bells ringing for many. It has been called the riskiest stock on the entire FTSE 100, because management has got into the strange habit of running up debts, while lavishing money on shareholders.

Last year’s half-yearly report said net debt increased by $79m to $3.65bn, largely due to the recognition of additional liabilities under new IFRS 16 financial reporting standards. Net profit fell sharply to $344m, down from $1.15bn year on year, due to falling steel prices. Depressed vanadium prices, lower average coking coal prices, and the lifting of US tariffs on Canadian steel imports didn’t help.

Management still lavished shareholders with more than $500m in dividends, citing a positive outlook, the strength of the Russian steel market, and its continuing efforts in efficiency improvements. Last week’s Q4 trading update was broadly positive, with crude steel output up 2.1% over the quarter, and steel product sales up 6.6%.

The Evraz share price is valued at just 7.5 times earnings, which looks a bargain. Its yield is forecast to fall to 9.3% in 2020, but that is still hugely generous. The 35.16 payout is expected to be covered 1.57 times by forecast earnings of 55.32p. I can’t find anything particularly disastrous in these figures, making it a tempting buy, but I’m also a bit unsettled. I don’t quite understand what management is up to, and as Warren Buffett said: “Never invest in a business you cannot understand.” 

Centrica

British Gas owner Centrica (LSE: CNA) used to be called a defensive stock, but nobody uses that term today. 

The Centrica share price now trades 70% lower than it did five years ago, turning a £10k investment into just £4k including reinvested dividends, after a dismal period for the company. Centrica was punished by falling energy prices and disgruntled home energy customers, who switched to cheaper rivals in droves, triggering a blizzard of profit warnings and dividend cuts.

Until recently, the prospective yield briefly stood at 13.68%, but please don’t buy expecting that kind of income today, because the rebased payout currently offers a forecast yield of just 5.5% for 2020.

I feel more comfortable with this, especially since earnings are now expected to rise 31% in 2020. That would see the anticipated 5.03p payout covered 1.66 times by earnings of 9.13p a share, which looks a lot more sustainable.

There are signs of a share price recovery in recent weeks, which suggests that Centrica may finally be finding its feet. I’d shop around, though, because you might find more solid FTSE 100 high yielders out there.

The post I’m sorely tempted by these 2 ultra-high-yield FTSE 100 dividend stocks 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.

Is the P/E ratio right?

To test how useful it is, I have picked out two FTSE 100 stocks with wildly different ratios, to decide which is the better buy.

Measured by its P/E, Russian steel producer Evraz (LSE: EVR) is one of the biggest bargains on the FTSE 100, trading at a meagre 3.12 times earnings. That is a fraction of the index average of just over 18 times. You don’t often see £5.85bn companies going so cheap.

At the other end of the scale, engineering data and design IT systems specialist Aveva Group (LSE: AVV) looks astonishingly (reassuringly?) expensive at just over 50 times earnings.

Evraz

Evraz has another astonishingly tempting figure – a forward yield of 12.5%. Cover is 1.3, which is relatively low (2 is ideal), but surprisingly high given the bumper payout.

You won’t be surprised to hear the Evraz share price has had a bad time, falling almost 40% in the last six months (although it is still up 209% over five years). It suffered a bruising after chairman Alexander Abramov and other top shareholders dumped tens of millions of shares in March, and again in July, without explaining why.

The group has also been hit by fears over a slowing global economy, and particularly China, as steel demand slumps, knocking revenues down 6% to $4.2bn. Its fate appears to rest on prospects for a US-China trade deal, and global growth generally. There have been positive signs on both fronts lately, and Evraz is up more than 8% in the last week as a result.

2020 is shaping up to be a bit bumpy, and Evraz seems the volatile type. Earnings are falling 50% this year, with a drop of 11% expected in 2020. This stock is massively risky, just a glance at the valuation tells you that. It’s also tempting, if you fancy a whiff of danger in your portfolio.

Aveva Group

Having seen its dizzying valuation, you will not be surprised to hear the Aveva share price has been on a bit of a run. It is up 96% over one year, and 270% over five. I owned this stock, back in the day. I wish I still did, and I’m not the only one kicking myself.

Aveva has posted healthy revenue growth, up 16.5% to £391.9m in the first half, delivering “good growth” across all geographic regions, particularly Asia Pacific.

The £7.52bn group sits on net cash and deposits of £58.6m, and recently jacked up its dividend by 10.7%. Despite this progressive attitude, its yield is at the opposite end of the scale to Evraz, a lowly 1% with cover of 2.2%.

Aveva Group looks set to continue its fabulous momentum, with earnings forecast to rise 18% in the year to 31 March 2020, and 14% the year after that. However, I am unnerved by its valuation, which leaves no room for slips.

I can’t quite bring myself to recommend it for that reason. This time, the valuation has the casting vote.

The post A P/E ratio of 3 and a 12.5% dividend yield! I’d call this FTSE 100 stock a risky buy 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.

Here are the two biggest of all, comfortably paying more than 10%. Perhaps surprisingly, they might even be sustainable.

Evraz shows its steel

Experienced investors will know to be wary of double-digit yields, so how should you approach the enormous 15% payout from Russia’s largest steel producer Evraz (LSE: EVR)?

The share price is down 40% in the last six months, although it is still almost 200% higher than five years ago, against average growth of just 13% on the index. Mining stocks can be volatile, but these movements are extreme.

The recent drop can be traced to moves by Alexander Abramov and other top shareholders to sell around 25.4m shares in March, with little explanation. Investors have also been deterred by falling steel prices, due to global growth fears and shrinking demand from China.

Despite this, my colleague Rupert Hargreaves makes a strong bull case, as the company aims to maximise shareholder returns. 

As well as being the highest-yielding stock on the FTSE 100, Evraz is also one of the cheapest, trading at just 5.8 times forward earnings. Those earnings look set to fall sharply, with a forecast drop of 44% in 2019, and another 7% in 2020. Despite that, the forecast dividend of 46.57p per share for 2021 is still covered by anticipated earnings per share of 67.14p, giving cover of 1.44. The forecast 2020 yield is 12.1%.

The group, with a market cap of £5.66bn in GBP, generated free cash flow of $692m in the first half of the year, up from $661m in 2018, although lower steel and coal prices slashed net profit from $1.145bn to $344m. The strong Russian steel market, vertical integration and efficiency improvements should all bolster the group. Total debt dropped by $112m to $4.5bn, which is high, but not overwhelming. We may learn more in this Friday’s trading report, but if you want a stonking yield, Evraz could just be worth a closer look. And I’m as surprised as you by that conclusion.

Taylor Wimpey

Building group Taylor Wimpey (LSE: TW) offers the second-highest yield on the FTSE 100, a forecast 11.9%. Cover here is lower at 1.1 times earnings, but again, a double-digit yield doesn’t set alarm bells ringing as it usually would.

Taylor Wimpey, like the rest of the UK housebuilding sector, has been hit hard by Brexit fears, but as no-deal prospects diminish, it could swing back into favour. Its first-half results showed profit before tax dipping only slightly from £301m to £299.8m, while the group boasts net cash of £392m.

There is massive demand for housing and this looks set to continue as the UK population climbs towards 70m, reflected in Taylor Wimpey’s strong order book of more 10,000 homes on 30 June 2019, which is 10% higher than the previous year. Total value: £2.37bn.

There is good visibility on dividends, including a 2020 special worth £360m, or 11p a share, to be paid next July. Next year, dividends are expected to total £610m, or 18.6p per share. Earnings are slowing after a strong run, but that yield is still to buy for.

The post This FTSE 100 stock is yielding 15%! Incredibly, it may even be sustainable 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.

But in the years since, Evraz has gone from strength to strength. Last year, it reported a net income of $2.4bn, and this year analysts have pencilled in a projected net profit of $1.4bn.

Cash returns

As profits have boomed, the company has adopted a policy of returning as much cash as possible to shareholders. In 2017, it distributed $0.30 per share and management declared a $1.18 (97p) per share distribution in 2018.

With earnings set to fall by around 38% for fiscal 2019, analysts aren’t expecting the company to repeat last year’s performance. Instead, they’ve pencilled in a full-year dividend of $0.66 (54p), giving a dividend yield of 11%. Still, if Evraz hits this objective, it’ll have returned a total of 175.6p per share to investors over the three-year time frame, 34% of its current share price.

I’m confident that this trend will continue. You see, Evraz’s two highest-ranking managers, Alexander Abramov and Alexander Frolov, own around 30% of the business. This implies they’ll work to achieve the best results for the company’s owners because they stand to lose more than most other shareholders if they don’t.

That’s why I think it could be an excellent addition to your portfolio if you’re looking for a blue-chip income stock trading at a bargain-basement price.

Brand value

Shares in International Consolidated Airlines (LSE: IAG) have taken a hammering over the past few months as the group’s flagship British Airways brand has suffered from strikes, IT glitches and lousy customer service. A recent survey of air travellers ranked BA as one of the worst airlines in the world to fly with, an accolade no brand wants to achieve.

These issues have sent investors running for the hills. Since the beginning of the year, shares in the airline group have fallen more than 30%, excluding dividends, and are currently dealing at a forward P/E of 4.3.

Nevertheless, despite the firm’s problems, I think IAG has a bright long-term outlook. The company operates somewhat of a monopoly over the landing slots at Heathrow, which gives it a tremendous competitive advantage. The group holds nearly two-thirds of airport’s current capacity, so while customers might not want to travel on the airline, their other options are relatively limited.

With this being the case, the market seems to have overreacted with regards to IAG’s valuation. The stock is around 50% cheaper than its international peers, despite its UK-market share. In my opinion, this indicates a wide margin of safety for investors buying at current levels. Only adding to the appeal is the company’s 6.5% dividend yield.

Considering all of the above, if you’re looking for a dirt-cheap, blue-chip dividend stock for your portfolio, I highly recommend taking a closer look at IAG.

The post 2 dirt-cheap FTSE 100 dividend stocks I’d buy yielding up to 11%! 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.

We’ve already had some notable dividend slashes on the FTSE 100 this year as Vodafone took the hatchet to the annual reward for the first time in its history. But it’s unlikely to be the last to hack back rewards, and I believe Evraz (LSE: EVR) could be one blue-chip to follow the same route.

City sirens

City analysts certainly believe it’ll be forced to reduce the dividend in the current year, a figure of 38 US cents currently being touted and one which would represent a shocking decline from 2018’s 78-cent one.

Some might still be tempted by Evraz’s bulky 5.8% forward yield, one that rips apart the broader Footsie yield which sits at a more modest 4.5%. However, I suggest you be prepared for an even-bigger reduction. The current estimate is covered just 1.5 times by anticipated earnings, way below the accepted safety benchmark of 2 times.

At the moment Evraz appears to be riding the crest of a wave, and this is reflected in its share price which is soaring amid sky-high iron ore prices and strong steel production all over the globe. It’s risen 10% over the past month alone and has been punching fresh record tops in June.

Global slowdown

The business is involved in all steps of the steel industry, from hauling essential materials for the production process like coal and iron ore from the ground, to producing the material and selling and shipping it to its customers all over the globe. It’s clearly a classic cyclical stock and this makes me pretty fearful, to be honest, as the warning lights for the global economy get brighter and brighter.

Right now, the number crunchers expect Evraz to endure a 35% earnings slump in 2019. But there could be much more bottom-line woes well beyond the current period should, as I expect, auto production continue to slump and the global construction industry follows it down the swanny.

Cash ain’t king

Evraz has one saving grace in its arsenal though and, to be fair, it’s a pretty impressive one. Put simply the commodities colossus throws cash out at a spectacular rate and, on paper, this could help it defend dividends from huge drops when market cyclicality hits profits. Last year free cash flow stood at a whopping $1.9bn, up more than $600m year on year.

That said, the business still has a hell of a lot of net debt on its books — $3.6bn as of December, to be exact — and, of course, it’ll need to keep servicing this even if earnings take a dive. Needless to say this could come at the expense of dividends.

If you’re hunting for big dividends on the FTSE 100, great. Arguably there’s never been a better time to grab a slice of the action. I would argue, though, that Evraz is a share that’s probably worth avoiding at the current time.

The post Buyer beware! I think this FTSE 100 dividend stock could be next to slash payouts appeared first on The Twelfth Magpie.

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Royston Wild 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.

I think the shares look reasonably priced at current levels. But for investors focused on maximising income, I think there may be better choices elsewhere.

What’s wrong at Glencore?

One reason that Glencore shares are under pressure is that the company is currently the subject of several corruption investigations. In the US, two investigations are under way into possible corrupt practices in the Swiss-based company’s overseas operations. Both are thought to relate to activities in Nigeria and the Democratic Republic of Congo.

The company is also being investigated by authorities in Brazil, in connection with possible bribery offences connected to state oil group Petrobras. And in December, a former employee was fined $1.8m by Canadian regulators.

Will these investigations cause lasting damage to the Glencore business? Probably not, in my view. But I suspect these reputational issues could result in some major investors avoiding the shares for the time being.

A dirty bargain?

Another potential concern for Glencore shareholders is the group’s focus on coal, which generated about one third of profits last year. A growing number of major investors are avoiding companies that produce coal, due to environmental concerns.

My view on this is that coal will remain an important source of profits for Glencore for the foreseeable future. Demand for the black stuff isn’t likely to disappear for decades. But this focus on ‘dirty energy’ could limit the stock’s valuation gains, as the market may price in environmental costs and the risk of future decline.

At about 310p, Glencore shares trade on 11 times 2019 forecast earnings and offer a 4.8% dividend yield. I’d rate the shares as a hold at this level, but for income investors I think there may be better options.

This 8% yield looks tempting

One company that has outperformed Glencore in recent years is coal and steel group Evraz (LSE: EVR). The Evraz share price has gained 41% over the last year, compared to a 10% fall for Glencore shares.

Although it’s based in Russia, Evraz operates in North America as well as Russia and Ukraine. A simplified view of the business is that it operates coal and iron ore mines in Russia and Ukraine. These supply the raw materials needed for steelmaking, much of which takes place in North America.

This group’s low cost mines and attractive scale mean that it generates a lot of cash. In 2018, Evraz reported free cash flow of $1,940m from total revenue of $12,836m. That represents a free cash flow yield of 16%, a very impressive figure.

Most of this spare cash was returned to shareholders, which paid dividends totalling $1,600m last year. At the current share price, that gives a dividend yield of 14%.

An income buy?

Evraz is what I call an oligarch stock. About 60% of the shares are controlled by three rich Russians, including Chelsea FC owner Roman Abramovich. My view is that such people own assets like this to provide them with income and a safe home for their cash.

For this reason, I think the firm’s focus on cash returns will continue. For investors who are happy investing in Russia, I think the shares could be a buy.

The post Should I buy Glencore shares or this FTSE 100 8% dividend? appeared first on The Twelfth Magpie.

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Roland Head 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.

At the time of writing, the stock trades at a forward P/E of just 7.4 and an enterprise value-to-EBITDA ratio (EV/EBITDA) of 4.4. To put this into some perspective, the rest of the market trades at a median EV/EBITDA ratio of 10.9 and the global metals and mining sector commands a multiple of 7.1.

However, the question we have to answer is, why is Evraz so cheap in the first place?

What’s the deal? 

I think there are three main answers to this critical question. First of all, Evraz is a Russian headquartered business, so there’s a bit of country risk here.

Second, it operates in a highly cyclical industry where any number of factors can decimate profits. Indeed, the company has only been profitable for the past two years, and between 2013 and 2016 it racked up nearly $2.5bn in net losses.

And third, the group has quite a bit of debt. Net debt as a percentage of equity was 211% at the end of 2018. On this last point, the company is making progress. It reduced net debt from $6.4bn to $3.5bn between 2013 and 2018.

Evraz has been able to reduce debt so quickly because it is throwing off cash. Free cash flow has totalled $8.5bn over the past six years, which is why the company was able to distribute $1.6bn to shareholders via dividends last year.

This cash generation doesn’t entirely make up for the company’s other faults, but in my opinion, it does show how resilient this business is. Some investors might not be comfortable investing in a business that is so exposed to Russia, but I think a lot of this risk is already reflected in Evraz’s discount valuation and a dividend yield of 8.8%. So, if you’re looking for value stocks, it might be worth considering Evraz for your portfolio.

Too cheap to pass up? 

Another value stock that I think might be worth your research time is Petra Diamonds (LSE: PDL).

Petra is very similar to Evraz, in my opinion, because this company is also struggling with a high debt load and volatile earnings. But once again, I think the majority of this risk is already reflected in the stock’s valuation. It is dealing at a forward P/E of just 3.7 at the time of writing and EV/EBITDA ratio of 4.2. 

That being said, I believe the business does deserve to trade at a discount to the rest of its sector because earnings are falling. Today, the company announced a 7% increase in fiscal third-quarter revenue due to a 6% fall in sales volumes. Net debt did fall marginally during the stated period (down 1% quarter-on-quarter), but this still leaves the business with a net gearing ratio of 120%.

These figures are not that impressive, but as I mentioned above, I think Petra’s current share price already reflects most of the pessimism surrounding a business and even a small uptick in expectations might lead to a significant re-rating of the stock. With this being the case, it might be an attractive investment for risk-tolerant value investors.

The post Is this FTSE 100 stock the market’s most undervalued? 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.

As safe as houses?

My sums indicate that housebuilder Persimmon has the highest dividend yield in the FTSE, with a 2019 forecast yield of 10.8%.

I am confident this payout will be made in full. But this year’s expected payout of 235p per share isn’t an ordinary dividend. Instead, it’s part of the group’s plan to return surplus cash to shareholders.

The current plan shows another payout of 235p in 2020, followed by a 110p payout in 2021. After that, there’s no guidance.

As I mentioned recently, I’m concerned that Persimmon’s management might be focusing too much on the short term. I’d choose another housebuilder.

Should you bet on British Gas?

Centrica is a stock that everyone loves to hate. But as I discussed in a recent article, the company’s performance actually improved last year.

My sums also suggested that last year’s 12p per share payout was covered by free cash flow.

However, the numbers look a lot tighter for 2019. City analysts expect falling earnings to trigger a 14% dividend cut. That gives the stock a yield of 9%.

I think a bigger cut may be necessary, but I still see this as a possible recovery buy.

Another 10% housebuilder

Like Persimmon, Taylor Wimpey has a lot of spare cash to return to shareholders. The stock currently offers a 2019 forecast yield of 10%.

I like this firm for its five-star HBF survey score. This suggests that customers are happier with their homes than they are with those of Persimmon, which scored three stars in the latest home builders’ survey.

However, my reservations about Taylor Wimpey’s dividend are the same. This year’s payout of 18p per share looks very safe, but there’s no commitment for the future beyond the board’s “intention to make material further cash returns in 2020 and beyond”.

I need a holiday

Shares in European holiday group TUI AG have fallen by 60% since May last year. The company has already issued two profit warnings in 2019.

In February, TUI warned of weaker profit margins on summer bookings for 2019. Last week saw the firm cut earnings forecasts by 17% due to the impact of the Boeing 737 MAX grounding.

This slump has left the stock trading on 7.1 times 2019 forecast earnings, with an 8.8% yield.

If management maintains the link between the dividend and profits, a dividend cut may be necessary this year. But in my view, this business remains fundamentally sound and could be a good long-term buy.

Digging deep

Russian mining and steel group Evraz paid out $1,556m in dividends last year, giving the stock a trailing dividend yield of about 13%. This record payout seems unlikely to be repeated.

Broker forecasts for 2019 suggest a payout of $1,111m, followed by a distribution of about $880m in 2020. These numbers give Evraz stock a 2019 forecast yield of 9.2% and a 2020 yield of 7.3%.

That’s nothing to be ashamed of. But this mining group carries more debt than its big FTSE 100 rivals and more political risk, thanks to its Russian ownership. I’d probably dig for dividends elsewhere.

The post Are these five FTSE 100 8%+ yielders too good to be true? appeared first on The Twelfth Magpie.

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Roland Head owns shares of Centrica. 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.

Secure income 

My first pick is financial services group Secure Trust Bank (LSE: STB). At the time of writing, shares in this enterprise are trading at a forward P/E of just 8 and support a dividend yield of 6.6%. 

Usually, when a bank’s valuation falls to this level, it’s a sign the market believes something is going wrong under the bonnet. However in this case, I can’t see anything to be concerned about. Secure Trust has a Tier 1 equity capital ratio of 13.6%… and its earnings are exploding. 

During the first half of 2018, the bank’s earnings per share (EPS) jumped 36.6% and analysts are forecasting growth of 45% for the full year, which should leave the dividend covered 1.9 times by EPS.

It looks to me as if the market has oversold this bank, and the stock could be an excellent buy for value-seeking investors after sliding nearly 40% over the past 12 months. 

Slow and steady 

My next embarrassingly cheap income play is Investec (LSE: INVP). Investec tends to fly under the radar of most investors because the company is, well, boring. Indeed, with EPS growth averaging 9% over the past nine years, Investec isn’t going to win any awards any time soon. 

Still, what Investec lacks in growth it more than makes up for in reliability. As mentioned above, the company has churned out consistent earnings growth of 9% per annum for the past six years, but despite this, the share price has hardly budged. Even though EPS have expanded from 30p in 2013 to 50p for 2018, the shares are around 10% lower today than they were at the same time in 2013 (~500p). The group’s dividend has also increased 44% over this period, and today the stock yields 5.4%. 

At the time of writing, shares in Investec trade at a forward P/E of just 8.5, which is, quite frankly, an embarrassingly low multiple for a business that has seen EPS expand 67% over since 2013. It could be worth buying the shares today before the rest of the market catches on to Investec’s untapped potential. 

Steel stock 

My last cheap income stock is Evraz (LSE: EVR). As a cyclical steel business, it comes with more risk than both Secure Trust and Investec. However, right now shares in this business are so cheap, there’s a wide margin of safety for investors if anything goes wrong.

Evraz is trading at a forward P/E of 7.3 and a discount of around 20% to the rest of the metals and mining sector on an EV/EBITDA basis. These figures are already based on the City’s expectation that EPS will slide 34% in 2019 to $1.11 from 2018’s blow-out number of $1.68.

Considering that shares in Evraz are trading at a discount of 20% to the rest of its sector, earnings could fall a further 20% before it started to look fairly valued.

On top of this margin of safety, shares in the steel producer support a dividend yield of 9.1% (based on the City’s target for 2019). The payout is covered 1.5 times by EPS, so it looks reasonably secure for the time being. 

The post 3 embarrassingly cheap dividend stocks I’d buy 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.