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We may be facing a recession, but 2022 is shaping up to be one of the best years since. FTSE 100 index income ever. However, the big question for me is what higher yields will be more sustainable. Today I’m looking at three that I think have staying power.
Consumer demand remains strong imperial brands (LSE: IMB), despite efforts to reduce tobacco consumption. The share price has been on the decline for a few years, but has been gaining momentum since mid-2020.
I’m sure most of the downfall was due to anti-smoking sentiment. But when it comes to the bottom line, some of the world’s most populous developing countries haven’t really picked up on the anti-smoking issue.
Add to that the increasing popularity of alternative tobacco products in the developed world, and I think I see a recession-proof cash cow. For 2021/22, the company reported a dividend of 6.6%. Analysts see this rising steadily in the coming years.
The biggest danger is certainly a growing aversion to tobacco, which I expect will someday make an impact. But maybe not for a while yet.
I love insurance stocks. Heading into an economic downturn, I’m looking for good dividend coverage and strong earnings coverage. I think I see both in Legal and public affairs (LSE: LGEN).
We’ve seen share prices drop 11% over the past 12 months, even though it’s been going up since October.
Today’s price puts the stock on an expected dividend yield of 7.2%. And if the last record is anything to modify, it should be well covered. For 2021, we had an earnings cap of 1.85 times. This is good for the sector.
Recession must be the biggest danger now. I think two years of economic pain is likely to reduce demand for financial services. So we may see pressure on statutory and general dividends. But short-term pain can mean a long-term deal.
Rio Tinto (LSE:RIO) cut its first half earnings this year, but I still see long-term sustainability. Rio’s share price fell in the second half of 2022. But it’s still up 15% in 12 months.
The dividend forecast for the full year still points to a yield of 8.3%. But I think this may be disappointing to investors who were hoping to repeat the 12% paid in 2021.
Rio Tinto, like the sector as a whole, has had a few years of rising earnings. But the mining and commodities business is cyclical, and forecasts point to weak earnings and earnings over the next couple of years.
Falling Chinese demand and the global recession are part of it. The main risk I see is several years of declining earnings. But I think the time is right to buy into this cyclical business.
will i buy
If I had enough cash for all the high yielding stocks that I think are good value, I would buy these 3 stocks today. In the real world, they would have to wait on my list of candidates for the next purchase.