These great shares are now even better value
No one knows whether this week’s market turmoil is prelude to a more sustained fall. But for investors seeking income in the form of dividends, any drop in price is welcome. It enables you to buy future income for less.
The following “crash buylist” draws on recommendations in the Telegraph’s Questor column. The premise is that dividend payments are secure and that current yields – already high – will improve if prices fall further.
257p/5.6pc Insurance giant L&G is enjoying a boom in its retirement business. It has a “free cashflow yield” – cash generated per share relative to the share price – of 20pc. This is an excellent indicator of dividend sustainability. L&G has increased its dividend consistently, and the current 7pc dividend growth rate is likely to be maintained. Over the past week the shares have fallen 7pc.
£26.82/6.4pc Tobacco firms have proven resilient dividend payers in the face of punitive tax and regulation. Imperial’s current high yield is in part due to a steep fall in share price in the past year, triggered by threats of further American regulation. The dividend is covered by profits at today’s level, and it seems undervalued even at this price.
757p/6pc Utility firm National Grid also has a 6pc yield boosted by share price decline over the past year – sparked in part by politicians on the right and left talking about price controls and other forms of state intervention. But dividend rises linked to inflation will continue for the time being, while its growth abroad is reducing risk.
£4.81/6pc Oil giant BP’s latest results, published this week, show massive profit growth, a reduction in costs (including costs associated with the Mexican Gulf spill) and some security of income even if the oil price doesn’t rise further. Debts are being slowly reduced and a move to buy back shares should also help dividend prospects.
BP has achieved massive profit growth and a reduction in costs