There are many dividend stocks on the FTSE 350 that income investors can choose from. At the time of writing (late March 2020), the market crash caused by coronavirus has pushed down share prices, sometimes by more than 50% and as a result, this has pushed up dividend yields. However, there is a problem with this. Many companies are now suspending their dividends.
Often these companies are from sectors harder hit by the lack of travel or consumer spending, but there are companies from across sectors which are struggling. This list then of shares for income investors is not completely fail-proof, it just represents what I think are the best five dividend stocks both in a bear market and quite frankly at any other time.
I keep an eye on all of them as I think they combine income and value. All have defensive properties and should have the cash and balance sheets to weather any storm – at least better than most companies so I think they should be a part of any investor’s portfolio.
The five shares I shortlist as the best ones for income investors are:
National Grid (LSE: NG) – the gas and electricity transmission business operates in the UK and US, so in very stable markets. I see this as a big advantage, especially for a utility with high levels of debt to finance its day to day operations. National Grid is growing its main businesses in both regions, at the time of writing, and I expect it will continue to do so. It also tends to have a high and growing dividend yield which is attractive.
Diageo (LSE: DGE) – the beverage producer is another quality company. An advantage it has over National Grid is, it has greater pricing power, given its earnings are unregulated. The shares don’t tend to be at the higher end of the yield scale, but that doesn’t mean they’re not suitable for income investors. Higher growth means greater potential for dividend growth which is also an important consideration. The company has a global presence, in 180 countries, and owns many well-known brands, such as Captain Morgan, Guinness and Baileys, which should ensure it continues to do well.
Mondi (LSE: MNDI) – the paper and packaging producer is another FTSE 100 company with a typically high yield. It’s a pretty steady company and is benefitting from the growth in e-commerce, a trend that shows no signs of slowing. It does however, have a lot of raw material prices (a variable cost) which can weigh on its profits. The global nature of the business, the potential for growth and the income though make it a good FTSE 100 share to own for income investors.
Centamin (LSE: CEY) is a goldminer with its main asset being the Sukari Gold Mine in Egypt. With the gold price often seen as a safe haven, it’s a good share to own when markets fall. A higher gold price leads to bigger profits for the miner. Centamin also tends to have a high dividend yield which is good for income investors, although dividend cover has fluctuated historically, sometimes to below one which is not ideal. Nonetheless, having a cyclical miner adds growth potential to this list of income shares. It’s probably the riskiest of the companies on here for income investors given it’s in a cyclical industry and the price it gets for its product is determined by global markets rather than by the company.
Last but not least, is drinks maker and owner of Robinsons, J2O and R Whites, Britivic (LSE: BVIC). The drinks company is likely to do well whatever the economic backdrop as people are still likely to spend money on soft drinks. The company has good pricing power and brands which helps it to raise prices when it needs to. The company operates internationally. The dividend has historically been covered twice by earnings meaning it’s unlikely to be cut and has room to grow in future years.
Although at different time each of these companies might experience specific problems or underperform, overall, I think they are five of the best dividend stocks on the FTSE 350.