Despite the economic outlook, this year looks set to be one of the best on record for dividend investors. And I want to invest in dividend stocks in November.
I already hold Lloyds Banking Group, Aviva, and Persimmon, and for my next purchase I’ll avoid doubling up on any of those sectors. So if I had enough money, which three FTSE 100 shares would I go for?
M&G (LSE: MNG) is a strong candidate. When stock market sentiment is weak, investment managers usually suffer. The M&G share price is already down 15% over the past 12 months.
And yes, 2022 has been a hard year so far, with assets under management falling. That impacts on the fees the company can charge, which in turn hits the bottom line.
But on the upside, the forecast dividend stands at 10%. I don’t know if that will happen, as analysts are often the last to notice when things change for the worse. But the company has only just completed a £500m share buyback, which suggests there’s been no shortage of cash.
I think M&G’s business has a profitable long-term future despite the short-term risk. So I just have to see the shares as good value now.
Food and essentials
At 5.3%, the Tesco (LSE: TSCO) dividend yield isn’t one of the highest. But I reckon it’s among the most dependable in the FTSE 100. Tesco shares have fallen 19% in the past 12 months.
But they’ve been picking up since the start of October.
Tesco is the market leader in its sector, providing just about the most essential consumer products there are. Yes, margins are being squeezed. And the current environment is helping the cut-price competition like Aldi and Lidl.
But forecasts suggest that Tesco earnings will keep growing, and we’re looking at a forecast price-to-earnings (P/E) multiple dropping to around 10 by 2023-24. I think that’s cheap, even with today’s economic risk.
I’ve come close to buying telecoms shares many times, though I’ve had mixed feelings about dividends. And right now, I’m starting to like the look of Vodafone (LSE: VOD). The Vodafone share price is down only 5.5% in 12 months.
But over five years, the stock has lost more than 50%. And that’s helped push the prospective dividend yield up to 7.4%. Vodafone is definitely not without its risks, mind.
Cover by earnings is weak. But forecasts suggest it should improve over the next couple of years. And I see Vodafone coming together as a better organised global group these days.
Vodafone carries large debt too, which is something else I don’t like. But on balance, I think now could turn out to be a good time to buy for long-term dividends.
I won’t have the cash to buy all three of these in November, which is a shame. But I should hopefully have enough for one purchase. Unless anything significant changes, I’ll probably go for M&G.
Alan Oscroft has positions in Aviva, Lloyds Banking Group, and Persimmon. The Motley Fool UK has recommended Lloyds Banking Group, Tesco, and Vodafone. 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.
Motley Fool UK 2022