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3 high yield dividend shares I’d buy today

Close-up of British bank notes
Image source: Getty Images

We might be facing a recession, but 2022 is shaping up to be one of the best years for FTSE 100 income ever. The big question for me, though, is which high yields will be the most sustainable. Today I’m looking at three that I think have staying power.

High demand

Consumer demand remains stubbornly strong at Imperial Brands (LSE: IMB), despite efforts to reduce tobacco consumption. The share price had been in a slide for a few years, but it’s been gaining ground since mid-2020.

I’m sure much of the fall was down to anti-smoking sentiment. But when it comes to bottom-line profits, some the the world’s most populous developing countries really haven’t caught on to the anti-smoking thing.

Couple that with the growing popularity of alternative tobacco products in the developed world, and I think I see a recession-resistant cash cow. For the 2021/22 year, the company has announced a 6.6% dividend. Analysts see that steadily rising in the coming years.

The biggest risk is surely the increasing aversion to tobacco, which I expect will have an effect some day. But maybe not for a while yet.

Good cover

I like insurance shares. Heading for an economic down spell, I look for a good dividend yield and strong cover by earnings. I think I see both in Legal & General (LSE: LGEN).

We’ve had an 11% share price fall over the past 12 months, though it’s been picking up since October.

Today’s price puts the shares on a forecast dividend yield of 7.2%. And if the recent record is anything to go by, it should be well covered. For the 2021 year, we had cover by earnings of 1.85 times. That’s good for the sector.

Recession has to be the biggest risk now. I reckon a couple of years of economic pain is likely to reduce demand for financial services. So we might see pressure on the Legal & General dividend. But short-term pain could mean a long-term bargain.

Cyclical stock

Rio Tinto (LSE: RIO) cut its first-half dividend this year, but I still see long-term sustainability. The Rio share price fell in the second half of 2022. But it’s still up 15% over 12 months.

Full-year dividend forecasts still suggest an 8.3% yield. But I guess that might be disappointing to investors who hoped for a repeat of 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 suggest weakening earnings and dividends over the next couple of years.

Falling Chinese demand and global recession are all part of it. And the main risk I see is several years of falling dividends. But I reckon it’s a good time to buy into this cyclical business.

Will I buy?

If I had enough cash for all the high-yield shares that I think are good value, I’d buy these three today. In the real world, they’ll have to wait on my list of candidates for my next purchase.

The post 3 high yield dividend shares I’d buy today appeared first on The Motley Fool UK.

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Alan Oscroft has no position in any of the shares mentioned. The Motley Fool UK has recommended Imperial Brands. 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