The best flexible Cash ISA interest rate on the market at the moment is just 1.36%. With interest rates expected to stay low for the foreseeable future, it is unlikely this level will increase any time soon.
As such, investors may be better off seeking an income from high-quality, high-yield dividend stocks. In many cases, these companies also offer the potential for capital gains as well as income.
With that in mind, here are two 10% yielding dividend stocks that could offer long term income investing potential and capital growth.
Real estate investment trust (REIT) NewRiver REIT (LSE: NRR) has seen its share price underperform over the past 12 months due to challenges in the retail sector.
However, despite these issues, the company has continued to report rising incomes from its property portfolio.
Management has also been repositioning the portfolio, selling low-quality properties and reinvesting the proceeds back into high-quality assets with trustworthy tenants. This strategy has so far helped the company avoid some of the pain its peers are suffering.
Still, despite this progress, NewRiver currently trades at a significant discount to its net asset value, with its price-to-book (P/B) ratio being 0.8. On top of this, the stock currently offers a dividend yield of 11%. With the payout backed by income from property rents, as well as asset sales, this yield looks exceptionally safe.
These metrics indicate that NewRiver’s shares offer excellent value for money with a wide margin of safety at current levels. Therefore, now could be a good time to take advantage of the continued uncertainty surrounding the business and buy a share of this income champion.
Another income stock that yields more than 10% today is Redde (LSE: REDD). Like NewRiver, Redde has fallen on hard times over the past 12 months. A poor trading update at the beginning of 2019 cut the stock in half.
After this setback, the accident management assistance and vehicle management company has been working flat out to return to growth. It seems as if trading has improved since the profit warning with analysts expecting a slight improvement in earnings per share for 2019, which implies that the business has started its turnaround.
Despite this progress, the company’s shares continue to trade on a low valuation. The stock has a price-to-earnings (P/E) ratio of just 8, which suggests that the capital growth prospects for it could be high.
It also supports a dividend yield of 10.9%, with the payout being covered 1.1 times by earnings per share. These metrics imply that Redde’s total return prospects could be big.
With the company committed to returning to growth, now could be the time to buy Redde and take advantage of the stock’s low valuation, as well as its market-beating dividend yield. These metrics suggest the business has the potential to deliver a growing sustainable passive income to its investors for many years to come.
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Rupert Hargreaves owns no share mentioned. The Motley Fool UK has no position in any of the shares mentioned. 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 2020