Stop saving & start investing! I'd buy three 5 percent dividend shares today

... Credit : @pixabay
Shadrach   in Stocks & Shares

Last updated: 11 February 2020, 09:39 GMT


You probably have a cash bank account . These wont to be an honest thanks to make money. But with best-buy interest rates hovering around 1.3% lately , making money from cash savings is pretty difficult.

This is why all of my retirement savings are invested within the stock exchange . My plan is to create a portfolio of dividend stocks which will provide long-term gains and a reliable income when Im older. Today i would like to seem at three companies Id buy for such a portfolio. 

Profit from gold

My first pick is gold digger Centamin, which owns the Sukari gold mine in Egypt. As Ive explained before, Im not tempted to have gold directly. But i feel Centamin features a good diary , with double-digit profit margins and a six-year history of cash-backed dividends.

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Management recently fought off a tender offer from Canadian firm Endeavour Mining. Investors have mixed views on whether Centamin should have engaged with Endeavour, but in my view, the corporate remains a beautiful investment as a standalone firm.

The board plans to declare a complete dividend of 10 US cents (approx. 7.7p) for 2019, giving the stock a yield of around 5.8%. Id expect an identical payout in 2020. In my view, Centamin provides a beautiful thanks to gain exposure to gold, while still enjoying a reliable income. I rate CEY shares as a buy.

Best-in-class pick?

Car insurance firm Admiral Group (LSE: ADM) may be a well-known name. But what you'll not realise is what an impressive investment this stock has been. Admiral shares have doubled over the last six years and risen by 840% since the firms IPO in September 2004.

Throughout this era , shareholders have also enjoyed generous dividends. These are made possible by an unusual business model that generates a return on equity of over 50% in most years.

My colleague Rupert Hargreaves recently explained why this business is so unusually profitable. But all you actually got to know is that as a general rule, Admiral pays out most of its earnings as dividends annually.

Admiral shares currently trade on about 18 times forecast earnings and offer a dividend yield of 5.5%. Given the groups diary , i feel thats a good price to pay. Id be happy to shop for the shares for a long-term investment portfolio.

This turnaround yields 5.1%

My final pick is weird . FTSE 250 retailer Dixons Carphone (LSE: DC) is that the owner of Currys PC World. But the group has faced problems over the last few years, mostly concerning its Carphone Warehouse mobile business.

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With sales of quite £10bn annually , i think Dixons Carphone is robust enough to survive the threat from online-only retailers like Amazon. Recent trading has supported this view, with sales of electricals up over Christmas, despite tough market conditions. 

CEO Alex Baldock says that a replacement mobile offering is thanks to launch later this year. this is often expected to support a return to profit growth during the last half of 2020.

The market seems to be gaining confidence in Mr Baldocks plans. The shares have gained 20% over the last six months, but still look affordable to me on 10 times 2020 forecast earnings. With a dividend yield on offer of 5.1%, I still rate Dixons Carphone as a buy.