When I am searching for dividend stocks to add to my portfolio, I am looking for companies that not only have high yields, but offer sustainable dividends as well.
There is no point in me buying shares in a company with a dividend yield of 10%, only for the corporation to go ahead and cut the payout in a couple of months. This would be a colossal waste of time and energy on my part.
With that in mind, here are two dividend stocks yielding 7%, or more, that I would buy for my portfolio today, considering their long term potential.
Long-term dividend stocks
The first enterprise on my list is the energy group Diversified Energy (LSE: DEC). I think this is a fascinating business with outstanding income credentials. It is predominantly a natural gas producer and has hedged most of its future output. This provides the company with visibility over future cash flows.
As such, I believe the enterprise has some desirable income credentials. Indeed, at the time of writing, the stock supports a dividend yield of 11%. This appears sustainable, thanks to the company’s hedging programme and plans to grow production with low-cost, low-risk assets.
That said, one risk I will be keeping an eye on is the company’s exposure to hydrocarbon liabilities. The costs of operating in carbon-intensive sectors are rising, which could impact Diversified’s cash flows. These challenges are something I have to keep in mind when analysing any oil and gas enterprise.
Still, despite this risk, I believe the gas business is a well-managed entity with some of the best income credentials on the market today.
Golden income
It seems as if the resource sector is currently out of favour with the market. This could present an opportunity for long-term investors.
For example, shares in gold miner Centamin (LSE: CEY) are trading around 10% lower than 2019 levels. Even though its net profit is expected to hit $125m in its current financial year, up from $88m for fiscal 2019.
The unpredictable gold price is the biggest challenge the company has to deal with. The group’s hedging programme is less extensive than Diversified’s, so gold price volatility can significantly impact the bottom line.
Nevertheless, what the corporation lacks in stability, it makes up for in income. Analysts believe the stock will yield 7.2% this year. Although the payout is set to decline to 5.7% next year, I think the company has room to increase the dividend in the near future. The firm has no debt and a net cash balance of $274m.
Thanks to these qualities, the company makes it onto my list of top-quality dividend stocks. What’s more, the price of gold has been on the up recently, which could generate a windfall for the enterprise.
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Rupert Hargreaves has no position in any of the shares 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.
