Telecoms giant Vodafone, mining firm Evraz and housebuilder Taylor Wimpey are among the high-yielding income stocks with the most potential to grow, according to experts.
Searching for income opportunities has been difficult over the past two years as the pandemic sent shockwaves across markets. Last year businesses conserved cash by cutting, suspending or scrapping payouts, and although the picture has improved, the latest report from the Link Dividend Monitor suggested payments from companies would not return to their pre-pandemic levels until 2024.
This could be pushed back further if the latest variant of concern – Omicron – proves more debilitating than is currently feared and the world returns to a state of lockdown.
This confusing picture has made it difficult to know which high-yielding stocks are worth buying, and which will fall by the wayside.
Using Tipranks, an online tool that collates analyst recommendations, there were four high dividend-paying companies that deserved a “strong buy” recommendation in aggregate across analysts covering the UK market.
Vodafone was the highest-yielding (6.8%). Despite a poor recent run – the shares are down 6.3% over the past year – analysts were bullish on its fortunes. At the current share price of 112p, analysts suggested that the shares should rise 52% before they would be deemed at fair value.
Earlier this month the company reported revenues rose 5% to €22.5bn (£19bn) for the six months to September while it expected full-year profits to be at the top end of analysts’ expectations. It also announced plans to expand into Europe.
Source: Tipranks
Insurance firm Legal and General, which yields 6.2% and has a share price of 292p, was another on the list. The target price on the stock was 18.6% higher than its current level, despite shares already climbing 20.9% over the past 12 months.
Aviva and Taylor Wimpey round out the ‘strong buy’ recommendations. Both yield more than 5% and share prices have risen over the past year 29% and 8.7% respectively, but analysts suggest there is more room to run, with target prices 19.2% and 27.4% above their current share prices. Fellow housebuilder Persimmon also made the list.
Earlier this month, Taylor Wimpey’s results showed that the firm was on track to deliver within expectations for the financial year, with Matt Britzman, equity analyst at Hargreaves Lansdown noting that the UK housing market was building on its recent strength.
“Taylor Wimpey looks to be in a good position to build on the abundance of buyers,” he said.
Yesterday chief executive Pete Redfern announced he is to step down, although analysts said that it should be a smooth transition.
Miners were also popular among analysts. Steel producer Evraz, precious metal miner Polymetal International and Anglo American – the world’s largest producer of platinum – all made the list. The stocks yield 6.1%, 7.6% and 6.5% respectively based on their current share prices of 609p, £27.99 and £29.54.
Evraz has made a total return of 57% this year for investors, but analysts predict the share price could rise another 35.4%. Anglo American is also up on the year (16.8%) but analysts suggest there is 7.8% further to go.
Polymetal has lost 15% over the past 12 months but analysts predict shares could be 21.2% higher than they are at present.
Tobacco company Imperial Brands, insurer Phoenix Group and asset manager abrdn also made the list.