With income hard to come by in 2020, the 8.8 per cent yield offered by iron ore pellet producer Ferrexpo (FXPO) leaps out on our dividend screen. The share price has defied concerns about some large shareholders this year, but this company is a reminder to do your homework before chasing dividends. Looking at the financial tests in a stock screen is just the start, albeit it’s reassuring that the company scores 7/8 on our screen.
- Online trading firms IG Group (IGG) and CMC Markets (CMCX) also offer attractive yields, and they both only fall short on our forward EPS growth target, although with volatility likely in financial markets for the remainder of 2020, they should have more time to make hay.
- Of the largest companies, pharma giant GlaxoSmithKline (GSK) yields 5.6 per cent and passes 6/8 tests; and miners Rio Tinto (RIO), which yields 6.2 per cent, and BHP Group (BHP), on 5.6 per cent, both pass 6/8.
- Defence and aerospace business BAE Systems (BA.) is another in the 6/8 club. Its dividend yield is 4.6 per cent. As well as Covid-19 related concerns, investors might want to consider wat M&A strategies companies could consider next year. Rumours of an approach for struggling Rolls Royce (RR.) may make strategic sense but income investors will want to think about the short-term impact on free cash flow and if that could affect the pay-out.
