Severe stock market declines in 2022 have turbocharged dividend yields across the London Stock Exchange. This gives investors a wide variety of top stocks to buy that could significantly boost their returns.
However, things aren’t quite as bright as they appear on the surface. The deteriorating economic landscape means that many of these high-yielding shares will in fact struggle to meet City dividend forecasts.
There are ways that investors can protect themselves, however. This includes finding stocks to buy whose operations remain highly profitable even when economic conditions deteriorate. Finding shares with cash-rich balance sheets and decent dividend cover is another way to avoid dividend disappointment.
2 dividend stocks to buy today
With this in mind, here are two high dividend stocks I’d happily invest my own cash in today.
#1: Topps Tiles
The forward dividend yield at Topps Tiles (LSE: TPT) sits at a market-beating 8%. Its declining share price also means the business trades on a rock-bottom P/E ratio of 6.2 times.
Topps’ share price has collapsed as investors worry about the impact of high inflation on the retailer’s sales. But, so far, the business has remained resilient to these pressures. Latest financials this month showed like-for-like sales up 2.9% in the 13 weeks to 2 July, in line with forecasts.
I’d buy the building products specialist to capitalise on the UK’s bright housing market. I expect sales of its products to remain strong as housebuilding picks up and DIY spending remains robust.
I’d also buy Topps Tiles because of the encouraging steps its taking to build market share. The business hopes to achieve a 20% share by 2025.
Let’s get back to this year’s projected dividend. At 3p per share, it is covered 2 times by predicted earnings, bang on the widely regarded security benchmark. Topps’ strong balance sheet also boosts its ability to pay big dividends (cash and cash equivalents stood at £13.4m as of April).
Like Topps Tiles, commodities producer Central Asia Metals (LSE: CAML) also offers excellent all-round value. As well as providing an 8.2% dividend yield, the firm trades on a P/E multiple of just 5.7 times.
Central Asia Metals is involved in copper, lead and zinc production in Kazakhstan and North Macedonia. And its share price has dropped sharply amid fears over the global economy and falling base metal prices.
I think this provides a great dip-buying opportunity though. I think the copper stock’s share price will rebound sharply when economic conditions recover. I’d also buy Central Asia Metals as demand for its metals from fast-growing industries like electric vehicles and renewable energy looks set to soar.
This year’s projected 18.7p per share dividend is covered 2.2 times by expected earnings. It has also seen a significant uptick in its balance sheet and enjoyed record free cash flow in 2021. I’d buy this high dividend stock today and look to hold it for years.