It’s probably never too late to buy good long-term dividend stocks. But we can easily miss chances to buy them at really cheap prices. I think these three could be good long-term buys. But I reckon the best opportunities might soon pass.
BT Group
I’ll start with one that’s maybe a bit controversial. BT Group (LSE: BT.A). It’s been paying decent dividends for years, with a current forward yield of 5.7%.
But at the same time, it’s been shelling out huge amounts in capital expenditure (capex) and, at the same time, building enormous debts. As sentiment’s faded, the share price has fallen 25% in the past five years.
So what do I think’s changing? Well, the price jump since May’s all down to the company telling us it’s passed the point of peak capex, and is at an “inflection point“.
Investors might see BT at a point of cash flow reversal, with more and more of the stuff rolling in over the next few years. And the bearish sentiment of the past few years could reverse.
There’s still some way to go mind, and it can take a long time to regain the market’s confidence. BT might need another couple of sets of results so people can see money where its mouth is.
But I think confidence in the dividend must be firmer now.
National Grid
My next pick, National Grid (LSE: NG.), has also been through a key change. But this time we saw the share price pushed down, not up.
It’s all about the new stock issue, at a bargain price to existing shareholders. It diluted the dividend and I can understand the share price fall. But I see it as overdone.
The forecast dividend yield, currently 6%, looks pretty good. Especially for a stock I think has one of the most stable outlooks of any in the FTSE 100.
The risk is that long-term confidence in the dividend might not recover. And now it’s done it once, what’s to stop National Grid issuing more shares whenever it wants a bit more capital? And diluting the dividend a bit more.
But if confidence does hold and the share price recovers, I can see that 6% yield not lasting much longer.
Phoenix Group Holdings
My final choice, Phoenix Group Holdings (LSE: PHNX), is simply because of its big dividend. Well, and because I see a decent chance it could be sustainable.
Again, the share price has had a bad few years, along with most of the insurance sector.
And I just can’t see a 10% dividend staying at 10% for very long.
Surely one of two things has to happen. Either the dividend won’t be sutainable and will be cut. Or investors will wise up and start buying the shares, pushing the price up and the yield down.
Forecasts show it will be steady in the next few years, but not covered by earnings. And that, whether the earnings cover can be achieved, could determine which of my two scenarios will come to pass.
These three could go either way. But they have to be worth considering for dividend investors.
This post was originally published on Motley Fool
